SMIC Defies Tech Downturn: How AI Chip Demand Is Fueling China’s Semiconductor Resilience
While the broader semiconductor sector hits the brakes, one Chinese foundry is finding its accelerator—in artificial intelligence.
The AI Lifeline
Forget the slowdown headlines. A surge in orders for high-performance computing and AI training chips is creating a revenue floor for Semiconductor Manufacturing International Corporation (SMIC). As global demand for consumer electronics stutters, the insatiable need for processing power in data centers and for frontier AI models is redirecting capital flows. SMIC's story isn't about overall market growth; it's a stark pivot toward where the money's moving now.
Strategic Pivot in Action
This isn't luck—it's a calculated shift. The company is channeling capacity and R&D focus toward the nodes and packaging technologies that AI workloads crave. It’s a classic case of a strategic hedge: when one sector cools, another overheats. They're not just filling fabs; they're aligning their roadmap with the most capital-intensive trend in tech. Every major cloud provider's expansion plans now read like a purchase order for companies like SMIC.
The Geopolitical Calculus
Let's be real—the AI chip race is as much about sovereignty as it is about specs. With export controls shaping global supply chains, domestic Chinese demand for locally produced AI silicon isn't just a market opportunity; it's a national imperative. SMIC sits at the nexus of this, providing a crucial, onshore alternative for developers and tech giants navigating an increasingly fragmented tech landscape. Their revenue stability is a direct function of this geopolitical tension.
What It Means for the Broader Slump
One segment's boom rarely lifts all boats. The AI-driven demand is creating a stark bifurcation within the industry. Companies tied to legacy consumer tech are feeling the full brunt of the downturn, while those with exposure to AI infrastructure are reporting a different reality. SMIC's results are a leading indicator—a signpost showing where industrial and investment capital is digging in for the long haul, cynical finance jab: proving once again that in a downturn, money doesn't vanish, it just gets more picky about which hype cycle to chase.
The takeaway? In today's market, resilience isn't about avoiding the storm—it's about catching the right wind.
SMIC ships more wafers because strong AI demand keeps its factories busy
SMIC said its revenue in 2026 increased by 16.2% year over year to $9.3 billion, driven by strong demand for AI chips, enabling the company to grow even as other parts of the market slowed. The company stated that net profit jumped 39% to $685.1 million because it shipped more wafers and ran its manufacturing plants closer to full capacity.
In 2025, SMIC shipped 21% more wafers, totaling 9.7 million units, compared to 8 million units shipped in 2024. The company’s plants are currently operating NEAR maximum capacity, with factory use rising by 8% to 93.5% because demand is strong enough to run the machinery almost around the clock.
The tariffs imposed by the U.S. on China in 2025 made it imperative for China to encourage its industries to produce their own chips rather than rely on external sources. The need has increased as more local companies rely on local sources rather than external ones, thereby boosting demand for SMIC.
SMIC’s factories have become so busy that the company has started increasing prices by about 10% on some production lines, underscoring how demand for AI-related and power-management chips keeps growing.
SMIC earns less profit because phone orders are weaker and costs are higher
Even as SMIC continues to benefit from strong AI demand, its profit fell short of analysts’ expectations due to weaker orders for low-end products. As a result, the company’s Hong Kong-listed shares dropped by about 3% after it released its earnings report, and investors noticed the weaker profit result.
During the earnings call, the company’s co-CEO, Zhao Haijun, stated that orders from smartphone manufacturers and other makers of low-end electronics are being “squeezed.” This is because the global chip industry is prioritizing the development of advanced chips for artificial intelligence, leaving less room for simpler chips that once made up a large part of the industry.
This challenge is made all the more difficult by the semiconductor industry’s current shortage of critical memory chips. In their race to produce better and better chips for AI data centers, they are consuming more and more manufacturing resources and wafer capacity, thereby driving up the cost of chip supply chains across the board.
Because memory chips and wafer space are harder to obtain, several businesses, including smartphone manufacturers, have already been forced to scale back their planned production. That represents another decrease in demand for lower-end chips, adding more pressure on companies like SMIC.
Nevertheless, Zhao stated that SMIC remains well-positioned in the current industry cycle. In addition, the company is prepared to address any urgent market needs to support revenue growth in 2026. SMIC believes that, despite its challenges, there are long-term opportunities driven by AI and China’s push for local chip production.
Meanwhile, the broader AI bubble continues to evolve the global semiconductor market. In fact, worldwide semiconductor sales set a record high of $791.7 billion during 2025. It is expected that semiconductor sales could reach $1 trillion in 2026, clearly indicating the influence of AI on the next phase of semiconductor market evolution.
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