Shanghai Huahong Grace Semiconductor Manufacturing Corporation — China's second-largest chip foundry — is running its fabs above full capacity on demand from AI, industrial and automotive customers, and expects that momentum to carry into 2026, according to CFO Daniel Wang.

Wang, speaking on CNBC's Squawk Box Asia, also addressed the regulatory question hanging over every Chinese chipmaker, saying HHGrace has "always been compliant" with U.S. export controls. The remark positions the Shanghai-based foundry, which trades in Hong Kong as 1347-HK, as a partner that multinational customers can work with despite the widening perimeter of U.S. restrictions on China's semiconductor sector.

The capacity picture is the sharper commercial signal. Running above full utilization — a condition where actual wafer output exceeds the nominal nameplate rate, typically achieved by stretching tool productivity and wafer starts — signals that pricing leverage sits with the foundry, not the customer, at HHGrace's process nodes. Demand strength is broad-based, spanning AI-related silicon, industrial controllers and automotive chips, the segments that anchor Huahong's specialty-process portfolio of power discretes, embedded non-volatile memory and analog/mixed-signal platforms.

Wang also weighed in on the memory market, arguing that the current boom may last longer than previous cycles because AI demand has added a structural leg to consumption. But he cautioned that this view does not repeal the industry's underlying economics. The semiconductor business "remains fundamentally cyclical," he said — a reminder that foundries and memory vendors alike have historically over-expanded into demand peaks and paid for it in the trough.

For HHGrace, the near-term setup is straightforward: capacity is constrained, demand from diversified end markets is holding, and the company expects the pattern to persist into 2026. The compliance declaration, meanwhile, is directed at customers and regulators in Washington alike, as U.S. export rules continue to redraw which Chinese fabs global chip designers are willing to book wafer starts with. If AI demand keeps utilization above full capacity through 2026 as Wang projects, HHGrace enters its next phase with tight supply, firm pricing and a compliance record it is actively marketing as a competitive asset.