SMIC conference call: "12-inch lines are nearly fully loaded," AI is driving up demand for storage and squeezing orders for phones and other products; this year's capital expenditures remain high at $8.1 billion.

SMIC conference call: "12-inch lines are nearly fully loaded," AI is driving up demand for storage and squeezing orders for phones and other products; this year's capital expenditures remain high at $8.1 billion.

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Despite the market generally being in a slow season, SMIC delivered an "unseasonably strong" performance: Sales income for the fourth quarter was $2.489 billion, a quarter-on-quarter increase of 4.5%, and capacity utilization rose against the trend to 95.7%.

On February 11, SMIC Co-CEO Zhao Haijun broke down the company's fourth quarter 2025 performance and future outlook in detail at the earnings presentation. In the face of a complex semiconductor cycle, Zhao Haijun focused on the "crowding-out effect" of AI demand on traditional markets, the better-than-expected capacity utilization, and the rationale behind the capital expenditure as high as $8.1 billion.

Strong AI demand “crowds out” mid- and low-end markets

The most notable topic during the call was management's deep analysis of changes in the structure of semiconductor demand. Zhao Haijun pointed out clearly that the explosion of Artificial Intelligence (AI) is having a crowding-out effect on the traditional consumer electronics supply chain.

Zhao Haijun noted that after extensive communication with industry chain partners, the company found that the strong demand for memory from AI “crowds out the supply of memory chips available to other application areas such as phones, especially in the mid- and low-end sectors.”

This crowding-out effect is directly passed on to end-product manufacturers. Zhao explained this means that end manufacturers in those sectors face both shortages and price increases of memory chips. “Even if terminal manufacturers absorb the cost increase through price hikes, it will still reduce demand for end products.”

This chain reaction led to polarization in wafer orders: On one hand, mid- and low-end orders decreased; on the other hand, “orders related to AI, memory, and mid- to high-end applications increased.” 

Zhao Haijun believes memory demand, out of a sense of crisis, “everyone is a bit panicked, and this demand is magnified.”

Against this backdrop, the company relies on its technology reserves and leading advantages in BCD, analog, memory, MCU, mid- to high-end display drivers and other segments, as well as its customers’ product layouts, to maintain a favorable position in the current industry cycle. The company will actively respond to the urgent market needs and drive revenue growth in 2026.

Capacity utilization surges: 12-inch nearly full load

Though in the traditional slow season, SMIC's fourth quarter 2025 operations showed "unseasonably strong" characteristics.

Data shows company-wide fourth quarter sales revenue was $2.489 billion, up 4.5% quarter-on-quarter. Zhao revealed that with an additional quarterly capacity of 16,000 12-inch wafers, capacity utilization was still maintained at a high 95.7%.

Specifically, “8-inch utilization overall is beyond full load, and 12-inch is close to full load.” 

Zhao analyzed this was mainly because of “continued effects from industry chain switch-over and iteration” and the concentration of mask shipments at year-end. By year-end, the company’s 8-inch equivalent standard logic monthly capacity reached 1.059 million wafers, up about 111,000 wafers year-on-year.

$8.1 billion capital expenditure exceeds expectations; high investment maintained in 2026

Facing strong customer demand and an optimized order structure, SMIC chose to continue increasing investment.

Zhao confirmed at the meeting that the company's capital expenditure for 2025 ultimately reached $8.1 billion, “higher than expected at the beginning of the year.” He explained the increase was “mainly to meet strong customer demand, adapt to external environment changes, and because of longer equipment delivery times.”

Looking ahead to 2026, the company has given positive growth guidance. Zhao stated the company will actively respond to urgent market demands and “drive revenue growth in 2026.”

Specific guidance figures include:

  • Revenue forecast: expects first quarter 2026 sales revenue to be flat quarter-on-quarter; the annual revenue growth target is “higher than the industry comparable average.”
  • Gross margin: expected to be between 18%-20% in the first quarter.
  • Capital expenditures: plans for 2026 to be “roughly equal” to 2025’s $8.1 billion, maintaining a steady pace of capacity expansion.

Zhao Haijun concluded that although facing challenges from cyclical fluctuations in the memory sector, the company’s advantages in BCD, mid- to high-end display drivers, and other segments will support SMIC to continue outperforming the market in 2026.

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