SMIC hits $3B quarterly revenue as AI chip demand lifts prices
China's largest chipmaker tripled profit year-over-year and plans capacity expansion through 2026 to meet surging orders.
Semiconductor Manufacturing International Corporation crossed $3 billion in quarterly revenue for the first time, propelled by AI-related chip orders that allowed the Chinese foundry to raise prices and expand production capacity.
The company reported second-quarter revenue of $3.01 billion, a 36.1% increase from the same period last year and 20% higher than the previous quarter. Profit attributable to shareholders reached $479.2 million, nearly triple the $132.5 million recorded a year earlier. Both figures exceeded analyst expectations, according to Reuters.
Pricing power returns
SMIC's gross margin climbed to 25.3% from 20.1% in the first quarter, reflecting successful price negotiations with customers. Co-CEO Zhao Haijun told investors Thursday that the company secured higher prices in first-quarter discussions that will apply to wafers produced in the third quarter.
"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," Zhao said, as reported by Reuters.
The foundry shipped 2.9 million 8-inch-equivalent wafer units during the quarter, up 14% sequentially, while per-wafer prices increased 5.7%. Zhao attributed the volume gains to accelerating demand for AI chips beyond traditional CPU and GPU categories, with most orders coming from Chinese customers and some arriving ahead of schedule.
Why it matters
SMIC's results demonstrate how China's domestic semiconductor industry is capturing value from AI infrastructure buildout despite U.S. export restrictions on advanced chipmaking equipment. The company's ability to raise prices signals tight supply for mature-node chips used in AI inference and edge applications — a strategic segment as Chinese tech companies develop alternatives to cutting-edge processors they cannot access. The planned capacity expansion through 2026 suggests SMIC expects sustained demand independent of geopolitical shifts.
Capacity expansion ahead
SMIC's manufacturing facilities operated at 93.7% utilization during the quarter, with monthly output capacity reaching 1.1 million 8-inch-equivalent wafers. For the third quarter, the company projects revenue growth of 2% to 4% and gross margin between 26% and 28%.
Zhao said SMIC expects AI to sustain strong order volumes through the rest of 2026 and plans to reallocate existing capacity while accelerating new production lines to address supply chain constraints.
China accounted for 90.2% of SMIC's second-quarter revenue, with the United States contributing 8.2%. Chief Financial Officer Wu Junfeng noted that a one-time gain from a subsidiary contributed to the net profit surge.
The earnings report comes as China has directed roughly $217 billion through equity and debt markets toward technology companies over the past two years, part of a broader effort to build domestic semiconductor capabilities. SMIC shares rose 5% following the earnings announcement.
These details were first reported by Quartz.
This is an original analysis by the Omega editorial team. Source reporting: AI Watch.
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