Morgan Stanley Flags Chinese Chip Stocks as Buy in 2026 Report
Morgan Stanley semiconductor team made a striking call
In a report published on June 5, 2026, Morgan Stanley Asia semiconductor analysts upgraded their stance on Chinese chip packaging and testing firms, recommending clients buy packaging, buy testing, buy Chinese chips while steering clear of traditional chip sectors facing cyclical headwinds.
The report authored by analyst Charlie Chan and his team in Taipei lays out capacity allocation data for CoWoS advanced packaging through 2026, covering NVIDIA B300 and Rubin architectures, Google TPU, AWS Trainium3, Microsoft Maia, and the newly announced OpenAI Nexus chip.
Why the call matters
Advanced packaging has become the bottleneck for AI chip production. TSMC CoWoS capacity remains fully booked through mid-2027, and Chinese OSAT firms like JCET and Tongfu Microelectronics are picking up overflow orders. Morgan Stanley estimates Chinese OSAT firms will handle roughly 18 percent of global advanced packaging volume by Q4 2026, up from about 11 percent a year earlier.
Key players in the packaging shift
JCET Group: Advanced packaging for AI chips, revenue up 25-30 percent year-on-year. Tongfu Microelectronics: FC-BGA and 2.5D packaging, expanding capacity 40 percent. TSMC: CoWoS dominance, capacity fully booked through 2027. ASE Technology: OSAT leader, SiP integration, AI packaging revenue up 50 percent.
China legacy chip expansion continues
Separately, China dominance in legacy chips continues to grow. According to SEMI Q1 2026 World Fab Forecast, China added more legacy chip production capacity in 2025 than the rest of the world combined. By 2027, China is forecast to control 39 percent of global legacy chip output. The Chinese government Big Fund has directed roughly 95 billion dollars across three funding rounds.
What to watch
The bull case for Chinese packaging firms rests on AI capex staying above 200 billion dollars annually through 2028. The bear case assumes a sharp pullback in hyperscaler spending. Investors should monitor TSMC CoWoS expansion timeline and any further US export controls on advanced packaging technology to China.
Sources
- Morgan Stanley, 2026 Semiconductor Report, June 5, 2026
- SEMI, Q1 2026 World Fab Forecast
- China US Focus, PRC Industrial Policy in US-China Semiconductor Competition
- FTC Electronics, Electronics Weekly News, June 1-7, 2026