SMIC Raises Wafer Prices As AI Demand Drives Strong Growth
China’s top foundry, Semiconductor Manufacturing International Corp (SMIC), expects artificial intelligence demand to continue supporting orders, while strong demand has prompted the company to raise prices for its most sought-after production capacity.
Co-CEO Zhao Haijun said during an earnings call that SMIC increased prices after negotiations with customers in the first quarter. The company also plans to charge more for wafers processed in the third quarter.
Zhao said SMIC had reached top-tier industry standards in several areas. However, he noted that a significant gap remained between industry-leading wafer prices and SMIC’s current prices, prompting further negotiations with customers for fairer pricing.
Silicon wafers provide the base material on which chip patterns are printed during the fabrication process.
AI Demand Supports SMIC Revenue
SMIC, the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs using a 7-nanometre process, reported quarterly revenue above $3 billion for the first time in the second quarter.
Strong AI demand drove the growth. Meanwhile, profit attributable to shareholders tripled to $479.2 million. Both revenue and profit exceeded average analyst estimates compiled by LSEG.
The company shipped 2.9 million 8-inch-equivalent wafers during the second quarter, representing a 14% increase from the previous quarter. In addition, the average selling price of wafers increased 5.7%.
Strong AI demand has tightened semiconductor supply chains around the world. As a result, SMIC has seen increased orders and higher wafer prices.
China Customers Drive Higher Shipments
Zhao said the increase in shipments was mainly driven by surging AI-fuelled demand for chips other than CPUs and GPUs. Most of that demand came from customers based in China.
The company also benefited from orders that arrived earlier than expected. Therefore, SMIC expects AI demand to remain an important driver of foundry services during the second half of the year.
Zhao said SMIC would adjust existing production capacity and accelerate the ramp-up of new production lines. The measures are intended to help ease supply constraints across the semiconductor industry.
Chief Financial Officer Wu Junfeng said the sharp increase in net profit was also supported by a one-time gain from a subsidiary during the second quarter.
Production Capacity Continues To Rise
SMIC’s monthly production capacity increased 1.7% from the previous quarter to 1.1 million 8-inch-equivalent wafers. At the same time, capacity utilisation reached 93.7%, slightly higher than in the first quarter.
SMIC added 8,000 wafers of monthly 12-inch capacity during the second quarter. The company reported first-half amortisation of $2.3 billion and expects full-year amortisation to reach about $5 billion, representing a 30% increase from the previous year.
Capital spending reached $3.4 billion in the first half, compared with $3.3 billion during the same period a year earlier.
China remained SMIC’s largest market, accounting for 90% of second-quarter revenue. Meanwhile, the United States contributed 8%.
SMIC shares rose 5% after the earnings call, although they remained down 0.21% year-to-date.
The company expects third-quarter revenue to increase by 2% to 4% from the second quarter. It also expects wafer shipments to continue rising as demand remains strong.
With inputs from Reuters
