SMIC co-CEO sees 2026 revenue topping $12 billion as AI demand stretches chip upcycle

The results and full-year outlook support the argument that AI demand is spilling over from leading-edge chips into mature-node foundries. That is constructive for China’s chip supply chain, and it may help steady sentiment toward SMIC’s Hong Kong shares after a steep sell-off. The warning about equipment delivery times points to strong demand for tools, a positive read-through for chip equipment makers that fits Applied Materials’ upbeat outlook this week. The Q4 margin guidance below Q3’s 29.9% will temper enthusiasm. So will continued questions over how quickly AI spending pays off, which could cap any rebound across Asian chip stocks.--- SMIC’s co-CEO expects AI to keep the chip boom going for longer and full-year revenue to top $12bn. His warning that equipment shortages could disrupt spending shows how tight the supply chain has become.Summary:Co-CEO Zhao Haijun expects full-year revenue above $12bn, up nearly 30%, with gross margin around 26%, about 5 points higher than last yearHe says AI demand could extend the semiconductor upcycle, alongside the ongoing localisation of China’s chip supply chainTight global equipment supply and longer delivery times may disrupt full-year capex, though not this year’s capacity expansionQ3 revenue rose 34% to a record $3.19bn, and net profit more than doubled to about $428m, beating forecasts near $397mQ3 gross margin of 29.9% topped guidance; Q4 guidance is revenue up 4% to 6% sequentially with margin of 26% to 28%SMIC’s Hong Kong shares fell 32% in Q3 and about another 20% so far this quarter SMIC co-chief executive Zhao Haijun said the company expects full-year revenue to top $12 billion, up nearly 30% from last year. He argued that demand from artificial intelligence could extend the current semiconductor upcycle. Speaking on the company’s third-quarter earnings call, he also warned that tight global supplies of chipmaking equipment could disrupt the timing of its capital spending.Semiconductor Manufacturing International Corp, better known as SMIC, is China’s largest contract chipmaker. It was founded in 2000 and is based in Shanghai. Like Taiwan’s TSMC, it is a foundry: it makes chips that other companies design, rather than selling chips under its own name. Most of its output is mature-node chips, the older but widely used technology found in power management, connectivity, cars and consumer electronics. SMIC is listed in Hong Kong and on Shanghai’s STAR Market, and is central to Beijing’s push for chip self-sufficiency. The United States placed it on its Entity List in 2020, restricting its access to American technology, including the most advanced chipmaking tools. That makes it a closely watched gauge of how far China can advance its chip industry under those controls.Zhao said gross margin for the year should come in around 26%, about 5 percentage points higher than last year, even as total depreciation rises by roughly 30%. He described two near-term certainties for the industry. The first is AI demand extending the cycle and changing how growth plays out. The second is the large-scale, ongoing localisation of China’s chip supply chain. SMIC plans to rely on its ties with Chinese customers, expand capacity in line with their demand and prioritise higher-value products to protect cash flow through the cycle.The equipment warning is the main caveat. Zhao said supply chains for chipmaking tools are generally tight, with longer delivery times and uncertainty over when some machines will arrive. He said that will not derail this year’s capacity expansion, but it may disrupt how capital spending is carried out over the full year.His comments followed another record quarter. Revenue rose 34% from a year earlier to about $3.19 billion, after topping $3 billion for the first time in the second quarter. Net profit more than doubled to around $428 million, ahead of analysts’ forecasts of about $397 million. Gross margin reached 29.9%, beating the company’s own guidance of 26% to 28% on higher wafer prices and a more profitable product mix. The fabs ran at about 97% utilisation.SMIC is benefiting from AI indirectly. The leading foundries are devoting more capacity to advanced AI chips, so customers in China and abroad are turning to China for mature-node chips. These are used for power management, connectivity and other supporting roles in data centres and consumer electronics. TrendForce data show SMIC’s global foundry market share rose to 5.4% in the second quarter, closing in on Samsung’s 5.9%, though both remain far behind TSMC.For the fourth quarter, SMIC guided for revenue growth of 4% to 6% from the third quarter, with gross margin of 26% to 28%. The results now face a sceptical market. The company’s Hong Kong shares fell 32% in the third quarter and have lost about another 20% this quarter, as investors question how quickly heavy AI spending will pay off.  This article was written by Eamonn Sheridan at investinglive.com.