---
title: "Price hikes and a fresh story — is SMIC set to rally?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40778504.md"
description: "SMIC (0981.HK/688981.SH) posted its Q1 2026 results after the HK close on May 14 (Beijing time). The quarter covered the period ended Mar 2026. Key takeaways: 1) Headline results:$SMIC(00981.HK) reported revenue of $2.5bn, slightly below market est. ($2.52bn). Revenue rose 0.7% QoQ, broadly in line with guidance (flattish QoQ). Growth in industrial and auto end-markets was largely offset by weakness in smartphones..."
datetime: "2026-05-14T13:55:17.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40778504.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40778504.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40778504.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# Price hikes and a fresh story — is SMIC set to rally?

SMIC (0981.HK/688981.SH) released its Q1 2026 results (to Mar 2026) after the Hong Kong close on May 14 Beijing time, with key takeaways as follows:

**1) Headline results:**$SMIC(00981.HK) **reported revenue of $2.5bn in Q1 2026, slightly below the $2.52bn consensus, up 0.7% QoQ**, broadly in line with guidance (flat QoQ). Growth in industrial and auto offset weakness in smartphones.

$SMIC(688981.SH) **posted GPM of 20.1% in Q1 2026, at the high end of its 18–20% guide**. Margin expansion was driven by an ASP uptick. **Rebounding demand for power-related products is lifting mature-node pricing and should support further GPM improvement.**

**2) Three core metrics: revenue, GPM, and utilization.** On revenue, the volume/price split shows **shipments dipped 0.2% QoQ, while blended ASP rose 0.9% QoQ**. With the share of 12-inch wafer shipments down this quarter, **Dolphin Research infers price hikes have emerged in 8-inch and other mature nodes**.

**3) Biz. updates:** Benefiting from import substitution, revenue from China approached 90% of total, with **industrial & auto and PC/tablet the main QoQ growth drivers**.

Smartphone revenue fell again on weak demand and seasonality, taking mix below 20%. **Consumer electronics remains the largest revenue contributor at 40–50%, and its share could rise as next-gen products from customers roll out.**

**4) Opex and capex:** Opex is concentrated in R&D and G&A. R&D rose 26% YoY as investment continued to ramp, while G&A fell 21% YoY on lower factory start-up costs.

**Q1 2026 capex was $1.56bn; with management guiding full-year 2026 capex roughly in line with last year, it implies about $8.1bn for the year (Avg. ~$2.0bn per quarter), skewed to 2H**.

**5) Q2 guide: SMIC expects Q2 2026 revenue to rise 14–16% QoQ to $2.85–2.9bn, well ahead of the $2.68bn street; GPM at 20–22%, with the midpoint above the 20.5% consensus**.

**Dolphin take: Bright guidance, operations likely off the bottom**

**SMIC delivered a decent quarter, with revenue near expectations and a clear GPM beat**.

Breaking down GPM, **blended ASP rose $9 per wafer QoQ while unit cost fell $2 per wafer, lifting margins**. Rebounding power-related demand is driving mature-node price increases and may further lift GPM.

**Guidance matters more than the print, and management’s Q2 outlook is notably strong**. **They see revenue up 14–16% QoQ vs the street at ~7%, and guide GPM at 20–22%, with the midpoint above consensus at 20.5%**.

For next quarter, **Dolphin Research expects both higher volume and price to drive results**. On one hand, demand recovery at mature nodes should support pricing; on the other, ongoing capacity additions and higher utilization should help. **While margins and earnings remain at relatively low levels, the guide points to a bottoming and recovery underway**.

Beyond the quarter’s ops metrics, key focus areas include:

**a) Capex and capacity**: **Q1 capex was $1.56bn; with full-year 2026 guided roughly flat YoY, total should be around $8.1bn (Avg. ~$2.0bn per quarter), concentrated in 2H**.

With traditional semis still weighed by soft smartphone/PC demand, GPM is around 20%, a relatively low level. **SMIC continues to invest roughly $8bn per year, pressing ahead with counter-cyclical expansion**.

Sustained high investment has lifted quarterly wafer capacity to 2,695k 8-inch equivalent wafers. Capacity growth mainly meets domestic demand, and the company now ranks third globally in foundry capacity.

**b) GPM and cash flow**: With GPM around 20%, annual operating profit is about $1bn. **Even adding back $3–4bn of annual D&A, free cash flow is unlikely to cover $7–8bn in annual capex**. \[FCF = after-tax OP + D&A − Δworking capital − capex\]

**Historically, FCF turned positive only in 2021**. In that upcycle, GPM topped 30% and capex was trimmed, pushing FCF positive.

Considering only after-tax OP, D&A, and $7–8bn annual capex, the funding gap closes only when GPM steadily recovers to around 27%.

**c) Competitiveness and node progress:** SMIC is firmly in the second tier of foundries, alongside UMC and GlobalFoundries, **but it is the only one still pushing toward the first tier**.

