Semiconductor Manufacturing International Corp. co-CEO Zhao Haijun said on Aug. 14 that the company does not see the possibility of wafer price cuts within this year, with orders already scheduled through the fourth quarter.
「Orders have already been lined up through the fourth quarter. Within this year, we have not seen the possibility of wafer price cuts, and current gross margin and capacity utilization are sustainable,」 Zhao said during an earnings briefing.
SMIC’s results for the second quarter of 2026, released on Aug. 13, showed revenue reached a record $3.006 billion, or about RMB 20.273 billion, up 20% from the previous quarter and 36.1% from a year earlier. Gross profit, gross margin and capacity utilization all rose both quarter over quarter and year over year.
Zhao said the increase in operating revenue came from a combination of higher shipments and price increases.
Price increases contributed more than capacity optimization
SMIC is an integrated circuit wafer foundry that provides 8-inch and 12-inch wafer foundry and technology services to customers worldwide.
The company reported a second-quarter gross margin of 25.3%, up from 20.1% in the first quarter and 20.4% a year earlier. Net profit attributable to shareholders was $479 million, or about RMB 3.230 billion, up 142.7% quarter over quarter and 399.9% year over year.
Zhao said gross margin increased by 5.2 percentage points from the first quarter, mainly because the average selling price increased and capacity profitability came in better than expected, offsetting the drag from higher depreciation. The average selling price rose 5.7% from the previous quarter this year. He said price increases contributed more to gross margin expansion than capacity optimization.
Monthly capacity increased from 1.0783 million wafers in the first quarter to 1.0965 million wafers in the second quarter, both converted to 8-inch standard logic. Wafer shipments in the second quarter were 2.8695 million wafers on the same basis, up 14.4% from the prior quarter and 20.1% from a year earlier. Capacity utilization reached 93.7%, higher than 92.5% a year earlier.
Zhao said higher shipments in the second quarter mainly came from stronger demand for AI-related supporting chips and demand from other customer shipments. The company added monthly capacity equivalent to 8,000 12-inch wafers, while capacity utilization increased 0.6% from the prior quarter.
China accounted for 90.2% of main business revenue
By region, China, the U.S. and Eurasia contributed 90.2%, 8.2% and 1.6% of main business revenue in the second quarter, respectively. Zhao said revenue increased in all regions, with China posting the biggest gain at 22%, driven mainly by strong demand for AI-related supporting chips, the return of overseas orders and continued improvement in manufacturing capability.
By wafer size, 12-inch wafers and 8-inch wafers accounted for 78.2% and 21.8% of sales revenue, respectively.
Capital expenditure in the second quarter of 2026 was $1.836 billion, or about RMB 12.382 billion, up 17.5% from the previous quarter. Cash and cash equivalents stood at $8.216 billion, or about RMB 55.410 billion, up 12.9% quarter over quarter.
Company points to stronger demand in computing-related segments
By application, second-quarter wafer revenue was split among smartphones, computers and tablets, consumer electronics, connectivity and wearables, and industrial and automotive at 16.9%, 15.6%, 44.2%, 6.8% and 16.5%, respectively. A year earlier, those shares were 25.2%, 15.0%, 41.0%, 8.2% and 10.6%.
Zhao said the company allocated more capacity to areas where demand was tight, lifting revenue from AI-related supporting chips, computers and tablets, and industrial and automotive by around 40% from the prior quarter. In other applications, weakness in end-market demand was partly offset by customers pulling in orders early, allowing smartphone, consumer, connectivity and wearable revenue to also increase.
The share of automotive and industrial revenue rose from 10.6% a year earlier to 16.5% in the second quarter. Zhao said customers in those categories cover multiple product lines and recently prioritized capacity orders for automotive and industrial chips, which reduced the absolute shipment level of smartphone and consumer products and pushed up the former category’s share.
In response to analyst questions, Zhao said computing-related niche markets, especially chips for data centers and artificial intelligence, are set to see larger demand ahead. As global investment in artificial intelligence increases, supporting chips including logic circuits, BCD and optical modules are in short supply, with prices continuing to rise.
Zhao also said AI-related business will remain a key investment area for SMIC. On customer supply, however, the company will keep a first-come, first-served policy and will not prioritize later buyers simply because they offer higher prices.
Third-quarter revenue guidance calls for 2% to 4% sequential growth
SMIC said inventory stood at $4.361 billion, or about RMB 29.411 billion, at the end of the second quarter of 2026, up 20.1% from $3.630 billion, or about RMB 24.481 billion, at the end of 2025.
On inventories, Zhao said the industry is seeing inventory reduction pressure in smartphone chips, while consumer products such as display driver chips have low inventories but weak demand. With capacity supply still tight, the market is concerned that if smartphone and consumer demand recovers next year, current reserves may not be enough. Together with expectations of higher supply-chain prices, manufacturers are trying to find a balance by building some inventory in advance to avoid difficulties in securing capacity and facing higher costs next year.
For the third quarter of 2026, Zhao said shipments are expected to continue growing and prices will remain stable. The company guided for revenue growth of 2% to 4% quarter over quarter and gross margin of 26% to 28%. After offsetting additional depreciation in the third quarter and higher summer electricity costs, gross margin could continue to improve from the prior quarter.
On Aug. 14, SMIC’s A-shares closed at RMB 132.87, up 2.65%, giving the company a market value of about RMB 1.14 trillion.
This article was sourced from the WeChat public account Zhongxin Jingwei (ID: jwview) and written by Xie Jingwen.