SMIC AI chip demand pushed China’s largest foundry past $3 billion in quarterly revenue for the first time. Q2 2026 revenue hit $3.006 billion, up 36.1% year over year, while net profit attributable to owners jumped 261.7% to $479.2 million. Gross margin widened to 25.3% from 20.4%. Wafer prices rose 5.7% sequentially — and management says more increases are coming in Q3.
How much did SMIC make in Q2 2026?
Semiconductor Manufacturing International Corporation reported $3.006 billion in revenue for the quarter ended June 30, 2026 — a 20.0% sequential increase and 36.1% growth year over year. Net profit attributable to owners reached $479.2 million, up 261.7%. Both figures beat analyst estimates compiled by LSEG, according to Reuters.
It is the first time SMIC has cleared $3 billion in a single quarter. Revenue was $2.51 billion in Q1 2026 and $2.21 billion in Q2 2025, per Global Times.
The profit line moved far faster than the top line. Operating profit rose 254.5% year over year to $534.2 million. That gap is the whole story of this quarter.
The margin story behind the revenue
Gross profit came in at $760.6 million, a 69.1% year-over-year increase. Gross margin expanded to 25.3%, up from 20.1% in Q1 2026 and 20.4% a year earlier.
Two things drove it: volume and price. Wafer shipments reached 2.869 million 8-inch-equivalent units, up 14.4% sequentially. Average selling price climbed 5.7% over the same period.
| Metric | Q2 2025 | Q1 2026 | Q2 2026 |
|---|---|---|---|
| Revenue | $2.21B | $2.51B | $3.006B |
| Gross margin | 20.4% | 20.1% | 25.3% |
| Net profit (attributable) | ~$132M | ~$197M | $479.2M |
| Wafer shipments (8-inch equiv.) | 2.39M | 2.51M | 2.869M |
| Fab utilization | 92.5% | 93.1% | 93.7% |
| China share of revenue | 84.1% | 88.9% | 90.2% |
Q2 2025 and Q1 2026 profit and shipment figures are derived from the disclosed growth rates (+261.7% and +142.7% for profit; +20.1% and +14.4% for shipments).
Why is SMIC raising wafer prices?
Because it can. Fab utilization hit 93.7% and monthly capacity grew just 1.7% sequentially to 1.097 million wafers. When demand outruns capacity that tightly, price becomes the only lever left. SMIC raised prices after Q1 customer negotiations and has told investors more increases land in Q3.
The company added only 8,000 wafers per month of 12-inch capacity during the quarter, Reuters reported. That is a rounding error against a 1.1 million-wafer base.
What Zhao Haijun actually said
Co-CEO Zhao Haijun framed the increases as a correction rather than opportunism. “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,” he said, per Taipei Times.
He also described where the volume came from: “The rise in shipments was driven mainly by surging AI-fueled demand for chips other than CPUs and GPUs, mostly from China-based customers.”
That second quote deserves more attention than it got. Read it again.
What kind of AI chips is SMIC actually making?
Not the accelerators. SMIC’s AI exposure is in the supporting silicon around the compute — power management ICs, controllers, connectivity parts, and interface chips. US export controls still keep the company off the leading-edge nodes where AI training chips are fabricated.
The application mix confirms it. Consumer electronics accounted for 44.2% of Q2 revenue, smartphones 16.9%, industrial and automotive 16.5%, computer and tablet 15.6%, and connectivity and IoT 6.8%.
Per AnySilicon’s breakdown of the results, AI-supporting products, computers and tablets, and industrial and automotive applications each grew roughly 40% sequentially. Twelve-inch wafers now represent 78.2% of revenue, up from 76.1% a year ago.
- Power management ICs — every rack of AI servers needs hundreds
- Controllers and interface chips — the connective tissue of a datacenter
- Connectivity and IoT silicon — 6.8% of revenue and growing
- Industrial and automotive — 16.5%, boosted by China’s intelligent-driving push
How does Hua Hong’s quarter compare?
Hua Hong Grace Semiconductor posted record quarterly revenue of $717.5 million, ahead of the $702.7 million consensus. Gross margin of 16.5% beat the 14.9% forecast, though net profit of $38.6 million came in slightly below the $39.4 million estimate. Guidance calls for $770–780 million in Q3 at 16–18% margins.
Both foundries are lifting prices. Both are running near capacity. The pattern is sector-wide, not company-specific.
Analyst Ma Jihua told Global Times that China’s domestic semiconductor sector “is benefiting from several factors at once, including strong downstream demand, policy support and market space created by US restrictions.”
