ACM Research straddles growing U.S.-China microchip divide

The California-based manufacturer of chipmaking equipment is growing quickly on demand from China, even as its strong Chinese ties become increasingly tricky
Key Takeaways:
- ACM Research, a U.S.-based chip equipment maker with strong China ties, expects 2025 revenue of up to $950 million, nearing its $1 billion target early
- Despite strong growth prospects, U.S. restrictions targeting China’s microchip industry and the background of ACM’s founder pose significant risks to the company’s operations
By Hugh Chen
As Washington continues to tighten the screws on China’s access to advanced semiconductor technology, Beijing’s push to develop a self-sufficient chip industry has shifted from strategic ambition to urgent necessity. China-based firms, backed by billions of dollars in state support, are now racing against time to develop domestic alternatives to Western technology, seeking to break a decades-long dependence that has become a critical national vulnerability.
Straddling this growing divide are a number of companies with bases in the West and other Asian countries, but substantial operations in China, which are having to tread carefully to avoid getting squeezed in the rivalry. One such lesser-known name, ACM Research (ACMR.US), appears to be riding the massive wave of Chinese investment, positioning itself uniquely as a U.S.-based company with extensive operations in China through its Shanghai unit.
But ACM may find it increasingly difficult to straddle the growing U.S.-China divide, as it battles a growing tide of U.S. restrictions affecting its business, including its placement of its Shanghai unit on a Washington-maintained blacklist just last month.
The California-based maker of the sophisticated equipment used to make microchips, considered one of China’s most promising players in that area, said in a business update last week it expects its 2025 revenue to reach between $850 million and $950 million, up substantially year-on-year, as it feasts on China’s growing appetite for its products.
The projected 2025 revenue represents an increase of about 18% from the estimated $755 million to $770 million the company expects to report for 2024, according to the same update. The growth trajectory is particularly striking considering that ACM in 2022 set a longer-term goal of reaching $1 billion in revenue and now looks set to nearly hit that target a few years early. Even more remarkable, the projected $950 million at the top of its forecast range would be almost quadruple the $250 million in revenue it recorded in 2021.
This dramatic expansion largely stems from China’s push to domesticate its semiconductor supply chain, as chip manufacturers increasingly shift toward equipment from locally based suppliers. While that might appeal to U.S. stock buyers looking to cash in on China’s chip investing frenzy, such people should temper their enthusiasm due to the company’s unusual structure that places it at the intersection of escalating U.S.-China tensions.
Founded in 1998 in California by David Wang, a Chinese born American citizen, ACM Research took a pivotal turn in 2005 when it established its China-based unit, ACM Research (Shanghai) (688082.SH). The Shanghai unit would later become ACM’s operational cornerstone, going public on China’s STAR Market in 2021, four years after its parent’s 2017 Nasdaq listing. Since its Nasdaq listing, the company’s stock has more than tripled as its business boomed.
While ACM Research maintains its U.S. corporate identity, including a mix of Asian and non-Asian top executives in its top ranks, the company conducts virtually all its business operations in China. Though ACM doesn’t disclose geographical revenue breakdowns, its Shanghai subsidiary’s projected revenue of 5.6 billion yuan ($765 million) to 5.88 billion yuan for 2024, disclosed in a separate business update, suggests that the vast majority of the company’s business is generated by the Shanghai unit.
Cleaning tech pioneer
To understand ACM Research’s business, some context about chip-making is essential. Manufacturing semiconductors requires a complex sequence of specialized equipment, from lithography machines that print microscopic circuit patterns, to etching tools that remove material layers, and cleaning systems that eliminate contaminants between processing steps.
When ACM was established in 1998, it initially aimed to compete in chemical mechanical planarization (CMP), a crucial process that flattens and polishes the surfaces of sophisticated wafers from which chips are carved out. However, facing fierce competition, the company pivoted to wafer cleaning, where it carved out a niche with technological innovations like Space Alternating Phase Shift (SAPS) that enables more thorough cleaning of deep, narrow trenches on wafer surfaces compared to traditional cleaning methods.
After years of development, ACM still trails global leaders in the cleaning space such as Screen (7735.T), Tokyo Electron (8035.T), and Lam Research (LRCX.US). However, ACM Research (Shanghai) has emerged as China’s dominant cleaning equipment vendor and ranks as the country’s third-largest semiconductor equipment maker overall, behind only Naura (002371.SZ). and AMEC (688012.SS) in revenue, according to a recent Kaiyuan Securities report.
While ACM secured its first major international client in South Korea’s SK Hynix in 2013, the majority of its revenue comes from domestic Chinese chip manufacturers. Its major customers include China’s leading foundries SMIC and Hua Hong, along with the country’s largest memory makers CXMT and YMTC.
China’s semiconductor manufacturing capacity is set for significant expansion. According to the Kaiyuan Securities report, citing SEMI data, China’s chip manufacturing capacity is expected to grow 15% to 8.85 million wafers per month in 2024, followed by another 14% increase to 10.1 million wafers in 2025, roughly double the global industry’s forecast growth rates. By 2025, China is expected to account for approximately 30% of global semiconductor manufacturing capacity.
Such expansion suggests significant demand for new chip-making equipment, with domestic suppliers positioned to benefit from China’s localization efforts. Still, investors should consider several key risks when evaluating the U.S.-listed ACM.
Perhaps most significantly, ACM’s Shanghai unit was placed on the U.S. Commerce Department’s “Entity List” just last month, restricting its access to U.S.-sourced components. Though the company responded by saying the impact would be “minimized and manageable” through alternative supply sources, the challenges it faces could still be significant.
A more complex risk stems from ACM’s unique corporate structure. As chairman of both the U.S.-based ACM and the Shanghai-listed unit, David Wang is quite the U.S.-China hybrid. He is Chinese-born but also a U.S. citizen, and has a Chinese green card, while leading a U.S.-based company primarily serving Chinese chipmakers. Given that U.S. regulations prohibit American citizens from supporting Chinese semiconductor manufacturers, Wang’s ability to continue leading a major Chinese semiconductor equipment company may face future restrictions, potentially impacting ACM’s operations.
At the end of the day, ACM offers U.S. investors unique exposure to China’s semiconductor equipment sector and stands to benefit from the country’s push for technological self-reliance. However, investors must also carefully weigh the growing risks the company faces, including U.S. export controls, supply chain restrictions, and potential leadership complications. The company’s success will largely depend on its ability to navigate these complex geopolitical and regulatory challenges while maintaining its technological competitiveness.
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