SMIC Posts Record $3B Quarter and Raises Wafer Prices as AI Chip Demand Surges

SMIC posts record $3B quarter and hikes wafer prices -- US sanctions hand Chinese foundry a captive AI market

China's only 7nm-class foundry ran at 93.7% utilization last quarter, blew past its own guidance, and told customers to expect "fairer pricing." SMIC posted its first $3 billion quarter earlier this month, with revenue up 36.1% year on year, net profit nearly tripling to $479.2 million. Co-CEO Zhao Haijun told analysts the next day that the Shanghai foundry will charge more for wafers processed in the third quarter after price negotiations concluded in the first. Utilization hit 93.7% against demand Zhao said SMIC can't fully meet, driven by Chinese AI data center buildouts that U.S. export controls have cut off from TSMC and Samsung at the leading edge. "Since there's still a big gap between industry-leading wafer prices and SMIC's current prices, we need to negotiate with customers for fairer pricing," Zhao said on the call. The quarter blew SMIC's own out of the water on every front. The company had guided to 14% to 16% sequential revenue growth and a 20% to 22% gross margin; it delivered 20% growth to $3.01 billion and a 25.3% margin, up from 20.1% in Q1. Wafer shipments rose 14% quarter-on-quarter to 2.9 million 8-inch equivalents, blended selling prices climbed 5.7%, and Q3 guidance calls for a 26% to 28% gross margin. China accounted for 90% of revenue. Demand isn't coming from GPUs, however, with Zhao commenting that the surge came mostly from AI chips other than CPUs and GPUs, such as logic ICs, BCD power-management parts, and optical transceiver components, all in short supply. Meanwhile, growth in SMIC's AI peripheral segment is expected to be around 40% for the quarter, while industrial and automotive chips rose to 16.5% of wafer revenue from 10.6% a year earlier. From bust to boom SMIC's utilization sat at 68.1% in the first quarter of 2023 and averaged 75% that year as net profit fell more than 60% and gross margin dropped 16.4 points to 21.9%. As late as early 2025, it was reported that SMIC and Hua Hong were cutting mature-node prices to defend share against a wall of new Chinese capacity. The company that spent 2023 and 2024 discounting into overcapacity spent 2026 raising prices by around 10% in December, negotiating targeted increases in capacity-constrained segments in February, and applying another round to Q3 wafers. Export controls did most of the work, with Washington's restrictions keeping China's AI accelerator demand away from TSMC. Beijing has been redirecting that demand inward: the government wants 70% of silicon wafers sourced domestically this year, and a Bloomberg Intelligence survey of 60 Chinese tech executives in June found firms plan to spend 46% of their AI accelerator budgets on local chips over the next 12 months, up from 30% now. SMIC is the only Chinese foundry that mass-produces 7nm-class logic, which makes it the sole domestic route to silicon for Huawei's Ascend line and Cambricon's accelerators. A protected buyer pool, along with a mandated shift to domestic supply and a single qualified supplier at the leading edge, produces a textbook seller's market. Hua Hong, China's second-largest foundry, reported utilization of 102.8% in the same week, with record revenue of $717.5 million, up 26.8% year on year. TrendForce data shows foundry prices across China rose 5% to 15% between Q1 and Q2, with a third round of increases being prepared for the second half. TSMC is reportedly raising prices across all its advanced nodes too, so SMIC's hikes track a global trend, but SMIC is doing it from a captive position TSMC doesn't have: its customers have no other choice. China's AI chip designers post record first halves Cambricon's first-half revenue rose 108% to 6 billion yuan (c. $890 million) with net profit up 122.6% to 2.3 billion yuan, per its Shanghai Stock Exchange filing reported by the South China Morning Post. Moore Threads grew first-half revenue 147% to 1.74 billion yuan and cut its net loss by 96%, and Biren projected first-half revenue growth of more than 1,850% off a small base ahead of a Hong Kong IPO. Memory maker CXMT raised $8.6 billion in Shanghai's biggest-ever semiconductor listing last month and surged 466% on debut to become the most valuable company on any mainland exchange. Every one of these firms sits on the U.S. Entity List or depends on suppliers that do, and every one just posted record or near-record numbers. Beijing had until recently been blocking Chinese imports of U.S. accelerators. The US approved around 10 Chinese firms to buy Nvidia's H200 in May, but China had been blocking the purchases to protect domestic suppliers. Under Secretary of Commerce Jeffrey Kessler told a congressional hearing on July 14 that "very few" H200s had actually shipped. Officials have relented as of August 19, with ByteDance and Tencent each having received around 10,000 H200 chips, the first meaningful deliveries since the U.S. approved around 10 Chinese firms as buyers. Some 20,000 delivered accelerators against Huawei's target of 600,000 Ascend 910Cs this year leaves Chinese cloud spending, which Goldman Sachs pegs at roughly $102 billion for 2026 in combined AI capex across Alibaba, Tencent, ByteDance, and Baidu, landing overwhelmingly on domestic silicon. SMIC's 7nm yields and the HBM shortage SMIC's leading-edge economics remain brutal, however, with industry sources cited by the Financial Times putting SMIC's 5nm and 7nm prices 40% to 50% above TSMC's with yields of less than a third, a consequence of running multi-patterned DUV on nodes designed for EUV. The wafers SMIC is repricing are overwhelmingly mature-node parts, where its cost position is sound; the advanced capacity that feeds Ascend production stays yield-limited and expensive per good die regardless. Memory, not logic, caps accelerator output anyway, and SemiAnalysis estimates Huawei has been drawing down a stockpile of roughly 13 million Samsung HBM stacks acquired before the late-2024 controls, and domestic HBM from CXMT will cover only a fraction of 2026 Ascend targets. SMIC's own profit surge also comes with a glaring asterisk: CFO Wu Junfeng said the near-tripling was boosted by a one-time gain from a subsidiary. Demand for its silicon rests largely on policy rather than proven end markets, with an analyst tally cited by Asia Times putting China's top 11 listed chip firms at a combined average of roughly 122 times projected 2026 earnings.

