Surging Profits and Record Revenues
Currently, China’s top two contract chipmakers, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Grace Semiconductor, saw their profits surge by triple digits in the second quarter. This massive growth occurred amid a sudden spike in demand for domestic artificial intelligence chips that remain free of US export controls. Specifically, net profits for SMIC and Hua Hong jumped 261.7 percent and 385.9 percent year on year, reaching $479.2 million and $38.6 million respectively. Meanwhile, SMIC reported a 36 percent revenue increase to $3 billion, while Hua Hong achieved a record $717.5 million. Consequently, these impressive results highlight how local foundries are aggressively running their fabrication plants at full capacity to meet booming domestic needs.
Sustained Demand and Broader Market Momentum
Looking ahead, executives firmly believe the industrial momentum generated by AI will persist well into the future. Furthermore, Hua Hong Grace’s chairman, Bai Peng, attributed the earnings surge directly to increased shipments and improved average selling prices during the ongoing AI cycle. He confidently expects these price increases and high demand to continue throughout the second half of the year and into 2027. This broader momentum is also highly evident among upstream chip designers, such as Iluvatar Corex, which recently reversed a massive previous loss to project significant first-half profits. Additionally, tech giant Lenovo saw its shares jump 20 percent in Hong Kong after posting a record quarterly revenue of $26.9 billion.
Global Rankings and Strategic Projections
Ultimately, these earnings offer a fresh barometer for a Chinese chipmaking sector successfully navigating a complex landscape of tighter US export controls. Based on first-quarter revenue, SMIC now ranks third among global foundries behind TSMC and Samsung Electronics, while Hua Hong sits in sixth place. Moving into the third quarter, both companies actively expect continued revenue growth. Consequently, analysts expect both foundries to maintain extremely high capacity utilization rates, largely driven by Beijing’s aggressive tech self-sufficiency drive. In fact, UBS analysts predict that AI chip fabrication demand will soon emerge as a massive secular driver for tier-1 Chinese foundries, creating a total addressable market well over $10 billion.
Reference
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