The problem
China entered the chip race with no domestic foundry able to mass-produce advanced logic semiconductors — every CPU, GPU, and AI chip depended on foreign fabs and foreign tools. SMIC was founded in Shanghai in 2000 to close exactly that gap.
How it works
SMIC runs fabrication plants that turn customer chip designs into finished wafers — logic parts plus the power, sensor, and connectivity chips where much of the latest AI-related demand sits. It sells manufacturing capacity by the wafer, negotiates prices quarterly, and is accelerating qualification of new lines as AI orders push utilisation near maximum. It remains China’s only foundry mass-producing 7nm-class logic, done with deep-ultraviolet multi-patterning since extreme-ultraviolet tools are denied to it.
Pain points
Domestic designers risk being cut off from leading-edge capacity abroad; AI demand has tightened supply and lifted prices; and export controls on tools, spares, and servicing mean equipment degrades without vendor support.
Business model
Per-wafer foundry revenue — average selling prices rose 5.7% sequentially in Q2 2026 — backed by public equity, state investment funds, retained earnings, and local-government support for specific fabs; extreme capital intensity keeps capacity investment heavy through the restriction period.
Challenges
The Entity List blocks advanced-node equipment and servicing; pushing tighter nodes via multi-patterning multiplies defect risk, so advanced output works for limited-volume flagships rather than mass-market AI accelerators; and fast mature-node expansion has already drawn trade investigations in the US and Europe.
Funding
- Raised: undisclosed (MISSING); listed in Hong Kong and Shanghai with substantial state ownership via the National Integrated Circuit Industry Investment Fund.
Latest — August 2026
On 13–14 August 2026 SMIC reported Q2 2026 revenue above US$3 billion for the first time (up 20% quarter-on-quarter) with profit tripling to US$479.2 million, gross margin at 25.3%, and wafer-price increases as AI demand tightened supply; management guided further strength into the second half of 2026.