SMIC's Revenue Jumps 34 Percent to $3.19 Billion as AI-Adjacent Chip Orders Push Its Fabs to 97.3 Percent Utilization

SMIC, China's largest contract chipmaker, beat the top of its own guidance in the September quarter: revenue of $3.19 billion under IFRS, up 34 percent year over year and 6.1 percent sequentially, a gross margin of 29.9 percent, and net profit attributable to shareholders of $428.4 million, up about 123 percent. Co-CEO Zhao Haijun told analysts the quarter exceeded the guidance ceiling because pull-in demand for AI-adjacent chips — BCD power management, specialty memory and controller silicon — was growing faster than the company had expected.

The operating detail behind the margin beat is utilization, not pricing. Wafer shipments rose 5.7 percent sequentially to above three million 8-inch-equivalent wafers for the first time, while average selling prices rose just 1.8 percent. Utilization climbed from 93.7 percent to 97.3 percent — effectively full — which diluted fixed costs enough to absorb a 2.3 percent rise in quarterly depreciation and still lift the gross margin by 4.6 points.

The mix shift underneath is the structural story. Smartphones fell to 14.3 percent of wafer revenue from 21.5 percent a year ago, and consumer electronics, still the largest segment at 40.6 percent, is shrinking. Filling the gap: industrial and automotive rose to 19.3 percent of revenue with 26 percent sequential growth, PC and tablet grew 26 percent, and interconnect and wearable 18 percent. Zhao attributed the gains to supply-chain localization and the company's platform buildout — Chinese demand for AI server power and data-path silicon is increasingly being placed domestically, and SMIC is capturing it.

China now accounts for 90.8 percent of revenue, up 7 percent sequentially, growing faster than the company overall. That concentration is both the growth engine and the exposure: it tracks the same domestic AI buildout that US export controls keep trying to pinch off, and SMIC's advanced-node capacity remains constrained by equipment access.

Guidance for the fourth quarter is revenue of $3.32 billion to $3.38 billion, up 4 to 6 percent sequentially — unusual growth for what Zhao called the traditional off-season — with gross margin guided down to 26 to 28 percent as depreciation, raw material costs and a planned increase in engineering and R&D tape-outs weigh. The company plans to steer freed-up capacity toward specialty memory and BCD power products, where pricing is firmer.

Goldman Sachs called the quarter a broad beat and raised its twelve-month targets to HK$156 for the H shares and 263 yuan for the A shares, lifting estimates on the view that Chinese generative AI demand is driving both mature-node product lines such as analog and power ICs and advanced-node domestic AI chips, with localization and capacity expansion supporting the trajectory.

The 97.3 percent utilization figure is the one to watch. SMIC is now selling essentially everything its fabs can produce, which means incremental AI-adjacent demand either displaces other customers, pushes prices, or waits on new capacity that is expensive to build under current export-control regimes. For the AI supply chain, the quarter is evidence that the compute buildout's demand signal has reached all the way down to mature-node power and controller silicon — and that China's share of it is running out of headroom.