SMIC Q3 Profit More Than Doubles to $428.4M on AI Demand

SMIC more than doubled its third-quarter profit, with earnings attributable to shareholders jumping 123.4 percent to $428.4 million as AI-related demand keeps China's semiconductor supply chain running hot. Revenue hit a record $3.19 billion in the three months ended September 30, up 33.9 percent from $2.38 billion a year earlier and 6.1 percent from the second quarter, according to the company's Hong Kong Stock Exchange filing.

The numbers landed above Wall Street expectations. Reuters reported that both the profit and revenue figures beat analyst estimates compiled by LSEG.

Where the money came from

Total profit for the period climbed 106.3 percent to $650.9 million. Gross profit rose 82.3 percent year on year to $953.2 million. Gross margin expanded to 29.9 percent, from 22 percent a year earlier and 25.3 percent in the preceding quarter — a gain of nearly eight percentage points in twelve months, driven by higher utilization and shifts in product mix.

The utilization number is the one practitioners should watch. SMIC's fabs ran at 97.3 percent capacity in the quarter, up 3.6 percentage points from Q2. Monthly production capacity reached roughly 1.1 million eight-inch-equivalent wafers. In plain terms: the company is running its plants nearly flat out, which means incremental revenue growth now depends more on adding capacity than squeezing more from existing lines.

Geographically, the business is almost entirely domestic. China generated 90.8 percent of quarterly revenue, up from 86.2 percent a year ago. The U.S. contributed 7.8 percent, Eurasia 1.4 percent. By application:

• Consumer electronics: 40.6 percent of wafer revenue
• Industrial and automotive: 19.3 percent
• Computers and tablets: 18.3 percent

What does the supply outlook change?

On the November 13 earnings call, co-chief executive Zhao Haijun said AI-related semiconductor supply chains will remain tight through 2027, as demand from data centers and private-cloud operators keeps building, according to Reuters. Worth noting: that's management commentary, not an independent market forecast. But coming from the head of China's largest contract chipmaker, it's a signal for anyone planning foundry capacity over the next two years.

SMIC is also grappling with longer equipment lead times, which management said could affect the timing of capital spending. That constraint is already visible in the numbers: third-quarter capital expenditure fell to $1.09 billion from $1.84 billion in the second quarter — a drop of roughly 41 percent quarter on quarter.

The forward view

For the fourth quarter, SMIC guided to sequential revenue growth of 4 to 6 percent, with gross margin between 26 and 28 percent — a modest step back from Q3's 29.9 percent. The company said it is adding capacity in response to customer demand, but it did not disclose customer-level orders or break out revenue from AI-specific products.

The gap matters. Investors can't yet verify how much of the surge is directly AI-driven versus general demand recovery. The peer signal is consistent, though: rival Hua Hong Grace reported a 147 percent profit rise in the same quarter, suggesting the strength is broad-based across China's mature-node foundries rather than a one-company story.

For buyers of foundry services, the practical takeaway is simple. With utilization at 97.3 percent and management flagging tight supply into 2027, negotiating capacity now looks cheaper than negotiating it later — especially if SMIC's capex timing slips because of equipment lead times.