Bullish on capacity release and technology transfer, Goldman Sachs has raised Hua Hong's target price three times in half a month.

Bullish on capacity release and technology transfer, Goldman Sachs has raised Hua Hong's target price three times in half a month.

On Tuesday the 30th, the A-share semiconductor industry chain continued to break out, with Hua Hong rising over 17% and its market capitalization surpassing 200 billion yuan, reaching a new high.

According to news from the Wind Trading Desk, Goldman Sachs has raised its target price for Hua Hong three times in just half a month and upgraded its rating to "Buy", believing that Hua Hong is entering the accelerated growth phase of its curve through a strategy of "capacity investment first, efficiency returns later".

In its report on the 29th, Goldman Sachs pointed out that Hua Hong's newly built 12-inch wafer fab (Fab9) is ramping up steadily, the company plans to acquire another 12-inch fab (Fab5), and aims to enter the 28nm technology node in 2027. Although depreciation and new fab ramp-up may disturb profits in the short term, this should be seen as "capital construction period noise." In the long term, Hua Hong's path of capacity expansion combined with technology upgrades will bring sustainable growth and profitability recovery.

According to Goldman Sachs estimates, Hua Hong’s revenue is expected to achieve a compound annual growth rate of 18–20% from 2026 to 2028, with gross margin stabilizing close to 20%.

Capacity Release: New fab ramp-up and Fab5 acquisition, clear scale expansion

Hua Hong's growth certainty is first established on its clear blueprint for capacity expansion. According to company planning, the new 12-inch Fab9 is designed for 83,000 wafers per month, currently with about 50% capacity online, and management targets full capacity by mid-2026.

In addition, the planned acquisition of the 12-inch Fab5 adds another 38,000 wafers per month, which not only boosts its order taking for the 40/55/65nm nodes, but also effectively reduces internal competition. In the longer term, Hua Hong plans to enter the 28nm process with its new fab in 2027, further extending its technology and growth curve.

Goldman Sachs’ latest forecast projects Hua Hong’s revenue to reach $3.22 billion in 2026 and increase to $4.58 billion in 2028. The realization of capacity, combined with structural leaps, drives both quantity and unit price, forming a virtuous "invest first, reap later" cycle.

Technology migration and structural upgrade: 28/40nm nodes drive gross margin elasticity

Technology evolution and product structure upgrades are Hua Hong’s second main line for ASP and gross margin recovery. With the ramp-up of Fab9 and the 28nm node entering mass production in 2027, Hua Hong will gradually migrate from mainly 55/65nm to 40nm and 28nm. AI servers, edge intelligent terminals, and other emerging fields with increased demand for mature processes make Hua Hong a critical domestic supplier.

Goldman Sachs report highlights that between Q3 2024 and Q2 2025, the company's capacity utilization remains above 100%, and it will start a new round of price negotiations with clients; ASP is expected to turn positive by Q3 2025, driving gross margin from 9.2% in 2024 to 12.0% at the end of 2025, and approaching 20% by 2028. The scale effect from structural upgrades, together with higher domestic equipment penetration, is likely to further reduce unit costs and significantly release profit elasticity.

AI drives new demand growth

The rapid expansion of the AI industry chain creates persistent incremental space for Hua Hong. The thermal design power (TDP) of AI server GPUs grew from 700W in 2023 to 1400W in 2025, with the next generation expected to surpass 2000W, increasing demand for power management ICs and power semiconductors. Edge AI devices are also being widely adopted, powering Bluetooth/WiFi, analog chips, MCUs, etc.—primarily using mature processes.

On the supply side, the third phase of China's Integrated Circuit Industry Investment Fund totals about $47 billion, with continued investments in domestic equipment, deposition/testing, and other sectors. Hua Hong benefits from improved maturity and availability of domestic equipment, shortening the industry chain "construction–adoption–mass production" cycle, ensuring the pace of expansion and yield improvement. Under the dual catalysts of AI and localization, Hua Hong's product portfolio and organizational resilience form a unique moat.

Profitability and valuation outlook: Growth and valuation rise together

Taking all the above into account, Goldman Sachs gives a positive forecast for Hua Hong’s financial prospects. In its base case, revenue is expected to reach $3.22 billion in 2026 with net profit of $267 million; by 2028, revenue could rise to $4.58 billion and net profit to $480 million.

For valuation, Goldman Sachs uses a model discounting expected EPS for 2028 back to 2026. Based on an assumed EPS of $0.280 in 2028 and a 47x PE ratio, Hua Hong's reasonable value range is estimated at HK$78 to HK$82 per share. In a more optimistic scenario, valuation may reach HK$95 per share. By press time, Hua Hong Semiconductor's share price has risen to HK$80/share.

 

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The above content comes from Wind Trading Desk.

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