SMIC, the Chinese foundry often called the vanguard of China's semiconductor ambitions [Getty Images]
SMIC, the Chinese foundry often called the vanguard of China's semiconductor ambitions [Getty Images]

Semiconductor Manufacturing International Corp. (SMIC), China's largest foundry, is considering expanding its production capacity to meet surging demand for AI chips.

According to the South China Morning Post on Friday, SMIC co-CEO Zhao Haijun said during an earnings conference call that wafer output had "significantly exceeded initial forecasts," and that the company was exploring adding equipment to factories with available floor space. He did not disclose a specific timeline or scale for the expansion.

The move comes as orders for companion semiconductors used in AI servers and data centers have surged, deepening a supply shortage. Zhao said orders for certain products — including those using BCD (bipolar-CMOS-DMOS) processes — are expected to continue through the end of 2027.

SMIC's capacity utilization rate stood at 93.7% in the second quarter, up 0.6 percentage points quarter-on-quarter and in effect near its ceiling. The company keeps its utilization cap at around 95%, reserving the remaining 5% of capacity for research and development.

Further price increases are also on the horizon. During the first-quarter earnings call, Zhao had said price hikes negotiated with customers would be reflected in second-quarter results. On Friday, he signaled the possibility of additional price increases for third-quarter production.

"We believe we have reached industry-leading standards in the relevant fields," he said. "There is still a significant gap between the wafer prices of industry leaders and SMIC's prices, so we need to negotiate with customers for more reasonable pricing."

SMIC's earnings have improved rapidly on the back of the AI boom. The company posted second-quarter sales of $3.01 billion, up 20% quarter-on-quarter and 36.1% from a year earlier. SMIC projected third-quarter sales would grow an additional 2 to 4% quarter-on-quarter, with a gross margin of 26 to 28%.


klee@heraldcorp.com