Chinese chipmaker SMIC increases prices on strong AI demand

BEIJING, Aug 13 (Reuters) - China's top foundry, Semiconductor Manufacturing International Corp (0981.HK), opens new tab, said on Friday that AI-related demand would continue to underpin orders for its production, and that it had raised prices for its most sought-after capacity. Co-CEO Zhao Haijun said on an earnings call that SMIC raised prices following negotiations with customers in the first quarter, and that it would charge more for wafers processed in the third quarter. "We believe we've reached top-tier industry standards in these areas," Zhao said. "Since there's still a big gap between industry-leading wafer prices and SMIC's current prices, we need to negotiate with customers ⁠for fairer pricing." Silicon wafers serve as the base material onto which chip patterns are printed by SMIC through the fabrication process. SMIC, the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs on a 7-nanometre process, posted revenue above $3 billion for the first time in the second quarter, driven by strong AI demand. Profit attributable to shareholders tripled to $479.2 million, with both figures beating average analyst estimates compiled by LSEG. The company shipped 2.9 million 8-inch-equivalent wafers in the second quarter, up 14% from the previous quarter, while the average selling price of wafers rose 5.7%, as strong demand in AI drives tightness in semiconductor supply chains around the world. Zhao said the rise in shipments was driven mainly by surging ⁠AI-fuelled demand for chips other than CPUs and GPUs, mostly from China-based customers, as well as earlier-than-expected orders. Chief Financial Officer Wu Junfeng said the jump in net profit was also boosted by a one-time gain from a subsidiary in the second quarter. Zhao said AI would continue to drive robust chip demand for foundry services in the second half of the year, adding SMIC would adjust existing capacity ⁠and accelerate the ramp-up of new production lines to help ease industry-wide supply constraints. SMIC shares were up 5% after the earnings call, though down 0.21% year-to-date. The company's monthly production capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilisation -- a measure of a ⁠foundry's production intensity -- reaching 93.7%, slightly up from the first quarter. SMIC added 8,000 wafers of monthly 12-inch capacity during the second quarter. The company said first-half amortisation totaled $2.3 billion, and it expects full-year amortisation of around $5 billion, up 30% year-on-year. China ⁠remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the U.S. contributed 8%. Capital spending in the first half reached $3.4 billion, up from $3.3 billion a year earlier. SMIC expects third-quarter revenue to rise 2% to 4% from the second quarter, with wafer shipments continuing to increase. Reporting by Che Pan and Eduardo Baptista; Editing by Jamie Freed Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Eduardo Baptista Thomson Reuters Eduardo Baptista is Chief Technology Correspondent, Greater China, for Reuters, based in Beijing. He covers artificial intelligence, semiconductors and emerging technologies. He holds a BA in History from the University of Cambridge.

