July Drawdown in Hard Tech: Analyzing the Resilience of Equipment and Materials from the Perspective of the STAR Semiconductor ETF Huaxia

Author: Zhou Fan (Fintech Industry Researcher)

On July 17, the STAR Market Index dropped by over 7% in a single day, with more than 5,000 stocks across the market closing lower. The semiconductor sector fell by more than 8%, wiping out gains accumulated in the first half of the year for computing power, memory, and lithography equipment within just a few trading days. Reviewing post-market commentary from major institutions, the wording was largely similar—'concentrated release of selling pressure,' 'emotional exhaustion reached,' 'brief technical correction.'

By July 18, the market saw partial recovery, with the STAR 50 opening higher by about 3%. Previously leading decliners in the semiconductor and computing power sectors led the gains.

Looking at the trends of these two consecutive trading days together, the question remains the same: Has the hard tech rally run its course, or is it merely taking a technical breather?

14 mainstream brokerages released their post-market strategies between July 17 and 18. The core conclusion of 12 of them can be summarized in one sentence—the mid-to-long-term logic for hard tech has not changed, and the short-term decline is a product of resonance between sentiment and trading dynamics. CITIC's research report stated that the market is already at the 'tail end of a mid-term adjustment,' while Huatai, Industrial Securities, and Tianfeng all listed the technology sector as the primary direction for replenishment in the second half of the year.

Two arguments were repeatedly cited: First, capital expenditure guidance from global cloud providers is still being revised upward. Second, bidding data for equipment in China's semiconductor industry continued to rise month-on-month in June. The former is the strongest indicator of demand-side hard tech needs, while the latter is the most realistic thermometer for domestic manufacturing. Real-world data from both ends is less susceptible to manipulation than any sentiment-driven judgment.

This means that for investors looking to pick up cheap chips from this round of volatility, the key question is not 'whether to enter the market,' but 'from which entry point to enter.'

Equipment and materials are the solid foundation for domestic substitution.

Before the sharp drop in July, divergence in the semiconductor sector had already begun to show. Chip design firms were the first to secure orders when AI inference demand exploded—because design service cycles are short and delivery is fast. In contrast, equipment and materials belong to longer-cycle segments, requiring orders from wafer fabs, production scheduling by manufacturers, and delivery confirmation. The entire chain typically spans three to four quarters.

This rhythm difference played a role in reverse during the July correction. When valuations for AI inference chips were significantly compressed due to market concerns about a computing power bubble, the stock price drawdown for equipment and material companies was relatively smaller—because their orders were already locked into procurement lists for future quarters, having not yet entered the sensitive zone for valuation corrections.

The holding structure of the Huaxia STAR Semiconductor ETF (588170) $ChinaAMC SSE STAR Semiconductor Material & Equipment Thematic ETF(588170.SH) happens to align perfectly with this node. It tracks the SSE STAR Semiconductor Materials and Equipment Theme Index, with constituent stocks selected entirely from those starting with 688 on the STAR Market, focusing on the equipment and materials segments. Among the top ten holdings—Piotech, Hwatsing Technology, AMEC, Skyverse Microelectronics, Kingsemi, and Huafeng Test Control—they basically occupy half of the domestic equipment enterprise supply chain. Added to this are material companies like Anji Microelectronics and NSIG, bringing the cumulative weight of the top ten holdings to approximately 74%.

The uniqueness of this holding structure lies in the fact that it does not engage in chip design nor follow wafer foundries; it only focuses on equipment + materials. While the market discusses 'whether the AI computing power bubble will burst,' the primary risk borne by the holdings of the Huaxia STAR Semiconductor ETF is 'whether domestic equipment orders will stop'—the answers to these two questions are completely different.

A 20 billion liquidity dividend

The scale growth trajectory of the Huaxia STAR Semiconductor ETF over the three quarters of 2026 climbed steadily from approximately 8 billion yuan to about 24.2 billion yuan, making it the largest among current similar STAR Semiconductor equipment ETFs. With a management fee of 0.50% per annum, the cost is at the median level for pure equipment and material ETFs. Reaching this scale corresponds to deep market maker quotes and multiple order book levels—the daily bid-ask spread is among the narrowest in its category. For investors who trade frequently and have large capital inflows and outflows daily, liquidity costs (bid-ask spreads) may cause more erosion to net value than the management fee itself.

More importantly, because this product's constituents are directly linked to 'equipment localization,' after the sharp drop in July, it became one of the first trading entrances opened during the market sentiment recovery phase. The current net asset value has already rebounded by approximately 5%-10% from the adjustment low, while wafer fab procurement data has not yet been fully digested by this round of recovery.

Things to clarify during the hard tech pullback

Placing the sharp drop on July 17 into a longer time frame, it is most likely to serve as a 阶段性 identification tool—separating 'herd-following rallies' from 'targets supported by production orders.'

The stock prices of herd-following targets are pushed up by sentiment and then pulled down by sentiment, lacking intermediate protection. However, equipment companies supported by orders and procurement data have a self-generated safety floor beneath the tension between net value and sentiment. This 'floor' is not an absolute valuation bottom, but rather the resilience inherent in the industry cycle itself.

For investors who are bullish on hard tech but do not wish to individually select stocks during high-volatility phases, the Huaxia STAR Semiconductor ETF (588170) offers a structural choice—replacing bets on individual equipment and material companies with systematic allocation to equipment and materials. Its net asset value fluctuates in sync with core equipment targets such as AMEC, Piotech, Hwatsing Technology, and Skyverse Microelectronics, but is diversified across ten to fifteen leading enterprises, smoothing out single-point volatility through portfolio diversification.

At the low point of this correction, the Huaxia STAR Semiconductor ETF has already attracted some fund inflows—the current net asset value has rebounded by approximately 5%-10% from the adjustment low, while wafer fab procurement data has not yet been fully digested by this round of recovery. When market sentiment bottoms out first and fundamental indicators have not yet caught up, this time lag itself is a signal. Its volatility remains significant, but its directional trend is more controllable than that of individual targets.

Risk Warning: This article is for industry analysis and information sharing only and does not constitute any investment advice. Past performance of the fund products mentioned herein does not predict future results. Fund investment involves risks; caution is advised when entering the market.

Data Source: Tiantian Fund Network, Huaxia Fund Official Website, data as of July 2026.