Machine Tool ETF Huaxia (159663): An Underestimated "Intelligent Manufacturing Revolution" Is Unfolding

Recently, while market attention has focused on sectors like artificial intelligence and semiconductors, a neglected theme has been continuously reaching new highs: machine tools.

Since 2026, the Huaxia Machine Tool ETF (159663), a relatively small ETF product, has performed remarkably. As of May 8th, its net asset value has increased by 40.26% year-to-date, ranking among the top in stock ETFs. This performance is not accidental but the inevitable result of multiple factors resonating together. Behind the data, we see an ongoing wave of manufacturing upgrades and a historic opportunity for China’s industrial mother machines to leap from “big but not strong” to “high-precision and cutting-edge.”

01 Prosperity Accelerating Rebound, Full Recovery in Demand

Since the third quarter of last year, the prosperity of the machine tool industry has begun to rebound comprehensively. In the first quarter of this year, this trend continued to accelerate. On a micro level, order data from leading machine tool manufacturers confirmed the industry’s genuine recovery. Several top companies in the industry achieved double-digit growth in their first-quarter performance. During institutional surveys, many companies reported strong order momentum this year, with capacity utilization rates quite full, and some high-end models even experiencing delivery shortages.

This recovery is not merely a simple cyclical rebound but driven by a structural boom resulting from the resonance of downstream demands such as AI computing infrastructure, semiconductors, new energy vehicles, and humanoid robots. Especially, the demand for liquid cooling plate processing driven by AI server construction and the huge need for precision components ahead of mass production of humanoid robots have opened new growth space for the machine tool industry.

02 Accelerated Domestic Substitution, High-End Breakthroughs Are Timely

For a long time, China’s machine tool industry has been considered “big but not strong.” However, this situation has subtly changed in recent years. By 2025, China’s CNC (Computer Numerical Control) rate in the machine tool industry was about 51%. Although still below the 70%-80% level of developed countries like the US, Germany, and Japan, this gap is narrowing rapidly.

In 2025, China’s metal processing machine tool production reached 219.8 billion yuan, a 6.9% year-over-year increase, while import quantities and values grew only slightly, indicating that domestic high-end machine tools are gradually meeting market demand, accelerating substitution. Meanwhile, export data is also impressive: in 2025, machine tool exports increased by 14.60% year-over-year, with the average export price soaring by 40.19%, demonstrating significant progress in high-end transformation.

Notably, policy support has been unprecedented. The “Mechanical Industry Stabilization Growth Work Plan (2025-2026)” and the “High-Quality Standard System Construction Plan for Industrial Mother Machines” are continuously implemented, promoting product upgrades toward high-end and intelligent manufacturing. As the “mother machine” of manufacturing, industrial mother machines’ strategic importance continues to rise. The new energy, artificial intelligence, and low-altitude economy sectors provide broad application scenarios for industrial mother machines.

Meanwhile, the domestic substitution of upstream core components is accelerating. Since early 2026, imported CNC systems have faced longer delivery cycles or even shortages, providing a rare window for domestic CNC system companies to replace imports.

03 From Traditional Manufacturing to Intelligent Manufacturing

When we review the strong performance of the Huaxia Machine Tool ETF this year, one key conclusion emerges: besides performance factors, this rally is fundamentally a reconstruction of valuation logic.

Traditionally, machine tools have been viewed as a cyclical sector within manufacturing, with valuation levels suppressed over the long term. However, the current industrial mother machine sector no longer limits itself to traditional machine tool companies but also includes high-growth targets like humanoid robots, PCB equipment, and nuclear fusion.

The Huaxia Machine Tool ETF tracks the CSI Machine Tool Index, which selects 50 listed companies involved in machine tools and their key components manufacturing and services from the Shanghai and Shenzhen markets. The index reflects the overall performance of listed companies in the machine tool industry. Its top ten holdings include companies like Huagong Tech, Han’s Laser, China Tungsten High-tech, Xiamen Tungsten, Haomai Technology, Green Harmonic, Inovance Technology, among others. These companies not only have competitive advantages in traditional machine tools but also hold key positions in emerging fields such as humanoid robot core components, AI computing infrastructure, and strategic metals. This diversified composition means that the valuation of the ETF incorporates both traditional business valuation and growth expectations for emerging sectors.

04 Three Logical Supports for Medium- and Long-Term Investment Value

In the short term, the Huaxia Machine Tool ETF has seen considerable gains. But in the medium to long term, the investment value of the machine tool sector remains well-supported by solid logic.

First, the equipment renewal cycle is arriving. China’s machine tool industry has entered a period of strong demand for equipment upgrades. Based on a roughly ten-year renewal cycle, machines purchased around 2016-2017 will reach their renewal peak in 2026-2027. Supported by national policies for large-scale equipment updates, the demand for CNC upgrades in China is expected to continue growing, further elevating the industry’s high-end CNC levels.

Second, the mass production of humanoid robots acts as a catalyst. Tesla’s Optimus Gen3 is expected to start production around mid-2026 and move toward large-scale mass production in 2027. Domestic humanoid robot companies are also expected to see significant growth in commercial mass production in 2026. As the core manufacturing foundation of humanoid robots, industrial mother machines and related precision components and actuators are entering a critical period of transition from “traditional manufacturing” to “intelligent manufacturing.” This trend will generate sustained demand for the industry.

Third, the outward expansion (going abroad) logic is gradually materializing. In 2025, China’s machine tool exports saw a 40% increase in average export price, indicating growing recognition of domestically produced high-end machine tools in overseas markets. With increasing orders from Japan, Europe, and other regions, as well as domestic companies expanding their overseas presence, the export expansion logic is gradually coming true, providing new growth momentum for the industry.

Of course, investors should also be aware of potential risks. Intensified industry competition may pressure corporate profits; delays in R&D and capacity building could also impact growth prospects.

From a allocation perspective, although the sector has surged in the short term, the long-term growth logic remains clear. Multiple application scenarios are gradually translating into orders. For investors optimistic about China’s manufacturing upgrade, domestic substitution, and humanoid robot industries, the machine tool ETF still offers significant allocation value. A dollar-cost averaging or phased investment approach is recommended to share in the long-term growth dividends.

After all, this “smart manufacturing revolution” driven by technological upgrades, policy support, and demand explosion has only just begun.

Risk warning: Funds are subject to risks; investments should be cautious. Past performance does not guarantee future results. The performance of other funds managed by the fund manager does not constitute a guarantee of this fund’s performance.