SMIC sees AI chip supply staying tight into 2027

what happened

China's largest contract chipmaker, SMIC, said on Friday that the artificial intelligence industry is still in its early stages and that demand remains strong. Co-CEO Zhao Haijun made the remarks, Reuters reports, in response to a question on whether AI stocks were forming a bubble.

According to Zhao, many customers who need computing resources still face shortages. The supply chain for AI semiconductors will stay tight through 2027, driven by demand from data centres and private clouds. Memory chip supply and demand are expected to reach balance toward the middle or end of 2028. SMIC expects full-year revenue to exceed $1.2 billion as its capacity utilisation keeps rising.

The company, however, faces longer equipment lead times, with some orders taking more than 24 months to deliver, which will affect its capital spending this year. Depreciation expense, Zhao said, will rise about 30% year on year in 2026.

why it matters

For markets, this suggests the shortage of AI computing capacity could last longer, keeping chipmakers in focus for investors. Rising depreciation and long equipment lead times, however, weigh on margins and lift capital spending. A senior executive's view from a major producer matters for expectations across the whole semiconductor chain.

market impact

AI chip stocks: prolonged supply shortage supports demand, but higher costs pressure margins

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