SMIC Posts Record Quarter and Hikes Wafer Prices Amid US Sanctions

SMIC, China's only 7nm-class foundry, has posted a record $3 billion quarter, with revenue up 36.1% year on year and net profit nearly tripling to $479.2 million. The company's utilization rate hit 93.7% last quarter, driven by demand from Chinese AI data center buildouts that have been cut off from TSMC and Samsung by US export controls.

## Record Quarter and Price Hikes The record quarter has led SMIC to hike wafer prices, with Co-CEO Zhao Haijun stating that the company will charge more for wafers processed in the third quarter after price negotiations concluded in the first. The price hikes are due to the high demand for SMIC's wafers, which has resulted in a shortage. SMIC's wafer shipments rose 14% quarter-on-quarter to 2.9 million 8-inch equivalents, and blended selling prices climbed 5.7%.

## Demand from AI Data Center Buildouts The demand for SMIC's wafers is coming from Chinese AI data center buildouts, which have been cut off from TSMC and Samsung by US export controls. According to Zhao, the surge in demand came mostly from AI chips other than CPUs and GPUs, such as logic ICs, BCD power-management parts, and optical transceiver components, all of which are in short supply. The growth in SMIC's AI peripheral segment is expected to be around 40% for the quarter.

## Comparison of Foundry Utilization and Revenue | Foundry | Utilization | Revenue | | --- | --- | --- | | SMIC | 93.7% | $3.01 billion | | Hua Hong | 102.8% | $717.5 million | | TSMC | - | - |

## China's AI Chip Designers Post Record First Halves China's AI chip designers, such as Cambricon, Moore Threads, and Biren, have posted record or near-record numbers, with Cambricon's first-half revenue rising 108% to 6 billion yuan and net profit up 122.6% to 2.3 billion yuan. The growth in China's AI chip industry is driven by the government's push to develop domestic AI capabilities, with Beijing aiming to source 70% of silicon wafers domestically this year.

## Challenges Facing SMIC Despite the record quarter and price hikes, SMIC still faces challenges, including yield limitations and high costs for its advanced nodes. According to industry sources, SMIC's 5nm and 7nm prices are 40% to 50% above TSMC's, with yields of less than a third. The company's profit surge also comes with a one-time gain from a subsidiary, and demand for its silicon rests largely on policy rather than proven end markets.