Based on company and industry intel, despite lacking EUV, SMIC is iterating N+1 and N+2 through multiple-patterning. **N+2 transistor density is roughly at a 7nm-class level, while N+3 is expected to approach TSMC’s N7+**.

In advanced nodes, major customers include Cambricon, Hygon, and H company. As the Shengteng 950 series scales into mass production, it should support further revenue growth.

At the current market cap of HKD 572.9bn, the stock implies roughly ~48x 2026 after-tax core operating earnings (assumes revenue +26% YoY, GPM 22.2%, tax rate 8%). The elevated PE embeds expectations for China’s semi industry and SMIC’s medium- to long-term margin expansion.

While SMIC’s revenue scale is close to UMC and GlobalFoundries, it is still catching up on nodes versus the first tier, yet ahead of the other two. **On PB, foundry valuations roughly line up as: TSMC 11 \> SMIC (H) 3.5 = GlobalFoundries 3.5 \> UMC 2.9**. TSMC’s premium reflects its high-quality advanced-node assets and AI-foundry leadership, supporting sustained growth (PEG < 1).

**UMC and GlobalFoundries have rallied sharply as price hikes spread from memory/CPU to mature-node analog ICs and MCUs.** TSMC also signaled active capacity rationalization at mature nodes, and under this backdrop UMC announced price hikes starting in 2H.

**SMIC’s recent underperformance vs peers stems from two factors:**

**1) A sizable revenue share still comes from smartphones and other consumer end markets (roughly 30–40%)**, where demand softness weighs on earnings. The earnings elasticity from mature-node price hikes is also relatively limited.

**2) Market concerns that the MATCH Act could escalate sanctions on immersion DUV**. On Apr 2, 2026, the US Congress introduced the MATCH Act to formalize and accelerate export-control coordination with the Netherlands and Japan on advanced semiconductor equipment, closing loopholes.

The bill explicitly **adds immersion DUV scanners and related services to the control list**, targeting capacity expansion for Chinese 7nm-and-below advanced logic and memory. **It is at the proposal stage; if enacted, it would directly impact SMIC’s advanced-node capacity expansion**.

**Overall, the quarter was solid, and the Q2 guide is notably strong.** Faster QoQ revenue growth and another GPM uptick signal an operational bottoming, lifting expectations for 2H.

**Smartphones could bottom in Q2 (per Qualcomm management), and Shengteng 950DT is slated for mass production in 2H.** With mature-node price hikes underway in certain categories, a broader industry upcycle could follow.

After sharp multiple expansion at UMC and GlobalFoundries, SMIC (H)’s relative premium within the second tier has narrowed, partly pricing in **risks of stricter controls on immersion DUV**. **Versus peers, SMIC carries more advanced-node optionality; if China AI customers (e.g., Cambricon) see smooth ramp, valuation could re-rate further**.

Below is Dolphin Research’s detailed analysis of SMIC:

**I. Core metrics: standout revenue guide, GPM turning up**

**SMIC posted Q1 2026 revenue of $2.5bn, up 0.7% QoQ, broadly in line with guidance (flat QoQ)**. Strength in industrial and auto offset weakness in smartphones.

By volume and price, the key drivers of Q1 revenue were:

**1) Volume:** wafer shipments (8-inch equiv.) were **2,509k pieces, down 0.2% QoQ**;

**2) Price:** revenue per wafer (8-inch equiv.) was **$999, up 0.9% QoQ**.

**Volume/price split suggests: despite rising installed capacity on heavy capex, production dipped on seasonality around the Lunar New Year.** The ASP uptick was driven by certain mature-node products.

**For Q2 2026, SMIC guides revenue up 14–16% QoQ to $2.85–2.9bn, well above the ~7% QoQ implied by consensus**. Dolphin Research expects continued growth in industrial and auto, with smartphone demand improving on restocking.

**Core metric 2: GPM**

**Q1 2026 GPM was 20.1%, up 90bps QoQ and above the 19.4% street**.

We break down unit economics to analyze margin changes:

**Unit GP = unit wafer revenue − unit fixed cost − unit variable cost**

**1) Unit wafer revenue:** revenue per wafer (8-inch equiv.) was $999, up $9 QoQ.

**2) Unit fixed cost (D&A):** unit fixed cost (8-inch equiv.) was $350, down $18 QoQ. **Total D&A this quarter was $87.9bn, down 5.1% QoQ**.

**3) Unit variable cost (other mfg. costs):** unit variable cost (8-inch equiv.) was $447, up $16 QoQ on higher raw-material costs.

**4) Unit GP:** unit GP (8-inch equiv.) was $201, up $11 QoQ.

**The unit-cost bridge shows GPM expansion was driven mainly by ASP gains with some help from lower unit costs, taking GPM back to 20%**.

**For Q2 2026, SMIC guides GPM at 20–22%, with the midpoint above the 20.5% street**. Alongside a double-digit QoQ revenue guide, margins are set to improve.