Why this matters for the AI market and investors
The AI trade has been priced almost entirely off the accelerator layer — Nvidia, Broadcom, the hyperscaler capex line. SMIC’s quarter is evidence that the mature-node tier underneath is also capacity-constrained and gaining pricing power. That is a cost input for everyone building AI hardware.
It also complicates the export-control thesis. Restrictions were designed to slow China’s advanced-node capability. They did. But they also handed SMIC a protected domestic market: China went from 84.1% of revenue a year ago to 90.2% today.
Goldman Sachs maintained a buy rating with a HK$135 price target after the print, per Global Times. SMIC shares rose 4.81% in Hong Kong.
The skeptical read
Three things temper the enthusiasm.
First, the deceleration. Revenue grew 20.0% sequentially in Q2. Management guides Q3 to just 2–4%. Capacity, not demand, is the ceiling — and adding 8,000 wafers a month will not move it.
Second, the margin gain is priced, not earned through technology. ASP rose 5.7% because customers had nowhere else to go. That is a real advantage, but it is not the same as node leadership, and it invites customers to qualify second sources.
Third, the depreciation wave is coming. H1 capex was $3.4 billion against $3.3 billion a year prior, and full-year amortization is running around $5 billion, up roughly 30% year over year. Those costs land on future margins regardless of what prices do.
A 90% domestic revenue concentration is a strength in a fragmenting market and a liability in a consolidating one. It is not obvious which one 2027 delivers.
This post is analysis and reporting, not financial advice.
What are the risks to SMIC’s momentum?
The near-term risk is not demand — it is the arithmetic of capacity plus depreciation. SMIC can raise prices only while customers lack alternatives. Chinese fabs are expanding aggressively, and every new line that qualifies erodes the scarcity premium that produced this quarter’s 25.3% gross margin.
- Capacity catching up. Domestic competitors adding mature-node lines through 2027
- Amortization drag. ~$5 billion this year, up ~30%, hitting reported margins
- Customer concentration. 90.2% of revenue from a single geography
- Node ceiling. Export controls still bar the leading edge
- Price fatigue. Two consecutive increases invite qualification of second sources
Frequently asked questions
How much revenue did SMIC report in Q2 2026?
$3.006 billion, up 36.1% year over year and 20.0% sequentially. It was the first quarter in company history above $3 billion.
How much did SMIC’s profit grow?
Net profit attributable to owners rose 261.7% year over year to $479.2 million, and 142.7% from Q1 2026.
Is SMIC making AI accelerator chips?
No. Zhao Haijun attributed the shipment growth to AI-driven demand for chips other than CPUs and GPUs. SMIC supplies power management, controller, and connectivity silicon that surrounds AI compute.
Why did SMIC raise wafer prices?
Utilization hit 93.7% with monthly capacity up only 1.7%. Zhao said there remains “a big gap between industry-leading wafer prices and SMIC’s current prices.”
What is SMIC’s Q3 2026 guidance?
Revenue growth of 2–4% sequentially, with gross margin between 26% and 28% — a sharp deceleration from Q2’s 20.0% sequential growth.
How did the market react?
SMIC shares rose 4.81% in Hong Kong. Goldman Sachs kept a buy rating with a HK$135 target, according to Global Times.
Did Hua Hong Semiconductor report similar strength?
Yes. Hua Hong posted record revenue of $717.5 million against a $702.7 million estimate, with gross margin of 16.5% versus a 14.9% forecast.
The bottom line
SMIC just proved that the AI buildout pays out well below the accelerator layer. A foundry barred from the leading edge posted a 261.7% profit increase by selling ordinary chips into an extraordinary shortage.
The question for the next two quarters is whether that shortage is structural or a timing artifact. Guidance of 2–4% sequential growth suggests SMIC itself is not certain.
Watch three numbers in the Q3 print: gross margin against the 26–28% guide, the China revenue share, and monthly capacity additions. If margin lands at the top of the range while capacity stays flat, pricing power is real. If capacity jumps and margin slips, this quarter was the peak.
Sources
- Reuters — Chinese chipmaker SMIC increases prices on strong AI demand
- Global Times — SMIC Q2 net profit jumps nearly 262% on AI demand surge
- Global Times — China’s leading chipmakers post strong Q2 results
- Taipei Times — SMIC lifts prices due to AI demand
- AnySilicon — SMIC Q2 2026 revenue surpasses $3 billion
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