SMIC reports overseas clients shifting orders to China due to capacity constraints abroad
Co-CEO Zhao Haijun says SMIC is capturing significant share of legacy-node demand, with utilisation rates holding at 93% in the first quarter despite expanded capacity.
Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chipmaker, reported on Friday that orders from overseas clients are rising as the global artificial intelligence boom tightens capacity at foreign foundries. Co-CEO Zhao Haijun stated during an earnings call that international customers are increasingly shifting production to China, citing it as one of the few regions with available capacity for legacy foundry products.
Many semiconductor companies have redirected factory output towards AI-related products, memory, and other high-bandwidth applications, reducing the availability of capacity for older node technologies. Zhao noted that some products previously manufactured at overseas foundries are no longer being produced there, with SMIC likely capturing the largest share of this shifting demand across the industry.
In the first quarter, SMIC added 9,000 12-inch equivalent wafers of capacity, bringing its utilisation rate to 93%, a slight decline from the previous quarter. The company shipped 2.5 million 8-inch equivalent wafers, a figure unchanged from the prior three months. Zhao attributed the dip in utilisation to smartphone makers cutting orders in the fourth quarter due to memory chip shortages, the impact of which carried into the first quarter, alongside the opening of new fabs that increased total capacity.
Financially, SMIC expects depreciation expenses to rise by approximately 30% compared to the previous year, with first-quarter depreciation and amortisation up 26% year-on-year. China accounted for 89% of SMIC’s first-quarter revenue, while the United States contributed 9%. The company has been aggressively expanding capacity, betting on strong demand from Chinese chip designers, although its push into advanced 7-nanometre manufacturing remains constrained by US export controls.
Data from Semicon China indicates that Chinese foundries’ share of global legacy-node capacity in the 22-nanometre to 40nm range is projected to rise from 32% in 2025 to 37% this year and 41% by 2027. Zhao described the shift in demand as a long-term trend, noting that growing demand for AI-related chips and edge applications is expected to further squeeze capacity for non-AI products in the coming year.
