SMIC Sees AI Chip Shortage Through 2027, Forecasts $12 Billion 2026 Revenue

SMIC expects revenue above $12 billion in 2026, a rise of nearly 30% year over year, co-CEO Zhao Haijun told analysts on the company's third-quarter earnings call on Friday morning, Hong Kong time. He guided gross margin to around 26%, an increase of roughly 5 percentage points over 2025. The forecast rests on demand for AI-related chips that he expects to outrun supply through 2027.

Zhao's argument is broad rather than narrow. He said AI is still at an early stage, customers report shortages of computing capacity, and demand does not depend on one region or one customer. He did not name the customers. The transcript records no management comment on US export controls, a notable omission given the company's position as China's leading contract chipmaker.

What did the third quarter deliver?

The call followed Thursday's results. Third-quarter revenue rose 34% from a year earlier to $3.19 billion, beating SMIC's own forecast. The company added about 20,000 wafers per month of capacity, measured in 8-inch equivalents, during the quarter.

Zhao said utilization will ease slightly in the fourth quarter as more capacity comes online. He expects total depreciation to rise about 30% this year. Chief financial officer Wu Junfeng said depreciation will climb again in 2027, with a figure to come at the next results call.

Why do tools, not orders, set the pace?

"The overall global equipment supply chain remains tight with extended lead times, and delivery timelines for some equipment remain uncertain," Zhao said on the call. In the question-and-answer session he quantified the problem. New tool orders carry lead times of roughly 16 to 24 months, and more than 24 months for the scarcest machines.

The consequence is a slip in spending, not in capacity. Some equipment due in 2026 will arrive in 2027, Zhao said. The 2026 expansion plan is unaffected, but quarterly capital spending will run below earlier expectations. Wu said full-year capex may come in slightly under plan. Management did not specify the size of the shortfall.

On the shortage timeline, Zhao expects memory supply to catch up in mid-to-late 2028. Compute and companion chips will stay short, in his view, even as memory recovers. That is a roadmap claim, not a booked figure.

Where are prices moving?

Blended wafer prices rose 1.8% from the second quarter, as price increases agreed with customers took effect in phases. Zhao said SMIC does not lead the market on pricing. He expects prices to rise for AI-related, automotive and industrial products. Mobile and low-end consumer chips are unlikely to see increases and may see cuts.

Fourth-quarter revenue is guided to grow 4% to 6%. Zhao expects roughly half of that growth to come from volume and half from price and mix. That split matters. It shows pricing, not just loading, now drives part of the expansion, and it signals which end markets can absorb higher wafer costs.

What is happening in China?

Zhao said SMIC benefited from "the domestic supply chain reshuffling" and that "the broad-based localization development of the entire industry chain still continues." Revenue from Chinese customers rose 7% from the second quarter. He offered no annual comparison for that figure. The claim of continued localization is a management characterization rather than a measured trend.

How have shares reacted?

Investors have not followed the revenue story. SMIC's Hong Kong-listed shares fell 32% in the third quarter and about another 20% so far this quarter, InvestingLive reported. The stock decline sits against guidance of nearly 30% revenue growth, a gap management did not address in the transcript.

The tension is plain. A $12 billion revenue forecast, rising margins and phased price increases point one way; a halved share price and capex slipping into 2027 point the other. Whether tool lead times of up to two years cap the 2027 ramp, or merely delay it, will decide which signal the market has priced correctly.