Semiconductor Manufacturing International Corp posted second-quarter revenue above $3 billion for the first time in its history, with shareholder profit tripling to $479.2 million—both figures beating average analyst estimates compiled by LSEG. The company then told investors it is raising prices again for wafers processed in the third quarter, building on negotiations with customers it completed in the first quarter.
Co-CEO Zhao Haijun laid out the pricing rationale on the earnings call. "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." The comment is a direct acknowledgment that SMIC has been charging below the rates commanded by Taiwan Semiconductor Manufacturing Co. and Samsung—and that it intends to close that gap.
SMIC shipped 2.9 million 8-inch-equivalent wafers in the second quarter, a 14 percent increase from the prior quarter. The average selling price per wafer rose 5.7 percent over the same period. Monthly production capacity reached 1.1 million 8-inch-equivalent wafers, up 1.7 percent quarter-on-quarter, while utilization—the share of available capacity actually running product—climbed to 93.7 percent, slightly above first-quarter levels. At that utilization rate, SMIC has almost no slack to absorb new orders without either raising prices or adding physical capacity.
Zhao said the shipment increase was driven mainly by demand for chips other than CPUs and GPUs—power management semiconductors, Time-of-Flight sensors, chips for electric vehicles and robotics—mostly from customers based in China. He also credited earlier-than-expected orders from customers who placed production slots in advance, concerned that supply-chain costs would keep rising. Chief Financial Officer Wu Junfeng said the jump in net profit was partly boosted by a one-time gain from a subsidiary, a detail that separates recurring earnings power from the headline figure.
SMIC is the only Chinese foundry capable of mass-producing logic chips on a 7-nanometer process—the node used to manufacture competitive CPUs and GPUs. That position gives it pricing leverage no domestic competitor can match and makes it the primary beneficiary of AI-driven chip demand inside China, particularly as U.S. export controls limit Chinese companies' access to leading-edge capacity from TSMC and other foreign foundries.
The demand mix Zhao described reflects how AI spending spreads through a supply chain. Nvidia and its peers buy advanced logic chips from TSMC, but every AI server also requires dozens of supporting semiconductors—power management ICs, interface chips, sensor controllers—that run on older nodes SMIC produces. As overseas AI infrastructure build-outs absorb TSMC's capacity, orders for consumer electronics and Internet of Things chips that would normally go to TSMC flow back to Chinese foundries, tightening SMIC's own order books.
China accounted for 90 percent of SMIC's second-quarter revenue; the United States contributed 8 percent. Capital spending in the first half of the year reached $3.4 billion, up from $3.3 billion in the same period a year earlier. First-half amortization—the accounting charge that spreads the cost of equipment and facilities over time—totaled $2.3 billion, and the company expects full-year amortization of roughly $5 billion, a 30 percent increase year-on-year. That figure reflects the scale of prior capital commitments now flowing through the income statement.
During the second quarter SMIC added 8,000 wafers of monthly 12-inch capacity. The 12-inch format—also called 300mm wafers—produces more chips per run than the 8-inch standard and is the format used for higher-value logic chips. Zhao said SMIC plans to adjust existing capacity and accelerate new production-line ramp-ups to ease supply constraints across the industry in the second half of the year.
For the third quarter, SMIC guided for revenue growth of 2 percent to 4 percent from second-quarter levels, with wafer shipments continuing to increase. The company expects gross margins of 20 percent to 22 percent in that period, up as much as two percentage points sequentially. At second-quarter revenue just above $3 billion, a 3 percent midpoint gain puts third-quarter revenue on track for roughly $3.09 billion.
SMIC shares rose 5 percent on the Hong Kong exchange following the earnings call, though the stock remains down 0.21 percent year-to-date. The muted annual performance against a strong quarterly result suggests investors are still weighing the durability of the AI demand cycle against the company's heavy amortization load and the geopolitical risk embedded in operating as China's premier advanced-node foundry under ongoing U.S. semiconductor restrictions.