Based on company and industry trends, **Dolphin Research sees two main drivers for higher GPM next quarter: 1) mature-node price hikes lifting blended ASP; 2) higher shipments diluting per-unit D&A via scale**.

**If advanced-node ramp accelerates, lower initial yields could weigh on GPM.** But if AI chips ramp smoothly to meet domestic demand, any margin drag should be tolerable in the ramp phase.

**Core metric 3: utilization**

Utilization reflects not only SMIC’s quarterly ops but also foundry cycle trends. In a soft cycle, tracking utilization helps gauge supply-demand shifts for both the company and the sector.

**Q1 2026 utilization was 93.1%, remaining elevated**.

**Based on utilization and shipments, we estimate total capacity at 2,695k 8-inch equivalent wafers, up 2.6% QoQ**. Q1 capex was $1.56bn; full-year guide is about $8.1bn (Avg. ~$2.0bn per quarter), with heavier spend in 2H.

**With utilization and GPM both guided higher, operations should continue to recover, especially with mature-node price hikes underway**.

**II. Biz. details**

After the three core metrics, Dolphin Research reviews quarterly biz. color in full:

**2.1 End-markets**

**Smartphone revenue was $450mn and now accounts for below 20%**, reflecting subdued demand and seasonality. **Consumer electronics remains the largest segment at 40–50%, which likely includes some advanced-node revenue**.

**Industrial and auto drove most of the incremental growth**, helped by stronger power-related demand and pricing, with momentum likely to continue.

**2.2 Wafer sizes**

Since 2022, SMIC no longer discloses revenue mix by process node, only by 8-inch and 12-inch, limiting node-level visibility.

**Q1 revenue mix from 12-inch fell to 76%, mainly on softer smartphone demand**. Based on mix and total revenue, **12-inch revenue fell 0.4% QoQ, while 8-inch rose 4.2% QoQ**.

**2.3 Geography**

SMIC revised its geography disclosure from 'North America/Mainland China & HK/Europe & Asia' to 'China/US/Eurasia', creating some data differences.

**In Q1, China rose to 89% of revenue, the largest contributor, while the US and Eurasia fell to 9% and 2%, respectively**.

**Revenue from China was $2.23bn, up 2% QoQ**, driven by domestic industrial and auto demand. Nearly 90% of revenue now comes from China, and serving localized demand remains paramount.

**III. Operating data**

**3.1 Opex**

**Q1 opex was $260mn, broadly stable**. Opex was about 10% of revenue.

Breakdown: R&D $190mn, G&A $120mn, and S&M $10mn. The decline in G&A reflects lower factory start-up costs.

**3.2 Working capital**

Key indicators include inventory and receivables:

1.  **Inventory was $3.92bn, up 8% QoQ;**
2.  **Accounts receivable was $1.5bn, up 4.5% QoQ**.

Relative to revenue, inventory/revenue and AR/revenue were 156% and 3%, respectively. **Higher inventory ratio reflects increased stocking amid rising raw-material costs**.

**3.3 EBITDA**

**EBITDA was $1.44bn, up sequentially**.

By components, **EBITDA improvement came from higher OP and D&A; EBITDA margin rose to 57.3%, aided by better GPM**.

<End here\>

**Dolphin Research SMIC archive:**

**Earnings season**

Feb 10, 2026 call notes '[SMIC (Trans): Smartphone market too pessimistic; memory shortage to ease by Q3](https://longportapp.cn/en/topics/38649256)'

Feb 10, 2026 earnings take '[SMIC: Doubling down against the cycle; the great hope for domestic AI chips?](https://longportapp.cn/en/topics/38632875)'

Nov 13, 2025 call notes '[SMIC (Trans): Memory price hikes; OEMs turn cautious on next-year plans](https://longportapp.cn/en/topics/36354701)'

Nov 13, 2025 earnings take '[SMIC: Not chasing the short-term print; is 'domestic AI' the true conviction?](https://longportapp.cn/en/topics/36323230)'

Aug 7, 2025 call notes '[SMIC (Trans): Smartphone expectations cut; prices to keep falling](https://longportapp.cn/en/topics/29467414)'

Aug 7, 2025 earnings take '[SMIC: Guide 'miss'; when can domestic AI chips break out?](https://longportapp.cn/en/topics/29451852)'

Feb 10, 2025 call notes '[SMIC (Trans): Capex plan flat YoY](https://longportapp.cn/en/topics/27143509)'

Feb 10, 2025 earnings take '[SMIC: Leaning on state subsidies to ride out the cycle?](https://longportapp.cn/en/topics/27124975)'

**Deep dives**

Jun 20, 2025 deep dive '[SMIC through another lens: How wide is the faith gap behind the HK–A spread?](https://longportapp.cn/en/topics/30925399)'

Risk disclosure and statement: [Dolphin Research disclaimer and general disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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