Chinese chip OEMs raise service tariffs to capture a share of the artificial intelligence market

Chinese chip manufacturers also feel the “AI boom”

In a market of rising demand for semiconductors in artificial intelligence, it is not just Western companies (memory and custom chips) that benefit. Their Chinese competitors are also noting price increases, reports TrendForce citing local media.

1. Rising expenses and utilization
- Chinese public developers admitted in Q1 that operating costs rose compared with the previous year. This is mainly due to higher contractor spend that produces chips for them.
- The SMIC production line, the leading domestic manufacturer, was almost twice as busy in May compared with Q3 2023.

2. Financial results of SMIC and Hua Hong
Metric | Q1 2024 | Q2 2024 (forecast)
Revenue ↑ – Profit ↑ 20–22 % (vs. 18 %)
SMIC and its nearest rival Hua Hong finished the first quarter with growth in both revenue and net profit—unusual during a period of declining customer activity.
Prices for high‑demand product categories were raised. Some SMIC customers are already stocking inventory beyond current needs to take advantage of lower prices.

3. Why demand is rising
SMIC management highlighted several key reasons:

1. Lack of free quotas from overseas manufacturers – clients must turn to Chinese factories.
2. The global AI industry requires infrastructure components, including power electronics.
3. Deploying AI in autonomous systems (autopilots, robots) boosts demand for specialized sensors and related parts—products that SMIC makes.

4. Hua Hong’s pricing strategy
- Hua Hong has already raised prices in 2025 and plans to continue growth into 2026, especially for processing 300‑mm silicon wafers.
- Power electronics are also valued because AI server farms need not only cutting‑edge chips but powerful power components.

5. Outlook for Chinese contract manufacturers
- TSMC and Samsung focus on high‑margin advanced nodes, so demand for mature technologies is gradually shifting to Chinese fabs.
- Taiwanese “second‑tier” contractors maintain high prices, forcing their clients to seek more favorable offers from Chinese competitors.
- Chinese producers are consolidating assets to better meet market demands and optimize costs.

Conclusion:

Chinese chip makers such as SMIC and Hua Hong are successfully leveraging the “AI boom” to raise prices and strengthen market positions. Their strategy includes increasing production utilization, raising prices on high‑demand products, and actively working with customers seeking long‑term supply agreements.