Gasgoo Munich- On Aug 14, SMIC Co-CEO Zhao Haijun revealed at a second-quarter earnings briefing that surging demand for AI-related chips, returning overseas orders, and accelerated localized manufacturing drove the company's revenue in China to become the primary growth engine this quarter, climbing 22%. By application, all five major downstream sectors posted sequential gains in absolute terms, signaling that shifting capacity toward shortage areas is paying off.Image Source: SMICBy application, second-quarter revenue was split between smartphones (17%), computers and tablets (16%), consumer electronics (44%), connected and wearables (7%), and industrial and automotive (17%). The computer and tablet sector, along with industrial and automotive, saw the sharpest growth—up nearly 40% sequentially in absolute terms—riding the wave of AI spillover effects. That surge is a direct result of SMIC actively reallocating capacity to prioritize orders in high-demand sectors.Notably, the broader markets for smartphones, consumer electronics, and connected wearables still face headwinds. Yet, downstream clients front-loaded their inventory, buffering the sector against the industry cycle's downturn. As a result, all three segments still managed sequential gains: smartphones rose 8%, consumer electronics climbed 16%, and connected and wearables grew 13%.The regional breakdown highlights a strengthening push for supply chain autonomy, as returning overseas orders bolster the domestic foundry order book. The AI wave isn't limited to high-end computing chips; it is also driving a sudden surge in demand for mature-process chips used in server power management, industrial control, and automotive electronics. That shift is opening up new growth space for domestic wafer manufacturers.Image Source: SMICThe spillover from AI is set to continue. SMIC plans to keep flexibly scheduling existing capacity while accelerating the validation and rollout of new production to meet critical supply chain needs. Even as traditional consumer electronics struggles, AI support chips, along with industrial and automotive components, are emerging as the new growth engines driving SMIC's performance.On August 13, SMIC (00981.HK/688981.SH) released its financial results for the second quarter of 2026. Revenue hit $3 billion—a 20% sequential surge and a significant year-over-year jump. Gross margins climbed to 25.3%, up 5.2 percentage points from the first quarter's 20.1% and markedly improved from 20.4% a year earlier, signaling a major restoration in profitability.Looking ahead, SMIC provided a clear outlook for the third quarter of 2026, projecting revenue growth of 2% to 4% sequentially. The company expects gross margins to hold between 26% and 28%, with profitability continuing its steady climb and sustaining the positive growth trajectory.
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