SMIC profit more than triples on AI-driven chip demand

BEIJING, Aug 13 (Reuters) - China's largest contract chipmaker, Semiconductor Manufacturing International Corp (0981.HK), opens new tab , reported on Thursday second-quarter profit more than tripled from a year earlier, beating analyst estimates, as demand for AI-related chips ⁠remained robust. Profit attributable to shareholders came in at $479.2 million, nearly double the average analyst estimate of $253.4 million compiled by LSEG. Revenue rose 36% to more than $3 billion, topping the $2.8 billion analysts had forecast, LSEG ⁠data showed. SMIC said in a stock exchange filing that AI would continue to drive robust chip demand ⁠in the second half of the year, adding that it would adjust ⁠existing capacity and accelerate the ramp-up of new production lines ⁠to help ease industry-wide supply constraints. Reporting by Che Pan and Eduardo Baptista; Editing by Toby Chopra Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * China Eduardo Baptista Thomson Reuters Eduardo Baptista is Chief Technology Correspondent, Greater China, for Reuters, based in Beijing. He covers artificial intelligence, semiconductors and emerging technologies. He holds a BA in History from the University of Cambridge.

Chinese firm sees 93.7% capacity use as high demand drives chip shortages

Demand is high for mature-node chips for AI processors, and China's Semiconductor Manufacturing International Corporation (SMIC) intends to raise the bar, according to the report. SMIC is a partially state-owned Chinese company that operates as the largest contract chipmaker in China and the third largest globally. It manufactures microchips for external tech companies based on their proprietary designs. It fabricates silicon wafers used in smartphones and consumer electronics, as well as automotive components, data centers, and Internet of Things (IoT) devices. But now, SMIC is facing a major demand inflection, driven less by smartphones and PCs and more by the infrastructure surrounding AI. Now, SMIC plans to expand its capacities in its factories, as customer demand for "mature-node chips" increases. The company told a Chinese media outlet that this year's "global artificial intelligence infrastructure boom" revealed critical gaps in manufacturing across AI-related supporting chips. "Future wafer starts are far exceeding our previous expectations," co-CEO Zhao Haijun said. Meaning: "the volume of new chip batches entering the production line." SMIC is expanding to meet the ever-increasing AI demand. According to the report, SMIC announced it might be installing additional equipment at its locations, though they have yet to disclose any information about when, what, and where. What they have said reflects what the AI-driven world needs right now: supporting chips for servers and data centers. That includes logic chips, power-management products and optical module components. "Order for BCD (bi-polar-CMOS-DMOS) power-management products were visible through the end of 2027," as per the report. Simply put, the company, though the third largest in the world, cannot meet the sudden increase in demand, as it had already practically reached its limit. "The foundry's capacity utilisation rate reached 93.7 per cent in the second quarter, up from 93.1 per cent in the previous three months, according to its earnings report on Thursday. Wafer shipments rose 14.4 per cent quarter on quarter, while monthly production capacity increased to the equivalent of about 1.1 million 8-inch wafers," as per the report. However, the company plans to invest in research and development as well, rather than push itself to "full operational limits." But it has raised some of its prices for consumer electronics, though not across the board. Smartphone chips and display-driver integrated circuits remained untouched by the changes. The company expected to announce more price increases, as the volatile market continues to allow for shortages as well as demand. "For the quarter ended June 30, SMIC reported revenue of US$3.01 billion, up 20 per cent sequentially and 36.1 per cent year on year. Gross margins expanded to 25.3 per cent from 20.1 per cent in the first quarter," as per the report. The increase in their sales speaks to all three regions that the company serves, though China led that increase due to chip demand, overseas orders, and ongoing supply-chain localization. SMIC is benefiting from an unexpected surge in demand for mature-node chips driven by the rapid expansion of AI infrastructure. With capacity utilisation already near its practical limit, strong orders extending into 2027, and growing pricing power, the company is considering additional equipment to expand production. While weakness in smartphones and consumer electronics remains a challenge, the strength of AI-related demand, improving margins, and continued growth in China suggest a positive outlook for SMIC. Overall, the company is well positioned to benefit from the growing demand for semiconductor components that support the global AI boom.

