Domestic AI Demand Lifts Both Foundries
China’s two leading contract chipmakers reported sharp profit growth during the second quarter of 2026. Semiconductor Manufacturing International Corporation and Hua Hong Grace Semiconductor benefited from rising demand for domestic artificial intelligence chips. These products are designed to operate without depending on components restricted by United States export controls.
The results show how demand for computing power is spreading through China’s semiconductor supply chain. Technology companies and start-ups need more chips to train large models and run AI applications. Consequently, local foundries are using their fabrication plants aggressively to satisfy domestic customers.
Profits and Revenue Rise at Triple-Digit Speed
SMIC’s net profit climbed 261.7 per cent from a year earlier to US$479.2 million. Meanwhile, Hua Hong’s profit increased 385.9 per cent to US$38.6 million during the June quarter. Although their scale differs greatly, both companies recorded triple-digit earnings growth.
Revenue also expanded strongly. SMIC generated US$3 billion, representing a 36 per cent annual increase and matching market expectations. Hua Hong reached a quarterly record of US$717.5 million, up 26.8 per cent and above the consensus estimate.
Capacity Expansion Becomes the Next Priority
Full plant utilization reflects the pressure created by fast-growing AI demand. Existing production capacity must serve a broadening range of integrated-circuit needs. The strong quarterly figures therefore indicate both commercial momentum and tighter supply conditions.
Looking ahead, SMIC expects AI-related momentum and spillover effects to continue through the second half of 2026. The company plans to allocate its current capacity more flexibly while accelerating additional production. This strategy is intended to ease supply constraints as domestic customers continue expanding their computing requirements.
References
Cao, A., & Cao, A. (2026, 13 agosto). AI demand drives triple-digit profit growth for Chinese chip foundries SMIC, Hua Hong. South China Morning Post. https://www.scmp.com/tech/tech-trends/article/3363929/ai-demand-drives-triple-digit-quarterly-profit-growth-chinese-foundries-smic-hua-hong?share=DAvnqW%2FhNRaj3wa2%2FdkrjUW71FSGngpuAE0LK1X24VeVwACdZkxCji5JeksOScRowzuLYc1yBpgd6VNeH8xmnziP7PdVQEdbGPlOj8qo12c%3D&utm_campaign=social_share