(Yicai) May 15 -- Shares of Hua Hong Semiconductor fell despite the second-largest wafer foundry in the Chinese mainland posting a more than five-fold increase in first-quarter profit as a result of soaring chip demand linked to the global artificial intelligence boom.

Hua Hong [SHA: 688347] closed 4.9 percent lower at CNY150.09 (USD22.05) a share in Shanghai today, after swinging between a 6.8 percent increase and a 6.4 percent drop. Its Hong Kong-listed stock [HKG: 1347] sank 8.7 percent to HKD115.90 (USD14.80).

Net profit soared 458 percent to USD20.9 million in the three months ended March 31 from a year earlier, the Shanghai-based company said in an earnings report released late yesterday. Revenue rose 22 percent to USD660.9 million.

Income will likely reach USD690 million to USD700 million this quarter, with a gross margin of between 14 percent and 16 percent, Hua Hong said.

"The company's results were supported by sustained efforts in cost reduction and efficiency enhancement, and by a positive demand signal that started at the beginning of the quarter and became stronger over the course of the quarter," said Chairman and President Bai Peng.

The global semiconductor industry is undergoing rapid transformation as AI and related applications become increasingly central to market dynamics, Bai noted, adding that Hua Hong's core strategy is to focus on market needs, strengthen its process technology capabilities, and expand production capacity.

Hua Hong's revenue from China climbed 19 percent to USD525.2 million in the first quarter, mainly driven by higher demand for microcontroller units, power management integrated circuits, flash, and insulated gate bipolar transistors. Income from the North American market jumped 52 percent to USD85.7 million.

Semiconductor Manufacturing International Corporation, China's largest contract chipmaker and main rival of Hua Hong, also released its quarterly report on the same day. Net profit rose 5 percent to USD197.4 million on a 12 percent gain in revenue to USD2.5 billion.

Shanghai-based SMIC expects second-quarter revenue to increase 14 percent to 16 percent from the prior three months, with gross margin forecast at between 20 percent and 22 percent.

SMIC’s shares [SHA: 688981] finished 1 percent higher at CNY119.02 apiece in Shanghai, while its Hong Kong stock [HKG: 0981] dipped 0.5 percent to end at HKD71.15 (USD9.09).

Editors: Dou Shicong, Martin Kadiev