AI semiconductor demand: Chinese chipmaker SMIC increases prices on strong AI demand

Co-CEO Zhao Haijun said on an earnings call that SMIC raised prices following negotiations with customers in the first quarter, and that it would charge more for wafers processed in the third quarter. China's top foundry, Semiconductor Manufacturing International Corp, said on Friday that AI-related demand would continue to underpin orders for its production, and that it had raised prices for its most sought-after capacity. Co-CEO Zhao Haijun said on an earnings call that SMIC raised prices following negotiations with customers in the first quarter, and that it would charge more for wafers processed in the third quarter. "We believe we've reached top-tier industry standards in ⁠these areas," ⁠Zhao said. "Since there's still a big gap between industry-leading wafer prices and SMIC's current prices, we need to negotiate with customers for fairer pricing." Silicon wafers serve as the base material onto which chip patterns are printed by SMIC through the fabrication process. SMIC, the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs on a 7-nanometre process, posted revenue above $3 billion for the first time in the second quarter, driven by strong AI demand. Profit attributable to shareholders tripled to $479.2 million, ⁠with both figures beating average analyst estimates compiled by LSEG. The company shipped 2.9 million 8-inch-equivalent wafers in the second quarter, up 14% from the previous quarter, while the average selling price ⁠of wafers rose 5.7%, as strong demand in AI drives tightness in semiconductor supply chains around the world. Zhao said the rise in shipments was driven mainly by surging AI-fuelled demand for chips other than CPUs and GPUs, mostly from China-based customers, as well as earlier-than-expected orders. Chief Financial Officer Wu Junfeng said the jump in net profit was also boosted by a one-time gain from a subsidiary in the second quarter. Zhao said AI would continue to drive robust chip demand for foundry services in the second half of the year, adding SMIC would adjust existing capacity and accelerate the ramp-up of new production lines to help ease industry-wide supply constraints. SMIC shares were up 5% after the earnings call, though down 0.21% year-to-date. The company's monthly production ⁠capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilisation - a measure of a foundry's production intensity - reaching 93.7%, slightly up from the first quarter. SMIC added 8,000 wafers of monthly 12-inch capacity during the second quarter. The company said first-half amortisation totaled $2.3 billion, and it expects full-year amortisation of around $5 billion, up 30% year-on-year. China remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the U.S. contributed 8%. Capital spending in the first half reached $3.4 billion, up from $3.3 billion a year earlier. SMIC expects third-quarter revenue to rise 2% to 4% from the second quarter, with wafer shipments continuing to increase. (Reporting by Che Pan and Eduardo Baptista; Editing by Jamie Freed)