Chinese chipmaker SMIC increases prices on strong AI demand 

By Che Pan and Eduardo Baptista

BEIJING, Aug ‌13 (Reuters) - China's top foundry, ​Semiconductor ​Manufacturing International Corp, said on Friday that AI-related demand would continue to underpin orders for its production, and that it had raised prices for its most sought-after capacity.

Co-CEO Zhao Haijun ‌said on an earnings call that SMIC raised prices following negotiations with customers in ⁠the first quarter, and that it would charge more for wafers processed in the third quarter.

"We believe we've reached top-tier industry standards ‌in these areas," Zhao said. "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."

Silicon wafers serve as the base material onto which chip patterns are printed ​by SMIC through the fabrication process.

SMIC, the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs on a 7-nanometre process, posted revenue above $3 billion for the first time in the ⁠second quarter, driven by strong AI demand.

Profit attributable to shareholders tripled to $479.2 million, with both figures beating average analyst estimates compiled by LSEG.

The company ​shipped 2.9 million 8-inch-equivalent wafers in the second quarter, up 14% from the previous quarter, while the average selling price of wafers rose 5.7%, as strong demand ​in AI drives tightness in semiconductor supply chains around the ‌world.

Zhao said the rise in shipments was driven mainly by surging AI-fuelled demand for chips other than CPUs and GPUs, mostly from China-based customers, as well as ⁠earlier-than-expected orders.

Chief Financial Officer Wu Junfeng said the jump in net profit was also boosted by a one-time gain from a subsidiary in the second quarter.

Zhao said AI would continue to drive robust chip demand for foundry services in the ⁠second half of the year, adding SMIC would adjust existing capacity and accelerate the ramp-up of new production lines to ​help ease industry-wide supply constraints.

SMIC shares were up 5% after the earnings call, though down 0.21% year-to-date.

The company's monthly production capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilisation — a measure of a foundry's production intensity — reaching 93.7%, slightly ‌up from the first quarter.

SMIC added 8,000 wafers of monthly 12-inch capacity during the second quarter. The company said first-half amortisation totaled $2.3 billion, and it expects ‌full-year amortisation of around $5 billion, up 30% year-on-year.

China remained SMIC's largest market, accounting for 90% of second-quarter revenue, while the ⁠U.S. contributed 8%.

Capital spending in the first ‌half reached $3.4 billion, up from $3.3 billion ​a year earlier.

SMIC expects third-quarter revenue to rise 2% to 4% from the second quarter, with wafer shipments continuing to increase.

(Reporting by Che Pan and Eduardo Baptista; Editing by ‌Jamie Freed)

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