SMIC Hikes Prices as AI Demand Drives Record Second-Quarter Revenue

China's leading chip foundry, SMIC, is raising prices for its most sought-after production capacity to capitalize on a surge in AI-related demand. The move follows record-breaking financial results, signaling a shift in the company's pricing power within the domestic market.

For the second quarter, SMIC reported revenue surpassing $3 billion for the first time. Profit attributable to shareholders tripled to $479.2 million during the period. According to company data, wafer shipments rose 14% quarter-on-quarter to 2.9 million 8-inch-equivalent wafers, while average selling prices increased by 5.7%. Production utilization remained high, reaching 93.7% in the second quarter.

The Drive for Fairer Pricing

SMIC holds a critical position in the Chinese semiconductor landscape as the only domestic foundry capable of mass-producing logic chips, such as CPUs and GPUs, on a 7-nanometre process. This technical edge has made the company the primary vehicle for China's pursuit of semiconductor self-sufficiency, especially as U.S. sanctions continue to restrict access to advanced semiconductor equipment.

Despite its dominant local position, SMIC leadership believes its rates have lagged behind global competitors. Co-CEO Zhao Haijun stated that the company is seeking to close this gap, noting, "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."

Strategic Implications for AI

This pricing shift underscores a deep dependency of the Chinese AI industry on SMIC's advanced nodes. With China accounting for 90% of SMIC's second-quarter revenue—compared to just 8% from the U.S.—the company is effectively insulated from some external pressures by an insatiable domestic appetite for AI hardware.

The ability to increase prices while maintaining utilization above 93% suggests that SMIC has transitioned from a volume-driven provider to a high-value strategic asset. For the broader industry, this indicates that the Chinese ecosystem is willing to pay a premium for domestic advanced logic capacity to mitigate the risks associated with geopolitical instability and trade restrictions.

Future Outlook

Market observers will now watch whether SMIC can successfully implement these "fairer" pricing tiers without slowing the growth of its customer base. While the current financial trajectory is strong, the company's long-term growth remains tied to its ability to maintain and advance its 7nm capabilities under strict international export controls. It remains to be seen if SMIC can further narrow the technical and pricing gap with top-tier global foundries as it continues to scale its AI-centric production.