Semiconductor Manufacturing International Corporation (SMIC) released its first-quarter 2026 results, providing a second-quarter outlook significantly above its previous guidance. This indicates that China's largest foundry is entering a new phase of accelerated growth, supported by sustained domestic demand expansion and a recovery in order backlogs. Management has also turned explicitly more optimistic about the full-year prospects. Under International Financial Reporting Standards (IFRS), the company achieved first-quarter sales revenue of $2.505 billion, a sequential increase of 0.7%. The gross margin was 20.1%, up 0.9 percentage points quarter-over-quarter. The company concurrently issued its second-quarter guidance, projecting revenue growth of 14% to 16% sequentially, with a gross margin range of 20% to 22%, representing a 2-percentage-point improvement over the previous quarter's guidance. Management stated that based on customer demand and the order backlog, "compared to the previous quarter, we are more optimistic about the overall operational performance for this year." In terms of regional structure, the revenue contribution from China further increased to 88.9%, a significant expansion from 84.3% in the same period last year. The contribution from the United States narrowed to 9.3% from 12.6% a year ago.
**First-Quarter Performance: Revenue Growth Year-Over-Year, Net Profit Essentially Flat** Under Chinese Accounting Standards for Business Enterprises, SMIC's first-quarter operating revenue was RMB 17.617 billion, a year-over-year increase of 8.1%. Net profit attributable to shareholders of the listed company was RMB 1.361 billion, up 0.4% year-over-year, remaining essentially flat. After deducting non-recurring gains and losses, the net profit attributable to the parent company's shareholders was RMB 1.232 billion, a year-over-year increase of 5.3%. Total profit fell 28.9% year-over-year to RMB 1.764 billion, primarily dragged down by a significant decrease in other income and investment income. Other income for the quarter was RMB 353 million, roughly half of the RMB 734 million recorded in the same period last year. Interest income also decreased to RMB 471 million from RMB 879 million a year ago, collectively creating a substantial year-over-year gap. Operating cash flow improved significantly, with a net inflow of RMB 5.132 billion this quarter compared to a net outflow of RMB 1.172 billion in the same period last year, primarily due to a substantial year-over-year increase in cash received from sales of goods. Total R&D expenditure amounted to RMB 1.298 billion, a 21.5% increase year-over-year, with the proportion of operating revenue rising by 0.8 percentage points to 7.4%, indicating a continued strengthening of R&D efforts.
**Second-Quarter Guidance: Capacity Expansion Supports Accelerated Growth Expectations** Management issued second-quarter guidance for sequential revenue growth of 14% to 16% and a gross margin of 20% to 22%. They stated they would "closely monitor customer demand, flexibly allocate resources, accelerate product response times, and ensure high-quality delivery even in a complex environment." The wording reflects notably stronger confidence in the demand outlook compared to the previous quarter. Regarding capacity, monthly capacity (converted to 8-inch equivalent wafers for standard logic) reached 1.0783 million units by the end of the first quarter, an increase of approximately 10.8% from 973,300 units in the same period last year, laying the foundation for handling larger-scale shipments in the second quarter. Capacity utilization for the quarter was 93.1%, lower than the 95.7% of the previous quarter but higher than the 89.6% of the same period last year, remaining at a relatively high overall level. The number of wafers actually sold in the first quarter was 2.5091 million, essentially flat with the 2.5150 million wafers sold in the previous quarter.
**Application Structure: Industrial and Automotive Sectors Rise, Smartphone Share Continues to Contract** Looking at wafer revenue distribution by application, consumer electronics remained the largest category with a 46.2% share. The industrial and automotive sectors performed notably well, with their share surging to 14.0% from 9.6% in the same period last year, becoming the segment with the most significant increase. This demonstrates the sustained pull from demand for vehicle electrification and industrial automation on related customer inventory builds. The share for smartphones decreased to 18.9% from 24.2% a year ago, while computers and tablets fell to 13.6% from 17.3%. The combined share of these two traditional categories contracted noticeably, forming a stark contrast with the structural shift towards industrial, automotive, and consumer electronics. In terms of wafer size, 12-inch wafers accounted for 76.4% and 8-inch wafers for 23.6%, remaining largely unchanged from the previous quarter.
**Capital Expenditure: Quarterly Pace Slows, Capacity Under Construction Continues Transfer** First-quarter capital expenditure was RMB 10.871 billion, lower than the RMB 17.043 billion in the previous quarter but still showing a slight increase from RMB 10.157 billion in the same period last year. The balance sheet shows that the balance of construction-in-progress decreased to RMB 74.874 billion from RMB 92.619 billion at the beginning of the year, while fixed assets increased to RMB 153.674 billion from RMB 136.254 billion at the start of the year. This indicates that some capacity under construction has been progressively completed and transferred to fixed assets, contributing to the ongoing optimization of the asset structure. Net cash inflow from financing activities was RMB 16.044 billion, primarily comprising new borrowings of RMB 14.253 billion and RMB 3.890 billion from subsidiaries absorbing minority shareholder investments. Short-term borrowings increased significantly to RMB 13.148 billion from RMB 3.452 billion at the beginning of the year, reflecting rising short-term financing needs during the capacity expansion cycle. As of the end of the first quarter, the company's total assets were RMB 380.546 billion, an increase of 3.5% from the beginning of the year. The ending balance of cash and cash equivalents was RMB 50.388 billion, an increase of RMB 9.076 billion from the start of the period.
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