SMIC Hits $3 Billion Quarterly Revenue Milestone Amid AI Surge
China's largest foundry sees profits triple and capacity utilization soar as domestic demand for AI silicon offsets U.S. sanctions.
Chinese semiconductor foundry SMIC has crossed the $3 billion quarterly revenue threshold for the first time, signaling a significant expansion of China's domestic chip-making capabilities. The milestone comes as surging demand for AI-related silicon drives both volume and pricing power for the company.
In the second quarter of 2026, SMIC reported revenue of approximately $3.006 billion. This financial growth was accompanied by a sharp rise in profitability, with profit attributable to shareholders reaching $479.2 million, nearly tripling on a year-on-year basis. Operational metrics also showed strong momentum; the company shipped 2.9 million 8-inch-equivalent wafers in Q2, representing a 14% increase over the previous quarter. This volume pushed capacity utilization to 93.7%.
Domestic Market Dominance
The growth is heavily concentrated within China, which accounted for 90.2% of SMIC's second-quarter revenue. In contrast, the U.S. market contributed 8.2%. This shift underscores a broader trend of Chinese firms seeking homegrown silicon solutions to mitigate the risks of international supply chain disruptions.
SMIC has operated under intense pressure due to U.S. sanctions designed to restrict China's access to advanced chip-making equipment, specifically extreme ultraviolet (EUV) lithography. To counter these restrictions, the foundry has focused on expanding its domestic footprint and leveraging deep ultraviolet (DUV) lithography to maintain production of advanced nodes.
Pricing and Industry Impact
The surge in demand has allowed SMIC to begin adjusting its cost structure. Co-CEO Zhao Haijun noted that the company needs to negotiate with customers for "fairer pricing," citing a persistent gap between SMIC's current rates and those of industry-leading wafer prices. This move toward higher pricing suggests that the domestic appetite for AI chips is strong enough to sustain growth despite the lack of the most advanced global tooling.
For the broader industry, SMIC's ability to scale revenue and increase prices indicates a growing level of self-reliance within China's semiconductor ecosystem. By successfully capturing the domestic AI market, SMIC is demonstrating that trade sanctions may not be sufficient to halt the development of advanced computing hardware in the region, potentially shifting the global balance of manufacturing power.
Future Outlook
Investors and analysts are now watching whether SMIC can maintain these utilization rates as it continues to scale. While the company has proven it can drive revenue through domestic demand, the long-term challenge remains the acquisition of next-generation equipment. It remains to be seen if DUV-based processes can keep pace with the rapid evolution of AI hardware requirements or if the gap between SMIC and global leaders will widen as EUV technology becomes more critical.