SMIC 2Q26 First Take: the quarter was strong, with revenue and GPM beating the street. On a GPM bridge, ASP rose by $49/wafer QoQ while unit cost fell by $15/wafer on scale benefits. These shifts drove a sharp margin rebound.

Guidance for next quarter is also solid. Management guides revenue up 2-4% QoQ and lifts GPM to 26-28%, well above the street's 22.5%.

For 2026 YTD GPM: Q1 (20.1%) -> Q2 (25.3%) -> Q3 (26-28%) per guide. Mature-node price hikes are now visibly flowing through margins, signaling that the company and the legacy semi sector have entered an upcycle.

Domestic customers now account for 90%+ of revenue, so the story has moved beyond simple 'import substitution'. Two focus areas: (1) mature-node price increases supporting earnings and enabling a valuation lens shift from PB to PE, and (2) progress at advanced nodes, with Ascend 950DT and Kirin 9030 set to ship in 2H, showcasing capability and bolstering confidence in a 'China chip breakout'.

Overall, GPM expansion driven by mature-node pricing provides tangible support for earnings and the stock, and signals a recovery in legacy semi. On top of that, multiple new launches from a key customer add advanced-node growth optionality. If advanced-node progress beats, valuation could re-rate further; for more, follow Dolphin Research's subsequent takes and Trans. $SMIC(00981.HK) $SMIC(688981.SH)