SMIC raises prices on AI demand as profits triple in second quarter

Semiconductor Manufacturing International Corp (SMIC), China’s largest chip foundry, has increased prices for its most sought-after production capacity, citing sustained demand linked to artificial intelligence. Co-CEO Zhao Haijun announced the adjustments following customer negotiations conducted in the first quarter, with the higher charges applying to wafers processed in the third quarter. The move underscores the growing leverage Chinese manufacturers hold in the global supply chain as demand for non-CPU and non-GPU AI chips accelerates.

The price hikes coincide with a strong financial performance for the Beijing-based company. SMIC reported second-quarter revenue exceeding $3 billion for the first time, driven by a 14% increase in wafer shipments and a 5.7% rise in average selling prices. Profit attributable to shareholders tripled to $479.2 million, a figure that beat average analyst estimates compiled by LSEG. Chief Financial Officer Wu Junfeng noted that the jump in net profit was further boosted by a one-time gain from a subsidiary during the quarter.

Zhao stated that the company aims to close the gap between its current wafer prices and industry-leading standards through negotiations for fairer pricing. "We believe we've reached top-tier industry standards in these areas," he said on an earnings call. The surge in shipments was largely attributed to AI-fuelled demand from China-based customers, alongside earlier-than-expected orders, highlighting the domestic market's critical role in the company's growth trajectory.

Operational metrics reflect this heightened activity, with monthly production capacity rising 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers. Utilisation rates reached 93.7%, indicating intense production intensity. To address global supply constraints, SMIC plans to adjust existing capacity and accelerate the ramp-up of new production lines. The company added 8,000 wafers of monthly 12-inch capacity during the second quarter, with capital spending in the first half reaching $3.4 billion.

Geographically, China accounted for 90% of second-quarter revenue, while the United States contributed 8%. Looking ahead, SMIC expects third-quarter revenue to rise between 2% and 4% from the second quarter, with wafer shipments continuing to increase. First-half amortisation totalled $2.3 billion, and the company projects full-year amortisation to reach approximately $5 billion, representing a 30% year-on-year increase.