Key Takeaways
BNP Paribas has given Semiconductor Manufacturing International Corp. (00981.HK) an “Outperform” rating, setting a price target of HKD86 that points to the chipmaker’s critical role in powering China’s artificial intelligence ambitions.
"SMIC is the only Chinese company with the capability and capacity to support Ascend 950PR using the N+3 process," a BNP Paribas report said. The bank believes the localization of AI chips will become a stronger growth driver for the company.
The new rating and target are based on SMIC's unique position as the primary domestic foundry for advanced AI chips. The report highlights SMIC's ability to produce Huawei's Ascend 950 PR AI processor, which is used in cutting-edge AI models like DeepSeek V4. The analysis assumes SMIC can produce approximately 2.5 million of these chips annually.
The bullish forecast comes as SMIC is positioned to capture demand from domestic AI firms seeking to avoid US sanctions. Washington has tightened export controls, with the Department of Commerce stating that use of Huawei's Ascend AI chips "anywhere in the world" would breach its rules, according to a China Daily report. This geopolitical pressure makes a domestic supply chain, with SMIC at its core, essential for Chinese tech firms.
BNP Paribas projects that SMIC's advanced process nodes (N+1 to N+3) will become a significant part of its business, contributing about 30 percent of total revenue after 2027. The bank expects SMIC to become the main foundry partner for most of China's domestic AI chip design companies, leveraging its improving process technology.
The bank's financial model forecasts SMIC's revenue to grow at a 19 percent compound annual growth rate (CAGR) between 2026 and 2028, with earnings projected to expand at a 42 percent CAGR over the same period. This growth is supported by an optimistic second-quarter revenue guidance from SMIC, driven by rising average selling prices and higher shipment volumes in its consumer and Internet of Things segments.
The "Outperform" rating solidifies SMIC's status as a national champion essential to China's goal of semiconductor self-sufficiency. Investors will be closely watching the company's next earnings reports for evidence of margin expansion and revenue growth from its advanced nodes.
This article is for informational purposes only and does not constitute investment advice.
