China’s SMIC says AI “spillover effects” boosting peripheral chip prices

SMIC’s strong performance, particularly in AI peripheral chips, underscores the profound impact of the AI infrastructure build-out on Asia’s semiconductor industry. The surge in demand for components like power management and optical communication chips, essential for supporting AI servers, highlights a critical shift in market dynamics. While traditional segments like smartphones and automotive face headwinds, AI-driven demand is not only offsetting these weaknesses but also enabling chipmakers to maintain or even increase prices, reflecting a seller’s market for specialized AI-related components. This trend is likely to accelerate investment in advanced manufacturing capabilities across Asia, as countries vie to become central hubs for AI chip production and innovation.

The increasing localization of manufacturing, with SMIC’s revenue from China reaching over 90%, signals a strategic imperative for technological self-sufficiency within the region. This focus on domestic supply chains, particularly in critical sectors like AI, could reshape global trade flows and foster greater regional collaboration or competition among Asian economies. Furthermore, the anticipation of continued AI spillover effects through 2026 suggests a sustained period of growth and transformation for the entire tech ecosystem, from chip design and fabrication to AI application development and deployment, solidifying Asia’s role at the forefront of the global AI revolution.