SMIC Triples Profit to $479M as AI Demand Pushes Chipmaker to Raise Prices and Expand Capacity

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)