High electron mobility transistors (HEMTs) with InAs∕InGaAs composite channel were fabricated by employing low damage, highly selective Ne-based atomic layer etching (ALET) for the dry gate recess process. Ne-based ALET exhibited very high etch selectivity of InP over InAlAs which is suitable for dry gate recess process removing InP etch stop layer on top of InAlAs Schottky barrier layer. The plasma induced damage on the exposed InAlAs surface due to the ALET was much lower than that due to the conventional Ar-based reactive ion etching (RIE), which was verified by atomic force microscopy and Hall measurements. For further comparison, dc characteristics were compared for the two types of 0.3μm HEMTs fabricated by utilizing ALET and conventional RIE during the dry gate recess processes.