‘Panic’ over capacity crunch in mature node chips drives orders to Chinese fabs

The global AI boom is driving orders back to Chinese foundries as overseas rivals shift production towards high-margin AI chips and high-bandwidth memory, creating a shortage in mature-node semiconductors, according to the head of China’s top contract chipmaker. “AI demand has directly pushed power-management and other mature capacity into shortage,” said Zhao Haijun, co-CEO of Semiconductor Manufacturing International Corporation (SMIC), during the company’s first-quarter earnings call on Friday. Zhao noted that the squeeze was prompting consumer electronics and IoT customers to seek capacity in mainland China – a trend reinforced by electric vehicle demand, a robotics boom, domestic supply-chain localisation, and companies stockpiling. His comments align with broader market data. The average utilisation rate for older generation 8-inch wafers at the world’s top 10 foundries was expected to hit nearly 90 per cent in 2026, up from 80 per cent in 2025, according to TrendForce. The rebound is driven by surging demand for power management integrated circuits (PMICs) used in AI servers. With global leader Taiwan Semiconductor Manufacturing Company (TSMC) planning to reduce some 12-inch mature-node capacity, Chinese suppliers and second-tier foundries are absorbing the overflow, the research firm said. SMIC’s own metrics reflect this migration. The company’s overall wafer utilisation rate rose to 93.1 per cent in the March quarter, up from 89.6 per cent a year earlier even as monthly capacity expanded. Revenue from China climbed to nearly 89 per cent of its total. In the last quarter of 2025, SMIC was the world’s third-largest foundry with a 5.2 per cent market share, though it lagged far behind TSMC at 70.4 per cent and Samsung Electronics at 7.1 per cent, TrendForce data showed. Zhao warned that the capacity squeeze had not peaked. He anticipated that rising AI data centre investments through 2027 would further crowd out non-AI semiconductor production, making overseas supply for legacy products increasingly unreliable. This “panic” extended to memory, he said. As international players discontinue small-volume specialty NOR and NAND flash products, customers are turning to Chinese foundries to secure supply. SMIC reported first-quarter revenue of US$2.51 billion, up 11.5 per cent from a year earlier. Net profit attributable to shareholders rose to US$197 million from US$188 million, while gross margins narrowed to 20.1 per cent from 22.5 per cent. The company guided for second-quarter revenue growth of 14 per cent to 16 per cent quarter on quarter, with gross margins of 20 per cent to 22 per cent. Smaller domestic foundry rival Hua Hong Semiconductor also reported stronger first-quarter results, with revenue rising 22.2 per cent from a year earlier to US$660.9 million and net profit attributable to shareholders increasing to US$20.9 million. Hua Hong guided for second-quarter revenue of US$690 million to US$700 million, compared with US$661 million in the prior quarter. On Friday, SMIC’s Hong Kong-listed shares closed down 0.49 per cent to HK$71.15, while Hua Hong fell 8.74 per cent to HK$115.90.