Chinese chipmaker SMIC raises prices on strong AI demand

Beijing-based Semiconductor Manufacturing International Corp (SMIC), the leading Chinese chipmaker, announced on Friday that it would increase prices for its most sought-after production capacity, citing strong demand from the artificial intelligence (AI) sector. AI-related orders would continue to bolster SMIC's production, according to Co-CEO Zhao Haijun during an earnings call.

SMIC has already raised prices following negotiations with customers in Q1 and intends to continue doing so for Q3. Zhao stated that SMIC has reached top-tier industry standards in this regard and that they intend to negotiate with customers to secure fairer pricing.

The Chinese foundry, which specializes in mass-producing logic chips like CPUs and GPUs using a 7-nanometre process, reported revenue exceeding USD 3 billion in Q2 for the first time. Profit attributable to shareholders also tripled to USD 479.2 million, surpassing analysts' estimates. SMIC shipped 2.9 million 8-inch-equivalent wafers in Q2, a 14% increase from the previous quarter, with an average selling price rising 5.7%.

The surge in shipments was primarily fueled by surging AI-driven demand for chips beyond CPUs and GPUs, primarily from Chinese customers, as well as earlier-than-expected orders.

CFO Wu Junfeng attributed the profit growth to a one-time gain from a subsidiary in Q2. Zhao further stated that AI would continue to strengthen chip demand for foundry services in the second half of the year. SMIC plans to adjust existing capacity and accelerate the launch of new production lines to alleviate industry-wide supply constraints.

SMIC's monthly production capacity grew 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilization at 93.7%, slightly higher than Q1. The company added 8,000 wafers of monthly 12-inch capacity during Q2. First-half amortisation totaled USD 2.3 billion, with an expected full-year amortisation of around USD 5 billion, up 30% year-on-year.

China remains SMIC's largest market, making up 90% of Q2 revenue, while the US contributed 8%. Capital spending in the first half reached USD 3.4 billion, up from USD 3.3 billion a year earlier. SMIC anticipates Q3 revenue to rise by 2% to 4% from Q2, with wafer shipments continuing to increase.