Asian Foundry Giants Report Strong Q1 Earnings as Agentic AI Ignites Fresh Demand

Major Chinese semiconductor foundries SMIC (00981) and HUA HONG SEMI (01347) have reported significant year-on-year profit growth for the first quarter of 2026. While HUA HONG SEMI's actual profit slightly missed market expectations, the overall performance of both companies demonstrates strong resilience, primarily driven by robust demand for supporting chips fueled by the proliferation of artificial intelligence applications.

For Q1 2026, HUA HONG SEMI achieved sales revenue of approximately $661 million, a 22.2% year-on-year increase. Net profit attributable to the parent company surged by over 458% year-on-year. This growth was mainly due to strong demand for MCUs, power devices, and specialty process products, an increase in average selling prices, and a greater contribution from its 12-inch production lines. However, revenue increased only marginally by 0.2% quarter-on-quarter, and the gross margin remained flat sequentially, leading to an overall performance slightly below market expectations. Notably, the company provided a relatively optimistic guidance for the second quarter, expecting revenue between $690 million and $700 million, with gross margins projected to improve to a range of 14% to 16%.

A report dated May 15, 2026, pointed out that price increase plans will gradually take effect in subsequent quarters. Driven by strong demand for AI and storage products, the full-year average selling price is expected to rise by 10% to 15%. Consequently, the target price was raised from 116.5 HKD to 152.4 HKD, maintaining a "Buy" rating.

SMIC reported Q1 2026 sales revenue of $2.505 billion, an increase of 11.5% year-on-year, with a gross margin reaching 20.1%. Achieving positive growth even during the traditional off-season, demand from domestic local customers served as a crucial support. The company's guidance for the second quarter is strong, anticipating quarter-on-quarter revenue growth of 14% to 16% and a gross margin between 20% and 22%.

A key highlight for SMIC this quarter was its resilience during the off-season, reflecting not only a gradual recovery in competitiveness within mature and specialty process nodes but also indicating that AI infrastructure and localization demand have become significant growth drivers. Simultaneously, the company's 8-inch wafer monthly capacity reached 1,078,250 pieces, with its proportion increasing to 23.6%, up 0.8 percentage points from Q4 2025.

While the individual performance of HUA HONG SEMI and SMIC is notable, concentrating investments in single stocks carries considerable uncertainty and company-specific risks. In contrast, a diversified portfolio of leading Asian semiconductor companies can more comprehensively capture industry growth while effectively mitigating single-company and geographic risks. In this context, the E Fund (HK) Solactive Asia Semiconductor Select Index ETF (03486) provides investors with a convenient tool for a one-stop allocation to the Asian semiconductor sector.

Beyond SMIC and HUA HONG SEMI, this ETF includes other Asian market leaders such as Taiwan Semiconductor Manufacturing (TSM.US), Samsung, SK Hynix, Tokyo Electron (8035.JP), and ASMPT (00522). It comprehensively covers high-growth segments including foundry, packaging and testing, power devices, and memory, helping investors share in the long-term growth dividends of the Asian semiconductor industry amid the AI wave. It is considered a preferred option for current allocations to the Asian semiconductor sector.

Furthermore, the rapid development of Agentic AI this year is expected to be a significant catalyst, potentially propelling the industry into a new upward cycle.

**Agentic AI Drives Explosive Token Consumption, Positioning Asian Semiconductors at the Forefront**

According to a recent report titled "Decoding the Agentic Economy," Agentic AI is evolving from single-chat models to autonomous, multi-step, continuously running intelligent agent systems. This shift is projected to drive a 24-fold increase in global Token consumption by 2030 compared to 2026, with enterprise-level Agents contributing the most (estimated 55-fold increase). This explosive demand is rapidly translating into the fields of computing power, edge computing, power management, and memory chips. Asia, as the core of global semiconductor manufacturing, stands to be the most direct beneficiary.

The report highlights that the flywheel effect of low-cost Tokens coupled with high Token consumption driven by Agentic AI will significantly enhance capacity utilization and profitability for Asian semiconductor companies. With a positive inflection point in Token economics expected in the first half of 2026, the Asian semiconductor sector is poised to benefit from both demand expansion and gross margin improvement.

A critical point in the report is that the entity capable of effectively reducing Token costs will determine the adoption speed of Agentic AI. In the semiconductor domain, the most dominant leaders remain NVIDIA, AMD, and Broadcom, which the report specifically recommends. However, further improvements in chip training and inference efficiency ultimately depend on breakthroughs in advanced process nodes. From this perspective, not only logic chips but also memory chips stand to benefit significantly. Leading Asian manufacturers such as Taiwan Semiconductor Manufacturing, Samsung Electronics, and SK Hynix are positioned to be key beneficiaries.

Although domestic Chinese chips were not within the scope of the discussed report, they similarly benefit from the aforementioned industry logic. In the development of domestic AI, the performance enhancements of chips from companies like Huawei and Cambricon are highly dependent on the capacity expansion of SMIC and HUA HONG SEMI in both mature and advanced nodes, as well as technological support from equipment suppliers like ASMPT. Against this backdrop, the prospects for the entire Asian semiconductor industry remain worthy of close attention.

The E Fund Asia Semiconductor ETF (03486) offers investors an ideal tool for a one-stop, diversified allocation to leading Asian semiconductor companies. It allows investors to efficiently capture opportunities during the industry's upward cycle without the need to select individual stocks.

Driven by the dual engines of rapid Agentic AI development and continued AI infrastructure expansion in 2026, the Asian semiconductor industry is entering a clear upward cycle. Since its inception, the Solactive Asia Semiconductor Select Index has demonstrated robust performance, outperforming several major peer indices, fully showcasing its advantage in capturing industry growth opportunities. Indices such as the Hang Seng Index, Hang Seng Tech Index, S&P 500, and Nasdaq Composite have all benefited significantly from this AI wave. As the core infrastructure for AI, the importance of semiconductors is becoming increasingly prominent.

Through the E Fund (HK) Solactive Asia Semiconductor Select Index ETF (03486), investors can achieve a one-stop allocation to leading semiconductor enterprises, efficiently capturing this long-term trend and balancing risk diversification with growth capture, making it a configuration choice worthy of focus.