Yes, it's fine.
The XXX that replaces the existing YYY is a noun phrase. You can consider it as a black box being placed into the surrounding sentence.
One of the key components will be [something].
Consider an actual sentence rather than just the variables:
One of the fruits on display will be the Gala apple.
You can add adjectival information to the noun:
One of the fruits on display will be the Gala apple [that won first prize at the harvest competition].
Returning to your original sentence:
One of the key components will be XXX [that replaces the existing YYY].
The only thing that makes this look strange is the use of the variables. Here is a more exact sentence that uses an actual example:
One of the new technologies on display will be the Wonder Car [that replaces the existing types of gasoline with white bread for its fuel].