China's SMIC Pushes Through Price Increases as AI Chip Orders Surge

KEY TAKEAWAYS

·Semiconductor Manufacturing International Corp raised wafer prices in the first quarter and will charge more for third-quarter output, leveraging tight capacity driven by AI demand.
·The Chinese foundry posted second-quarter revenue above three billion dollars for the first time, with profit attributable to shareholders tripling to 479.2 million dollars.
·SMIC shipped 2.9 million eight-inch-equivalent wafers in the second quarter, up 14 percent sequentially, while average selling prices rose 5.7 percent and utilization reached 93.7 percent.

Foundry Capacity Commands Premium

Semiconductor Manufacturing International Corp has begun charging customers more for wafer fabrication services, capitalizing on sustained artificial intelligence workload growth that pushed the Chinese foundry past $3 billion in quarterly sales for the first time.

Co-chief executive Zhao Haijun disclosed the pricing adjustments during an earnings briefing, noting that contract renegotiations concluded in the opening quarter now translate into higher charges for third-quarter output. The move reflects confidence that demand will absorb the cost increase even as SMIC's rates remain below those commanded by industry leaders.

"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, emphasizing that the company's manufacturing standards now justify premium positioning.

Revenue Breaks Records

Second-quarter revenue cleared the $3 billion threshold on shipments of 2.9 million eight-inch-equivalent wafers, a sequential jump of 14 percent. Average selling prices climbed 5.7 percent over the same span, combining volume and rate gains that drove profit attributable to shareholders to $479.2 million, three times the year-earlier figure. Both top- and bottom-line results exceeded consensus forecasts compiled by LSEG.

Chief financial officer Wu Junfeng noted that net income also benefited from a one-time gain tied to a subsidiary transaction during the period.

SMIC is the only Chinese manufacturer capable of high-volume production on a seven-nanometer logic process, the geometry required for central processing units and graphics processors. Zhao clarified that much of the incremental demand stems not from those headline chips but from ancillary semiconductors, power management ICs, and connectivity components that support AI infrastructure. Most orders originate with domestic customers, though some arrived ahead of anticipated timelines, compressing lead times.

Tight Utilization Across Lines

Monthly production capacity stood at 1.1 million eight-inch-equivalent wafers at quarter-end, up 1.7 percent from March, while utilization reached 93.7 percent. The foundry added 8,000 wafers of twelve-inch monthly capacity during the quarter, part of a broader effort to relieve bottlenecks that Zhao said would accelerate in the second half.

The company projects third-quarter revenue will advance two to four percent sequentially, with shipment volumes continuing to expand. Zhao indicated that SMIC will prioritize ramping new production lines and reallocating tool sets to match customer mix, anticipating that AI-related orders will sustain momentum through year-end.

Amortization expense totaled $2.3 billion in the first half; full-year amortization is forecast at roughly $5 billion, a 30 percent increase that reflects continued capital intensity. First-half spending reached $3.4 billion, slightly above the $3.3 billion deployed a year earlier.

Geographic and Market Position

Mainland China accounted for 90 percent of second-quarter sales, with the United States contributing eight percent. The concentration underscores SMIC's role as the primary domestic source for advanced logic as Beijing pursues semiconductor self-reliance amid export restrictions on cutting-edge lithography tools.

Shares rose five percent following the earnings call, though the stock remains marginally lower for the year to date, down 0.21 percent. Investors appear to weigh record financial performance against geopolitical uncertainties and technology access constraints that could cap long-term node advancement.

SMIC's ability to extract higher pricing while maintaining near-full utilization highlights the broader supply tightness rippling through Asian foundries. As hyperscalers and device makers compete for limited wafer starts, smaller and mid-tier manufacturers are finding leverage to reset contract economics, a dynamic that could persist as long as AI infrastructure build-outs continue at current pace.

Asia's overnight moves, distilled into a five-minute read.

Foundry Capacity Commands Premium

Revenue Breaks Records

Tight Utilization Across Lines

Geographic and Market Position

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