SMIC: Driven by demand from artificial intelligence and automobiles, the production capacity of consumer products may decrease and prices are likely to rise slightly

In the earnings conference call of SMIC (00981.HK), co-CEO Zhao Haijun stated that the market landscape is undergoing significant changes driven by the substantial growth in demand from artificial intelligence (AI), data centers, and the domestic automotive market. Zhao Haijun pointed out that these rapidly growing areas are bringing additional incremental demand, impacting existing production capacity.

He explained that due to the expansion of AI and automotive-related demand, some production capacity originally used for other purposes has been reallocated. At the same time, the demand for BCD technology capacity is also increasing, exacerbating the overall capacity tension.

In addition, the exit of some industry players from the supply chain has further reduced the supply capability of BCD-related products. These factors have collectively led to a decrease in the effective capacity of mass-market products. Zhao Haijun mentioned that, unlike in the past, there is a new trend in the pricing of mass-market products. In the past, prices would often decrease as capacity increased. However, now, due to reduced market supply, many customers need to seek new partners, leading to increased demand and higher prices. It is expected that the prices of mass-market products will remain stable in the future, and may even rise slightly.

He further added that as some capacity shifts to support artificial intelligence, automotive, and other emerging fields, the supply of mass-market products has been reduced, which is also one of the main reasons for the price changes