SMIC conference call: "12-inch wafers are nearing full capacity," AI drives up storage demand squeezing orders for mobile phones and others, with capital expenditure remaining at a high level of $8.1 billion this year

Despite the market generally being in the off-season, SMIC delivered a "not-so-off-season" performance: Fourth-quarter sales revenue of $2.489 billion, a quarter-on-quarter increase of 4.5%, and capacity utilization rate rising against the trend to 95.7%.

On February 11, SMIC's co-CEO Zhao Haijun detailed the company's fourth-quarter performance for 2025 and future outlook during the earnings briefing. In the face of a complex semiconductor cycle, Zhao Haijun emphasized the "squeeze effect" of AI demand on the traditional market, the unexpectedly high performance of capacity utilization, and the logic behind the capital expenditure of up to $8.1 billion.

Strong AI Demand "Squeezes" the Mid- to Low-End Market

During the conference call, the most concerning aspect for the market was the management's in-depth analysis of the changes in semiconductor demand structure. Zhao Haijun clearly pointed out 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 partners, the company found that the strong demand for AI in storage has "squeezed the supply of storage chips available to other application areas, especially in the mid- to low-end sectors like mobile phones."

This squeeze effect is directly transmitted to terminal manufacturers. Zhao Haijun explained that this puts terminal manufacturers in related fields under dual pressure of insufficient supply and rising prices for storage chips. "Even if terminal manufacturers can pass on the cost increase through price hikes, it will lead to a decrease in demand for terminal products."

This chain reaction has resulted in a polarization of wafer orders: on one hand, mid- to low-end orders have decreased; on the other hand, "orders related to AI, storage, and mid- to high-end applications have increased."

Zhao Haijun believes that the demand for storage has been amplified due to a sense of crisis, "everyone is a bit anxious, and this demand has been magnified."

Against this backdrop, the company, leveraging its technological reserves and leading advantages in niche areas such as BCD, analog, storage, MCU, and mid- to high-end display drivers, along with its customers' product layouts, can still maintain a favorable position in this round of industry development cycle. The company will actively respond to urgent market demands and promote continued revenue growth in 2026.

Capacity Utilization Rate Soars: 12-inch Close to Full Load

Despite being in the traditional off-season, SMIC's operational performance in the fourth quarter of 2025 showed characteristics of "not-so-off-season."

Data shows that the company's overall sales revenue in the fourth quarter was $2.489 billion, a quarter-on-quarter increase of 4.5%. Zhao Haijun revealed that based on the addition of 16,000 pieces of 12-inch capacity in the quarter, the company's capacity utilization rate remained high at 95.7%.

Specifically, "the 8-inch utilization rate is overall over full load, and the 12-inch is overall close to full load."

Zhao Haijun analyzed that this is mainly due to the "continuous effect of industry chain switching and iteration" as well as the concentrated shipment of photomasks at the end of the year. By the end of the year, the company's equivalent 8-inch standard logic monthly capacity had reached 1.059 million pieces, an increase of approximately 111,000 pieces year-on-year

Capital Expenditure of $8.1 Billion Exceeds Expectations, High Investment Maintained in 2026

In response to strong customer demand and optimized order structure, SMIC has chosen to continue increasing its investment.

Zhao Haijun confirmed at the meeting that the company's capital expenditure for 2025 will ultimately reach $8.1 billion, a figure that is "higher than the expectations at the beginning of the year." He explained that the increase in expenditure is "mainly to respond to strong customer demand, changes in the external environment, and extended equipment delivery times."

For the outlook in 2026, the company has provided a positive growth guidance. Zhao Haijun stated that the company will actively respond to urgent market demands, "driving continued revenue growth in 2026."

Specific guidance data includes:

• Revenue Expectations: Sales revenue for the first quarter of 2026 is expected to remain flat quarter-on-quarter; the annual revenue growth target is "higher than the comparable industry average."
• Gross Margin: The gross margin for the first quarter is expected to be between 18%-20%.
• Capital Expenditure: The plan for 2026 is to be "roughly in line" with the $8.1 billion of 2025, to maintain a steady pace of capacity expansion.

Zhao Haijun concluded that although facing challenges from cyclical fluctuations in the storage industry, the company's advantages in segments such as BCD and mid-to-high-end display drivers will support the company in continuing to outperform the market in 2026