"Orders are already booked through the fourth quarter. We do not see the possibility of wafer prices dropping this year. Current gross margins and capacity utilization rates are sustainable," said Zhao Haijun, Co-CEO of SMIC, during the earnings conference held on the morning of the 14th.
SMIC's 2026 second-quarter earnings, released on the 13th, show that the company's Q2 revenue exceeded $3.006 billion (approximately RMB 20.273 billion) for the first time, setting a historical record, with a sequential increase of 20% and a year-on-year increase of 36.1%. Meanwhile, gross profit, gross margin, and capacity utilization rate all achieved sequential and year-on-year growth.
Zhao Haijun stated that the growth in the company's revenue was primarily driven by a combination of increased shipments and price hikes.
Price Increases Contributed More Than Capacity Optimization
SMIC is an integrated circuit wafer foundry enterprise, providing 8-inch and 12-inch wafer foundry services and technical support to global customers.
According to the announcement, SMIC's second-quarter gross margin was 25.3%, up from 20.1% in Q1 and 20.4% in the same period last year; net profit attributable to shareholders was $479 million (approximately RMB 3.230 billion), up 142.7% sequentially and 399.9% year-on-year.
Zhao Haijun explained during the earnings conference that the 5.2 percentage point sequential increase in Q2 gross margin was mainly due to higher average selling prices and better-than-expected capacity utilization, offsetting the drag from increased depreciation. The average selling price increased 5.7% sequentially this year. He particularly pointed out that among the factors contributing to the gross margin growth, price increases played a larger role than capacity optimization.
The announcement shows that the company's monthly capacity increased from 1,078.3k 8-inch equivalent wafers in Q1 this year to 1,096.5k 8-inch equivalent wafers in Q2. Wafer sales volume in Q2 was 2,869.5k 8-inch equivalent wafers, up 14.4% sequentially and 20.1% year-on-year. Capacity utilization reached 93.7%, higher than the 92.5% in the same period last year.
Zhao Haijun said the increase in shipments in Q2 mainly stemmed from the boost in demand for supporting chips from artificial intelligence and the pull from other customer shipment demands. The company added 8,000 units of monthly capacity (12-inch equivalent), and capacity utilization increased by 0.6% sequentially.
The announcement shows that in Q2, SMIC's main business revenue, categorized by region, was China, the United States, and Euraisa, accounting for 90.2%, 8.2%, and 1.6% respectively. Zhao Haijun noted that revenue amounts increased in all regions, with China seeing the largest growth at 22%, mainly benefiting from strong demand for AI-supporting chips, the return of overseas orders, and continued strengthening of manufacturing capabilities.
By wafer size, revenue from 12-inch and 8-inch wafers accounted for 78.2% and 21.8% respectively.
In the second quarter of 2026, SMIC's capital expenditures were $1.836 billion (approximately RMB 12.382 billion), a sequential increase of 17.5%; cash and cash equivalents were $8.216 billion (approximately RMB 55.410 billion), a sequential increase of 12.9%.
Greater Demand for Computing-Power Related Segments
In Q2, SMIC's wafer revenue by application was categorized as smartphones, computers & tablets, consumer electronics, IoT & wearables, and industrial & automotive, accounting for 16.9%, 15.6%, 44.2%, 6.8%, and 16.5% respectively. In the same period last year, the revenue share for each application was 25.2%, 15.0%, 41.0%, 8.2%, and 10.6% respectively.
Zhao Haijun stated that the company allocated more capacity to areas with tight demand, leading to revenue growth of about 40% sequentially for AI-supporting chips, computers & tablets, and industrial & automotive. Although other applications were affected by the overall downturn in end markets, customers' early stockpiling offset some of the impact, resulting in growth in revenue from smartphones, consumer electronics, and IoT & wearables as well.
The share of automotive and industrial revenue increased from 10.6% in the same period last year to 16.5% in Q2. Zhao Haijun explained that related customer product lines cover multiple fields. Recently, they prioritized placing orders for automotive and industrial chips, leading to an absolute decline in shipments for smartphones and consumer categories, thereby increasing the former's proportion.
During the analyst Q&A session, Zhao Haijun stated that the demand for computing-power related market segments, especially chips for data centers and artificial intelligence, will be greater in the future. With the increase in global AI investment, supporting chips such as logic circuits, BCD (single-chip integration process technology), and optical modules are in short supply, with prices continuing to rise.
Zhao Haijun said that AI-related fields will also be a key investment area for SMIC going forward. However, regarding customer supply, the company will maintain a "first-come, first-served" principle and will not prioritize supply for latercomers even if they offer higher prices.
The announcement shows that in Q2 2026, the company's inventory was $4.361 billion (approximately RMB 29.411 billion), a 20.1% increase from the $3.630 billion (approximately RMB 24.481 billion) at the end of 2025.
Addressing inventory issues, Zhao Haijun noted that within the industry, destocking pressure for smartphone chips is currently apparent, while inventory for consumer products like display driver chips is low but demand is weak. Due to tight capacity supply, there is widespread concern that if demand for smartphones and consumer products recovers next year, existing reserves will be insufficient. Coupled with expectations of supply chain price increases, manufacturers are seeking a balance, moderately stocking up in advance to avoid the risk of difficulty securing capacity and rising costs next year.
Looking ahead to Q3 2026, Zhao Haijun stated that the company expects shipments to continue growing, with prices remaining stable. The revenue guidance is a sequential increase of 2% to 4%, and the gross margin guidance is 26% to 28%. After offsetting the additional depreciation in Q3 and peak summer electricity costs, gross margin is expected to continue improving sequentially.
On August 14, SMIC's A-share closing price was RMB 132.87 per share, up 2.65%, with a total market capitalization of approximately RMB 1.14 trillion.
This article is from the WeChat public account "Zhongxin Jingwei" (ID: jwview), author: Xie Jingwen
