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

SMIC Achieves Record Revenue Amid Surging AI Demand

Chinese chipmaker SMIC posted record revenue exceeding $3 billion for the first time in the second quarter, marking a 36.1% year-on-year increase to $3.01 billion1

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. Net profit attributable to shareholders tripled to $479.2 million, nearly double the average analyst estimate of $253.4 million3

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. The Chinese semiconductor foundry blew past its own guidance, which called for 14% to 16% sequential revenue growth, delivering 20% growth instead1

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. Gross margins expanded to 25.3% from 20.1% in the first quarter, exceeding the company's projected 20% to 22% range1

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. China remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the U.S. contributed 8%2

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Capacity Utilization Reaches Near-Maximum Levels

The foundry's capacity utilization rate reached 93.7% in the second quarter, up from 93.1% in the previous three months4

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. Wafer shipments rose 14% quarter-on-quarter to 2.9 million 8-inch equivalents, while the average selling price of wafers climbed 5.7%1

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. Monthly production capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers5

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. SMIC added 8,000 wafers of monthly 12-inch capacity during the second quarter2

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. Co-CEO Zhao Haijun noted that "future wafer starts are far exceeding our previous expectations," indicating the volume of new chip batches entering the production line continues to climb4

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Wafer Price Increases Reflect Supply Constraints

SMIC announced wafer price increases following negotiations with customers in the first quarter, with additional hikes planned for wafers processed in the third quarter2

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. "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 explained on the earnings call1

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. The company raised prices by around 10% in December, negotiated targeted increases in capacity-constrained segments in February, and is now applying another round to Q3 wafers1

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. 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 half1

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. Q3 guidance calls for a 26% to 28% gross margin1

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US Sanctions Create Captive AI Market for SMIC

US export controls have effectively created a captive AI market for SMIC by keeping China's AI accelerator demand away from TSMC and Samsung at the leading edge1

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. SMIC is the only Chinese foundry able to mass-produce 7nm logic chips such as CPUs and GPUs on a 7-nanometre process, making it the sole domestic route to silicon for Huawei's Ascend line and Cambricon's accelerators1

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. Beijing has been redirecting AI semiconductor demand inward, with the government wanting 70% of silicon wafers sourced domestically this year1

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. 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% currently1

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AI-Driven Chip Demand Extends Beyond GPUs

Zhao said the rise in shipments was driven mainly by surging AI-fuelled demand for chips other than CPUs and GPUs, such as logic ICs, BCD power-management products, and optical transceiver components, all in short supply1

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. Growth in SMIC's AI peripheral segment is expected to be around 40% for the quarter1

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. Industrial and automotive chips rose to 16.5% of wafer revenue from 10.6% a year earlier1

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. The company told Chinese media that this year's "global artificial intelligence infrastructure boom" revealed critical gaps in manufacturing across AI-related supporting chips, including mature-node chips for servers and data centers4

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. Orders for BCD power-management products were visible through the end of 20274

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Chinese AI Chip Designers Post Record Results

Cambricon's first-half revenue rose 108% to 6 billion yuan (approximately $890 million) with net profit up 122.6% to 2.3 billion yuan1

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. Moore Threads grew first-half revenue 147% to 1.74 billion yuan and cut its net loss by 96%1

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. Biren projected first-half revenue growth of more than 1,850% off a small base ahead of a Hong Kong IPO1

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. Every one of these firms sits on the U.S. Entity List or depends on suppliers that do, yet each posted record or near-record numbers1

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. Hua Hong, China's second-largest foundry, reported capacity utilization of 102.8% in the same week, with record revenue of $717.5 million, up 26.8% year on year1

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SMIC Plans Capacity Expansion and Investment

SMIC stated it would adjust existing capacity and accelerate the ramp-up of new production lines to help ease industry-wide supply constraints2

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. The company announced it might be installing additional equipment at its locations, though it has yet to disclose specific details about when, what, and where4

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. Capital spending in the first half reached $3.4 billion, up from $3.3 billion a year earlier2

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. First-half amortisation totaled $2.3 billion, and the company expects full-year amortisation of around $5 billion, up 30% year-on-year2

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. SMIC expects third-quarter revenue to rise 2% to 4% from the second quarter, with wafer shipments continuing to increase2

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