It took only six years for the overall market share of domestic manufacturers to approach 40%, shifting from a situation where Japanese and American companies guarded nearly 80% of the global semiconductor sputtering target market. This business, known as the "metal pipeline for chips," has completed a shift that outsiders find incredible—sputtering targets deposit layers of ultra-high-purity metal atoms onto wafers via physical vapor deposition (PVD). The barrier layers and interconnect layers inside chips rely entirely on them for construction. Although the value proportion is not high, it is an unavoidable bottleneck for advanced process nodes.
However, the real turning point often occurs at the steepest section. If one only focuses on the total volume dropping from 80% to 38%, it is easy to mistake the result for the whole picture. The winning hand in the target market has never been about capacity, but rather two things: whether upstream high-purity metal smelting can be kept in one's own hands, and whether entry into the advanced production lines of leading foundries such as TSMC (Taiwan Semiconductor Manufacturing Company), Samsung, and SK Hynix can be achieved. Only companies that can hold both of these simultaneously are the ones that truly gain something in this transition of offense and defense; players who merely pile up capacity and slap on labels will be the first to be exposed by the market during the valuation digestion period.
01. Loosening Monopoly: Which Layer is Loosening?
First, let's clarify a hierarchical issue that is often glossed over: which layer is loosening in the 80% shift? Global sputtering targets are roughly divided into two tiers. The three traditional categories—copper targets, aluminum targets, and titanium targets—have long been penetrated by domestic manufacturers on a large scale, accounting for the absolute majority of the industry. The truly tough challenges are the high-end categories such as cobalt targets, 6N and above high-purity copper targets, and high-purity tantalum targets, which are compatible with HBM and 7nm and below process nodes. These have been monopolized by Japan's JX Advanced Metals, Sumitomo, and Honeywell for decades, and remain the lowest in domestic substitution rate and the hardest bone to chew. The domestic substitution sprint over the first six years was actually advancing simultaneously on two fronts: "volume expansion of traditional categories" and "ice-breaking of high-end categories." However, the stories that get passed around mostly focus on the more appealing one.
The truth of scarce supply also lies in this layer. Among the pure targets in the A-share market with "targets" in the name of their main products, there are only three: Jiangfeng Electronic, Acetron, and Oulai New Material. Adding companies like GRINM Advanced Materials and Longhua Technology, which take targets as one of their main businesses or have a niche positioning, the supply that can be put on the table in the entire A-share market can be counted on one hand. Behind the scarce supply are the threshold barriers of each link: from high-purity metal purification at the upstream, to large-size target grain structure control and bonding welding processes in the midstream, and then to the lengthy customer certification at the downstream. If any link fails, orders cannot come in. The ultra-high-purity targets of Jiangfeng Electronic have been stably used in 7nm and 5nm and have entered the 3nm node, with customers including TSMC, SMIC (Semiconductor Manufacturing International Corporation), and SK Hynix. Relying on its subsidiary GRINM E-Material, GRINM Advanced Materials has become the only domestic company to mass-produce 12-inch cobalt targets on a large scale, and has also incorporated TSMC, Intel, YMTC (Yangtze Memory Technologies Co., Ltd.), and CXMT into its supply system. These "centimeter-level breakthroughs" are the truly valuable part of the domestic substitution narrative—it means that the positions of domestic manufacturers have already been installed in the world's most advanced production lines.
However, the watershed on this path is also exceptionally clear. The domestic substitution of traditional categories has long been a foregone conclusion, and the number of players capable of entering 3nm and supplying HBM cobalt targets remains in the single digits. The so-called transition of offense and defense means conquering the already loosened territory; what truly determines the landscape in the coming years is whether the next batch of enterprises can swim into the deep water and tear apart the monopoly of high-end categories bit by bit.
02. Gross Margin is the Most Honest Pricing Indicator
When the financial books of several listed companies are laid out, the stratification of gross margins immediately takes concrete form.
