Chinese chipmaker SMIC increases prices on strong AI demand

China's top foundry, Semiconductor Manufacturing International Corp (0981), 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 US$3 billion (HK$23.4 billion) for the first time in the second quarter, driven by strong AI demand.

Profit attributable to shareholders tripled to US$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 percent from the previous quarter, while the average selling price of wafers rose 5.7 percent, 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 percent after the earnings call, though down 0.21 percent year-to-date.

The company's monthly production capacity rose 1.7 percent quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilisation — a measure of a foundry's production intensity — reaching 93.7 percent, 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 US$2.3 billion, and it expects full-year amortisation of around US$5 billion, up 30 percent year-on-year.

China remained SMIC's largest market, accounting for 90 percent of second-quarter revenue, while the US contributed 8 percent.

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

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

Reuters

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