Key Takeaways
Everbright Securities maintained its “Buy” rating on Semiconductor Manufacturing International Corp. after the chipmaker projected second-quarter revenue growth of up to 16 percent, exceeding analyst expectations.
"AI-related demand, domestic manufacturing reshoring, and dedicated storage orders are continuously strengthening," Everbright Securities said in a research note released May 20. The firm noted that the global AI boom is absorbing overseas foundry capacity, causing consumer and IoT-related orders to flow back to mainland China.
The positive outlook follows a strong first quarter where revenue grew 11.5% year-over-year to $2.505 billion, beating the company's prior guidance. Gross margin was 20.1%, also topping the high end of the company's 18% to 20% forecast range, which it attributed to an improved product mix.
The guidance suggests SMIC is a key beneficiary of a hardware bottleneck in AI, where even industry leader TSMC is struggling to meet demand. In response to the strong order book, SMIC management said it expects to begin raising prices gradually across the second and third quarters of 2026.
Revenue from consumer electronics customers jumped 27% from a year earlier, making up 46.2% of the total in the first quarter. The industrial and automotive segment also saw a significant 63% year-over-year revenue increase. The company's China-based revenue continued to climb, accounting for nearly 89% of the total.
While SMIC is benefiting from strong demand for mature-node chips used in power management and connectivity, its ability to compete at the cutting edge remains a challenge. The complexity of scaling up advanced semiconductor production is immense, a point recently emphasized by TSMC Chairman C.C. Wei, who stated it takes two to three years to build a new fab and another one to two years to ramp up production with no shortcuts.
The report signals that SMIC's near-term growth is secured by strong domestic demand and a spillover from the strained global supply chain. Investors will watch the company's second-quarter results in August for confirmation of margin expansion following the planned price hikes.
This article is for informational purposes only and does not constitute investment advice.
