By Sherry Qin
The chief executive of China's largest contract chip maker said the semiconductor industry is "a bit panicked" about a memory chip shortage driven by the artificial-intelligence boom.
The robust demand for memory chips by AI networks has squeezed the supply for other sectors, such as phones, particularly in the low-end market, SMIC co-chief executive Zhao Haijun said in a post earnings call on Wednesday. He added that the crunch in supply could be amplified because of overbooking by manufacturers eager to lock in much-needed components.
Memory prices so far this year have soared 80%-90% from late last year, according to market researcher Counterpoint's data, driven by a sharp price increase in dynamic random access memory used in general-purpose servers.
The three companies that make more than 90% of memory chips-- SK Hynix, Samsung and Micron--couldn't satisfy demand from AI systems and while still supplying memory for such products as PCs and smartphones.
"For device manufacturers, this is a double whammy," Counterpoint analyst Jeongku Choi said, adding that rising component costs and weakened consumer purchasing power could slow consumer demand for electronic devices.
Foundries like SMIC have seen a decline in orders from these mid- to low-end phone makers, Zhao said, and even if they could pass on increased costs to consumers, it would still result in a decline in consumer demand.
However, Zhao cautioned that the shortage of memory chips is likely amplified by overbooking during this supply crunch. "Everyone is a bit panicked," Zhao said. He added that more supply could come to market in nine months.
SMIC has told clients making consumer electronics not to be too pessimistic as the new supply could come to them first since memory chips for AI-related products such as high-bandwidth memory would need a longer and more complicated verification process.
SMIC guided for flat revenue in the first quarter of 2026, compared with the previous quarter, and a gross margin of between 18%-20%.
SMIC's Hong Kong-listed shares fell 3.6% after management's cautious comment and guidance.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
February 10, 2026 23:43 ET (04:43 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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