The expanding global AI market is driving a sudden surge in demand for mature-node semiconductors, pushing overseas foundries to focus on high-end AI chips and steering legacy chip orders to Chinese suppliers, according to Semiconductor Manufacturing International Corporation (SMIC).
- AI growth causes shortage in mature-node chips globally
- Chinese foundries absorb overflow demand from international peers
- Capacity constraints expected to worsen into 2027
What happened
The rapid expansion of AI technologies has triggered increased demand for mature-node semiconductors, especially power management integrated circuits (PMICs) critical to AI servers. This has prompted major global semiconductor producers to prioritize producing high-margin AI and high-bandwidth memory chips, reducing availability for legacy products.
In response, customers in consumer electronics, IoT, electric vehicles, and robotics have turned to Chinese foundries such as SMIC and Hua Hong Semiconductor to meet capacity needs. SMIC reported a wafer utilization rate exceeding 93% in the first quarter of 2026 and revenues heavily weighted towards China, a clear indicator of the local demand surge.
Why it matters
The shift in production focus by global leaders like TSMC and Samsung is creating a bottleneck for mature-node chips, impacting industries reliant on these legacy products. This capacity squeeze limits the supply of chips essential for power management and specialty memory, areas critical to many AI-related and traditional hardware applications.
Chinese foundries benefiting from redirected demand illustrates the evolving global semiconductor supply chain dynamics and highlights China’s growing role in producing essential mature-node chips. This trend supports domestic supply chain localization and reduces reliance on overseas suppliers amid geopolitical tensions and market uncertainties.
What to watch next
Industry observers should monitor how capacity constraints evolve alongside investments in AI data centers, which are expected to increase through 2027 and further squeeze mature-node chip production. The extent to which Chinese foundries can scale production to meet this growing demand will influence the global chip supply balance.
Additionally, watch the financial performance and capacity expansion plans of Chinese foundries such as SMIC and Hua Hong Semiconductor. Their ability to maintain high utilization rates and secure revenue growth amid the shifting global chip manufacturing landscape will be key indicators of ongoing supply chain shifts.