SMIC Sees Influx of Foreign Orders Amid AI Chip Boom

Key Takeaways

China's top contract chipmaker, Semiconductor Manufacturing International Corp (SMIC), reported an increase in orders from overseas clients. Co-CEO Zhao Haijun stated that the global AI boom is tightening capacity at foreign foundries, leading many customers to shift manufacturing orders to China where capacity is more available.

Global Market Situation

As semiconductor firms worldwide pivot production towards high-demand AI-related products and high-bandwidth memory, capacity for legacy foundry products has diminished. This shift creates a significant opportunity for Chinese foundries. According to Semicon China, Chinese foundries' share of global legacy-node capacity is projected to increase from 32% in 2025 to 41% in 2027.

Impact on SMIC and the Market

SMIC is aggressively expanding its own capacity to meet this demand, anticipating a 30% rise in depreciation expenses from last year. In the first quarter, the company's utilization rate was 93%, with China accounting for 89% of its revenue. The company is positioning itself to capture a larger share of the global market as non-AI product capacity tightens elsewhere.

Summary and Outlook

The trend of redirecting orders to Chinese foundries is expected to be long-term. As demand for AI chips continues to grow, it will likely further squeeze capacity for non-AI products, solidifying the strategic importance of foundries like SMIC with available production lines.

FAQ

Q: Why are foreign clients shifting chip orders to SMIC?
A: The global AI boom has caused capacity shortages at overseas foundries, which are prioritizing AI chips. This pushes clients seeking legacy product manufacturing to Chinese firms with available capacity.

Q: What is SMIC's primary market?
A: China remains SMIC's largest market, contributing 89% of its revenue in the first quarter.

Source: Investing.com