AI Infrastructure Demand Continues to Exceed Supply

Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chipmaker, expects strong demand for artificial intelligence infrastructure to continue, with supply constraints across the AI semiconductor industry extending through 2027.

Co-CEO Zhao Haijun said the AI industry remains in its early stages and that many customers requiring computing resources continue to face shortages.

He identified demand from data centers and private cloud infrastructure as key factors keeping the semiconductor supply chain under pressure.

Zhao’s comments also addressed concerns about a potential AI investment bubble. Rather than indicating that demand is weakening, the company’s assessment points to continued requirements for computing capacity across the industry.

Memory Chip Supply May Take Longer to Normalize

The outlook for memory semiconductors remains more constrained. Zhao expects memory chip supply and demand to reach a balance between the middle and end of 2028.

This suggests that supply pressures could persist beyond the period identified for the broader AI semiconductor supply chain.

The difference in expected timelines highlights the challenges facing companies expanding AI infrastructure, particularly as demand for computing resources continues to outpace available capacity.

SMIC Expects Revenue Growth as Utilization Rises

SMIC expects full-year revenue to exceed $1.2 billion as its capacity utilization rate continues to increase.

Higher utilization indicates that the company’s existing production capacity is being used more intensively to meet customer demand.

However, expanding manufacturing capabilities is becoming more difficult because of longer equipment delivery times. Zhao said some equipment orders now require more than 24 months to arrive, creating potential constraints for the company’s capital spending plans this year.

Depreciation Costs Add to Investment Pressure

SMIC also expects depreciation expenses to increase by approximately 30% year over year in 2026.

The anticipated increase reflects the financial implications of the company’s manufacturing investments, adding another cost consideration as it expands production capacity.

Long equipment lead times and rising depreciation expenses create a more complex investment environment for the company, even as demand for AI-related semiconductors remains strong.

What Investors Should Watch Next

Investors will be monitoring SMIC’s capacity utilization, revenue performance and equipment procurement as the company works to meet sustained demand for AI-related semiconductors.

The expected supply constraints through 2027 and the later normalization of memory chip supply indicate that infrastructure expansion may continue to face capacity limitations.

SMIC’s ability to increase production while managing equipment delays and higher depreciation costs will be important to its financial performance over the coming periods.