China's SMIC Raises Chip Prices as AI Demand Drives Record Quarterly Revenue

Semiconductor Manufacturing International Corp, China's largest foundry, said Friday that AI-related demand will continue to underpin orders for its production and confirmed it has raised prices for its most sought-after capacity. Co-CEO Zhao Haijun said on an earnings call that SMIC raised prices following negotiations with customers in the first quarter and will charge more for wafers processed in the third quarter.

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

SMIC, the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs on a 7-nanometer process, posted revenue above $3 billion for the first time in the second quarter, driven by strong AI demand. Profit attributable to shareholders tripled to $479.2 million, with both figures beating average analyst estimates compiled by LSEG.

Chief Financial Officer Wu Junfeng said the jump in net profit was also boosted by a one-time gain from a subsidiary during the quarter.

The company shipped 2.9 million 8-inch-equivalent wafers in the second quarter, up 14% from the previous quarter, while the average selling price of wafers rose 5.7%, as strong AI demand drives tightness in semiconductor supply chains globally. Zhao said the rise in shipments was driven mainly by surging AI-fueled demand for chips other than CPUs and GPUs, mostly from China-based customers, as well as earlier-than-expected orders.

SMIC's monthly production capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilization — a measure of a foundry's production intensity — reaching 93.7%, slightly up from the first quarter. The company added 8,000 wafers of monthly 12-inch capacity during the quarter.

Zhao said AI will continue to drive robust chip demand for foundry services in the second half of the year, adding that SMIC will adjust existing capacity and accelerate the ramp-up of new production lines to help ease industry-wide supply constraints.

The company said first-half amortization totaled $2.3 billion and it expects full-year amortization of around $5 billion, up 30% year-over-year. China remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the U.S. contributed 8%.