Chinese chipmaker SMIC increases prices on strong AI demand

• Second-quarter wafer shipments rose 14% to 2.9 million 8-inch-equivalent wafers while average selling prices increased 5.7% following customer negotiations
• China accounted for 90% of SMIC's second-quarter revenue, with the U.S. contributing 8%; the company is the only Chinese foundry capable of mass-producing 7-nanometre logic chips
• SMIC expects Q3 revenue growth of 2-4% and plans to adjust capacity and accelerate new production lines to address industry-wide supply constraints, with full-year capital amortization projected at $5 billion, up 30% year-over-year

Summary: SMIC Raises Prices Amid Surging AI Demand

Key Financial Performance:

Semiconductor Manufacturing International Corporation (SMIC), China's leading foundry, reported record second-quarter revenue exceeding $3 billion for the first time, surpassing analyst estimates. Net profit jumped significantly, though partially due to a one-time subsidiary gain. The company's average selling price increased 5.7% while wafer shipments rose 14% quarter-over-quarter to 2.9 million 8-inch-equivalent wafers.

Strategic Developments:

SMIC has raised prices for its most sought-after capacity following first-quarter customer negotiations, with additional price increases planned for third-quarter wafer processing. Co-CEO Zhao Haijun cited a "big gap" between industry-leading prices and SMIC's current rates, justifying the need for "fairer pricing." The company is the only Chinese foundry capable of mass-producing 7-nanometre logic chips (CPUs and GPUs).

Market Drivers:

Strong AI-related demand, primarily from China-based customers, is driving order growth beyond traditional CPUs and GPUs. Production capacity utilization reached 93.7%, with monthly capacity rising 1.7% to 1.1 million 8-inch-equivalent wafers. The company added 8,000 wafers of monthly 12-inch capacity during the quarter.

Outlook and Investment:

SMIC expects third-quarter revenue to grow 2-4% sequentially, with continued wafer shipment increases. First-half capital spending reached $3.4 billion, up from $3.3 billion year-over-year. Full-year amortization is projected at approximately $5 billion, representing a 30% year-over-year increase. China accounts for 90% of revenue, while the U.S. contributes 8%.

The company plans to adjust existing capacity and accelerate new production line ramp-ups to address industry-wide supply constraints.