Jiangfeng Electronic remains the sample closest to "holding pricing power." In the first half of 2026, its operating revenue reached CNY 2.737 billion, a year-on-year increase of 30.68%, and net profit attributable to shareholders reached CNY 540 million, a massive year-on-year increase of 113.61%. Ultra-high-purity metal sputtering targets contributed CNY 1.671 billion, a further year-on-year increase of 26.08%, with a gross margin of 31.77%—even though upstream metal raw material price increases had already suppressed costs in advance and had not been fully transmitted in the current quarter, it still kept its gross margin above 30%. Semiconductor precision components accelerated their volume growth, growing into a second curve with CNY 645 million in revenue and a year-on-year growth rate of 40.59%. What truly sets the gap is the company's ability to stably supply TSMC, SK Hynix, and SMIC up to the 3nm node, and its capability to control costs through the integration of upstream high-purity metals. Even though they hold the same ticket for domestic substitution, their positions are different from the very beginning.
GRINM Advanced Materials is another mirror. In 2025, its target business revenue was CNY 2.288 billion, but the gross margin was only about 19%, barely more than half of Jiangfeng's. The cards it holds are not weak—its subsidiary GRINM E-Material is the only domestic company to mass-produce 12-inch cobalt targets on a large scale, compatible with HBM and sub-7nm process nodes, and its customers also cover TSMC, Intel, YMTC, and CXMT. It is precisely the juxtaposition of the scarcity of this "supply capability" and the mere 19% gross margin that exposes the company's shortcomings in metal integration degree and pricing power for advanced process nodes. Being able to break into top-tier production lines but failing to sell for commensurate profits indicates that there is still a solid capability gap between "getting into the supply chain" and "knowing how to price."
Acetron and Oulai New Material represent another type of comparison. Acetron claims to have the most comprehensive domestic PVD coating material equipment and owns over 200 products, while Oulai New Material focuses on high-performance sputtering targets. The main businesses of both are perfectly aligned with "targets," yet both are trapped in a stage of small revenue scale and low gross margins, with their price-to-earnings ratios pushed to over a hundred or even several hundred times. Under the same domestic substitution narrative, Jiangfeng can digest its valuation through profit realization, whereas their high valuations are more supported by sentiment and scarce supply. When the three companies are placed at the same table, the gross margins have long told the whole story of who is superior.
When it comes to valuation, this stratification carries more weight. The sputtering target sector has experienced a rotation from thematic concepts to market trends. GRINM Advanced Materials was once pushed to double its market performance by capital within half a month, and the TTM price-to-earnings ratios of multiple targets were raised to over a hundred times. The market has paid a high price for the imagination of domestic substitution, but it has not necessarily priced the true gold content of every company. When the sentiment recedes, the yardstick for distinguishing superiority will most likely still be the hard indicators of revenue scale, gross margin level, and customer structure. The few enterprises that can enter 3nm, supply HBM, and hold the upstream in their own hands will digest their valuations through profit realization; the followers who jump on the bandwagon will eventually face the scissors gap of revaluation between the "dream ledger" and the "profit ledger."
This level of cognition determines a more fundamental judgment: the winning hand in the second half of the sputtering target industry has shifted from "whether it can be manufactured" to "whether market share can be captured in advanced production lines and then turned into profits." Domestic supply has moved from single-digit market share to approaching 40%, completing the industry's growth logic from 0 to 1. Moving forward from 1 to N, the competition is about who can forge certifications into a moat and forge market share into pricing power in the steeper deep water. Those who always focus on discussions about "how much room is left" underestimate the hardest lesson in this transition—space belongs to all participants, while pricing power belongs only to those who have mastered the most upstream link.
In this transition of offense and defense in the sputtering target market, the first half is about erasing the name of "choke points" from the map, while the second half is about seeing who truly takes over the material hegemony. The monopoly loosening from 80% to 40% first loosened the volume and the imagination; what needs to be loosened next is the price and the things held in the hands of that small group of enterprises at the most upstream of the profit structure. When domestic manufacturers gain a firm foothold in 3nm production lines and the HBM supply chain, this transition will truly reach its most valuable section—and those who can reach that section will ultimately be the two or three companies that, behind the current gross margins, have turned technical content into a real moat.