Driven by overseas AI capacity crowding out, the return of mature node orders, capacity expansion at domestic fabs, and robust AI demand, the semiconductor industry has seen sustained prosperity in 2026. SMIC (Semiconductor Manufacturing International Corporation) and Hua Hong Semiconductor, the two leading players in China's foundry sector, have successively released their Q2 earnings reports. Benefiting from multiple tailwinds, both companies reported substantial increases in net profit, with Hua Hong successfully turning a profit after previous losses.
Previously, TrendForce pointed out that the global mature node market is experiencing a shift in supply and demand dynamics. Not only have the capacity utilization rate and foundry prices for 8-inch wafers stopped declining and begun to rebound, but the 12-inch mature node is also expected to see order transfers driven by TSMC (Taiwan Semiconductor Manufacturing Company)'s planned capacity reductions. Furthermore, some fabs are shifting capacity for 90nm and above High Voltage (HV) processes to power orders. The Chinese supply chain has benefited from this trend, and a pricing hike atmosphere is gradually emerging.
01 SMIC: Net Profit Surges 261.7% Year-on-Year
On August 13, SMIC released its unaudited financial results for Q2 2026. During the reporting period, the company achieved sales revenue of $3.006 billion, surpassing the $3 billion milestone for the first time, representing a year-on-year increase of 36.1%. Net profit reached $479 million, surging 261.7% year-on-year.
The report disclosed revenue breakdowns by different categories. In terms of regional revenue, the proportion of revenue from China further increased to 90.2%, up from 84.1% in the same period last year. The sustained growth in China's revenue is primarily driven by robust demand for AI companion chips, the return of overseas orders, and the continuous strengthening of localized manufacturing. Additionally, the share of revenue from the US region decreased to 8.2%, while the Eurasian region accounted for 1.6%.
Regarding revenue by application, consumer electronics remains the largest segment, accounting for 44.2%; industrial and automotive account for 16.5%; smartphones saw a slight decline, accounting for 18.9%; and computers and tablets increased from 13.6% to 15.6%. Although the revenue share of certain sub-segments decreased, in absolute terms, all application segments achieved quarter-on-quarter growth.
02 Hua Hong Semiconductor: Net Profit Surges 385.9% Year-on-Year, Turning Losses into Profits
On August 14, Hua Hong Semiconductor released its financial report for Q2 2026. The report shows that the company achieved sales revenue of $717.5 million, reaching a historic high and representing a year-on-year increase of 26.8%.
Notably, Hua Hong Semiconductor successfully turned a profit after consecutive quarters of losses. The company reported a net profit of $3.9 million for the quarter, compared to a loss of $17.3 million in the previous quarter. Net profit attributable to shareholders of the parent company reached $38.6 million, surging 385.9% year-on-year.
In terms of regional revenue, revenue from China reached $563.7 million, accounting for 78.6%, up 20.0% year-on-year; revenue from North America was $93.8 million, accounting for 13.1%, up 77.0% year-on-year; and revenue from Europe was $28.0 million, up 90.1% year-on-year. The robust growth in North America and Europe was particularly noteworthy.
Regarding end-market applications, consumer electronics, the largest segment, generated $481.3 million in revenue, accounting for 67.1%, up 34.7% year-on-year; industrial and automotive revenue was $162.1 million, accounting for 22.6%, up 25.5% year-on-year; computing revenue reached $11.7 million, up 48.1% year-on-year; and communications revenue was $62.5 million, down 12.8% year-on-year.
Across its technology platforms, all five of Hua Hong's major process platforms achieved year-on-year growth. Embedded non-volatile memory (NVM) revenue was $200.1 million, up 41.8% year-on-year; standalone NVM revenue was $68.8 million, surging 149.3% year-on-year; analog and PMIC (Power Management IC) revenue was $183.1 million, up 13.0% year-on-year; power devices revenue was $182.3 million, up 9.4% year-on-year; and logic and RF revenue was $83.2 million, up 21.3% year-on-year.
03 Multiple Tailwinds Converge to Drive Shipment Growth
The surge in net profits for SMIC, Hua Hong Semiconductor is underpinned by profound industrial trend logic. It is the result of a resonance among multiple factors, including the global semiconductor cycle, AI spillover demand, supply and demand dynamics, capacity and costs, domestic substitution, and the overall industry landscape.
Taking capacity as an example, the share of revenue from 12-inch wafers at SMIC increased to 78.2%, while 8-inch wafers accounted for 21.8%. In Q2, the company added approximately 8,000 wafers of monthly capacity equivalent to 12-inch, raising the total monthly capacity from 1.078 million wafers in Q1 to 1.097 million wafers (equivalent to 8-inch standard logic). The capacity utilization rate edged up slightly from 93.1% to 93.7%, remaining at a high level above 90%.
AI spillover demand ignites super prosperity in mature nodes. PMICs, power devices, MCUs (Microcontroller Units), memory, and interface control chips required for NEVs (New Energy Vehicles) are mostly concentrated in the 28nm to 130nm mature node and specialty process ranges. Meanwhile, international giants such as TSMC and Samsung continue to concentrate their capacity on advanced node GPU orders, actively shrinking and transferring out traditional mature node capacity. This has caused a persistent shortage of global 8-inch and 12-inch mature foundry capacity, driving a steady increase in wafer prices.
Prominent localization advantages also constitute a major driver of net profit growth.
In Q2, the share of revenue from China at SMIC rose to 90.2%. The continuous increase in stable domestic orders offset fluctuations in overseas markets, serving as a ballast for performance growth.
Hua Hong Semiconductor, on the other hand, has pursued a differentiated strategy, focusing more on segments such as analog power, non-volatile memory, industrial control, automotive electronics, and energy storage MCUs. Furthermore, driven by the contraction of overseas mature node capacity and significantly prolonged delivery cycles for overseas orders, companies have shifted some of their production to domestic wafer fabs to mitigate supply disruption risks, thereby creating market space for domestic substitution.
At the earnings briefing, Zhao Haijun, Co-CEO of SMIC, stated that the growth in Q2 shipments was primarily driven by the surge in AI-related companion chip demand and customers' pull-forward shipments. AI is driving not only advanced nodes but also generating a massive spillover effect on companion chips for mature nodes, including logic circuits, PMICs, optical modules, and power supplies.
Zhao also noted that in a single rack equipped with 72 GPUs, power management alone could require over 16,000 chips, indicating an extremely massive demand.
04 Conclusion
As AI computing infrastructure construction continues to advance and demand for NEV and industrial electronics steadily expands, the global shortage of mature node capacity is expected to persist. Therefore, semiconductor companies such as SMIC are poised to continuously reap the dividends of industrial transfer in the future. In their earnings announcements, both SMIC and Hua Hong Semiconductor also provided relatively optimistic guidance for their Q3 financial results.
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