SMIC Raises Chip Prices as AI Demand Drives US$3 Billion Revenue

SMIC reported record 2Q26 revenue of US$3 billion as AI-driven demand increased wafer shipments and tightened semiconductor capacity, prompting the Chinese foundry to raise prices for its most sought-after production capacity. The company expects AI-related demand to continue supporting orders in the second half of 2026 as it reallocates existing capacity and accelerates the qualification of new production lines.

AI is reshaping semiconductor demand beyond the processors most closely associated with AI infrastructure. For Semiconductor Manufacturing International Corp. (SMIC), that shift is translating into higher wafer shipments, stronger pricing, and record quarterly revenue.

China's largest semiconductor foundry reported US$3.01 billion in revenue for the second quarter, its first quarter above the US$3 billion mark. Revenue increased 20% from the first quarter and 36.1% year over year, while gross profit reached US$760.6 million and gross margin expanded to 25.3%.

The results came as AI-related demand continued to increase orders across the semiconductor manufacturing supply chain. SMIC also raised prices for some of its most in-demand production capacity, signaling that supply constraints are beginning to affect pricing as customers compete for foundry capacity.

AI Demand Tightens Foundry Capacity

Zhao Haijun, Co-CEO, SMIC, says the company raised prices after negotiations with customers in the first quarter, with the increases applying to wafers processed in the third quarter. "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," says Zhao.

The pricing adjustment came alongside a 14.4% sequential increase in wafer shipments. SMIC shipped about 2.87 million 8in-equivalent wafers in the second quarter, compared with 2.51 million in the first quarter.

Average selling prices also increased 5.7%, according to Reuters. The combination of higher shipments, pricing and changes in product mix was the primary driver of the quarterly revenue increase, according to SMIC's financial report.

Zhao says the increase in shipments was driven primarily by stronger demand for chips used in AI applications beyond traditional CPUs and GPUs. Most of that demand came from customers in China, with some orders arriving earlier than expected.

The development points to a broader characteristic of the current AI semiconductor cycle: demand is expanding across a wider range of components and manufacturing requirements rather than being concentrated only in advanced AI accelerators. SMIC's own revenue mix reflects that diversification. Consumer electronics accounted for 44.2% of wafer revenue in the second quarter, followed by smartphones at 16.9%, industrial and automotive applications at 16.5% and computers and tablets at 15.6%. Connectivity and IoT represented 6.8%.

Capacity Expansion Becomes a Priority

Higher demand is also putting pressure on SMIC's production network. Monthly capacity increased to 1.0965 million standard logic 8-inch-equivalent wafers in the second quarter, from 1.07825 million in the first quarter. Factory utilization reached 93.7%, compared with 93.1% in the previous quarter. The company also added 12-inch wafer capacity during the quarter as it continued to expand production.

For the second half of 2026, SMIC says AI-related industrial momentum and its spillover effects will continue to support broad demand for integrated circuit manufacturing. The company plans to respond by reallocating existing capacity and accelerating the qualification of newly added capacity. The objective is to increase available production while helping ease supply constraints across the semiconductor industry.

Capital expenditure reached US$1.84 billion in the second quarter, up from US$1.56 billion in the first quarter. First-half capital expenditure totaled US$3.4 billion, according to the company.

The expansion comes with higher depreciation and amortization costs. SMIC reported US$1.21 billion in depreciation and amortization for the second quarter, up 11.4% from the first quarter and 37.9% from a year earlier.

China Accounts for Most of SMIC's Business

The quarterly results also highlight the concentration of SMIC's business in the Chinese market. China represented 90.2% of second-quarter revenue, up from 88.9% in the first quarter and 84.1% a year earlier. The United States accounted for 8.2%, while Eurasia represented 1.6%.

The company generated US$479.2 million in profit attributable to shareholders, compared with US$197.4 million in the first quarter and US$132.5 million a year earlier. SMIC says part of the increase in net profit was linked to a one-time gain from a subsidiary. Other income also increased sharply, supported in part by gains associated with investments in associates and joint ventures.

For the third quarter, SMIC expects revenue to increase between 2% and 4% sequentially, with gross margin projected at between 26% and 28%.

The company says AI will continue to support strong foundry demand through the second half of the year. Its strategy will center on using existing capacity more flexibly while bringing new production lines into operation faster.