Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor forecast higher second-quarter revenues driven by soaring artificial intelligence chip demand and a global memory shortage, with Hua Hong optimistic about potential relaxation of US export controls following high-level US-China talks.
- SMIC and Hua Hong forecast Q2 revenue increases amid AI chip demand
- Memory supply crunch drives up prices benefiting foundries
- Export control relief hopes linked to Xi-Trump meetings
What happened
China’s foremost semiconductor foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, have announced optimistic revenue forecasts for the second quarter of 2026. SMIC expects revenues to climb to between $2.86 billion and $2.91 billion, marking an increase from $2.51 billion recorded in the first quarter. Similarly, Hua Hong anticipates revenues between $690 million and $700 million, up from $661 million previously. Both companies attribute this rise to escalating demand fueled by artificial intelligence applications and a tightening global memory chip market.
Despite ongoing US export restrictions affecting semiconductor equipment supplies, Hua Hong’s leadership downplayed their impact on the firm’s expansion projects, particularly the construction of its new Fab 9B facility in eastern Jiangsu. The company expressed cautious optimism that ongoing high-level diplomatic exchanges between China and the United States, including President Xi and former President Trump’s meetings, may lead to a relaxation of trade controls that presently constrain access to key chip production tools.
Why it matters
The semiconductor market is currently experiencing a significant supply crunch, especially in memory chips such as DRAM, NAND, and NOR flash. This shortage is driven by increased consumption in AI data center infrastructure, which requires advanced chips and wafer capacities. The supply-demand imbalance has pushed prices upward, benefiting chipmakers like SMIC and Hua Hong that maintain high capacity utilization rates and can capitalize on higher average selling prices. Their ability to meet rising orders positions them favorably amid global industry disruptions.
Chinese foundries traditionally focus on analogue and logic chips, but increasing AI adoption accelerates demand for components like microcontroller units (MCUs), flash memory, and power management chips. Domestic demand and strategic investments in long-term AI infrastructure signal a shift beyond periodic capacity expansion towards sustained growth. This makes the sector a critical element in China’s technology self-reliance ambitions and a focal point for ongoing geopolitical trade negotiations.
What to watch next
Market watchers should closely monitor the outcome of Sino-US diplomatic engagements and any resulting changes to export controls on semiconductor manufacturing equipment. A relaxation in restrictions could enable Chinese foundries like Hua Hong to accelerate capacity expansion and technology upgrades, improving their competitive position in the global chip market. Progress in these talks could also influence investment flows and supply chain stability for the wider semiconductor ecosystem.