SMIC raises chip prices as AI demand pushes Q2 revenue past $3B

Semiconductor Manufacturing International Corp, China's largest chip foundry, reported second-quarter revenue exceeding $3 billion for the first time as artificial intelligence applications fueled demand for its manufacturing capacity.

The company raised prices for its most sought-after production capacity following customer negotiations in the first quarter, with further increases planned for third-quarter wafer processing, according to details first reported by Reuters.

Record results driven by AI chip orders

SMIC shipped 2.9 million 8-inch-equivalent wafers in the second quarter, a 14% increase from the prior quarter. Average selling prices rose 5.7% during the same period. Profit attributable to shareholders tripled to $479.2 million, beating analyst estimates compiled by LSEG.

Co-CEO Zhao Haijun told analysts that AI-related demand would continue to underpin orders for the company's production services. He noted that surging demand came primarily from chips other than CPUs and GPUs, mostly from China-based customers, along with earlier-than-expected orders.

SMIC is the only Chinese foundry capable of mass-producing logic chips such as CPUs and GPUs using a 7-nanometer process. The company's production utilization rate reached 93.7% in the second quarter, slightly above the first quarter's level.

Capacity expansion and pricing strategy

Zhao said SMIC would adjust existing capacity and accelerate new production line ramp-ups to ease industry-wide supply constraints. The company added 8,000 wafers of monthly 12-inch capacity during the quarter, bringing total monthly production capacity to 1.1 million 8-inch-equivalent wafers.

"We believe we've reached top-tier industry standards in these areas," Zhao said on the earnings call. "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."

Capital spending in the first half reached $3.4 billion, up from $3.3 billion a year earlier. The company expects full-year amortization of around $5 billion, representing a 30% year-over-year increase.

Why it matters

SMIC's pricing power and capacity expansion signal tightening global semiconductor supply chains amid the AI boom. For Chinese technology companies facing restricted access to advanced foreign chips, SMIC's 7nm production capability represents a critical domestic alternative. The company's ability to raise prices while maintaining strong order flow demonstrates how AI infrastructure buildout is reshaping foundry economics, even for players operating below the cutting edge of process technology.

Market outlook

China remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the United States contributed 8%. The company expects third-quarter revenue to rise 2% to 4% from the second quarter, with wafer shipments continuing to increase.

SMIC shares rose 5% following the earnings call, though they remain down 0.21% year-to-date.

These details were first reported by Reuters correspondents Che Pan and Eduardo Baptista.