Despite the typically slow season for the broader market, SMIC delivered a robust performance, with fourth-quarter revenue reaching $2.489 billion, up 4.5% quarter-over-quarter, while capacity utilization climbed to 95.7%.
On February 11, SMIC Co-CEO Zhao Haijun provided a detailed breakdown of the company's Q4 2025 results and future outlook during an earnings briefing. Addressing the complex semiconductor cycle, Zhao emphasized the "crowding-out effect" of AI demand on traditional markets, better-than-expected capacity utilization, and the rationale behind maintaining high capital expenditure of $8.1 billion.
Strong AI demand is exerting pressure on mid- to low-end market segments. The most closely watched topic during the call was management's analysis of structural shifts in semiconductor demand. Zhao clearly stated that the AI boom is creating a crowding-out effect on the traditional consumer electronics supply chain.
After extensive discussions with industry partners, the company observed that robust demand for memory chips driven by AI is "squeezing the supply of memory chips available for other application areas, particularly in the mid- to low-end segments such as mobile phones."
This squeeze is directly impacting end-device manufacturers. Zhao explained that manufacturers in these segments face a dual challenge of insufficient memory chip supply and rising prices. "Even if end-device manufacturers can pass on cost increases through price hikes, it leads to reduced demand for the final products."
This chain reaction has resulted in a polarization of wafer orders: on one hand, mid- to low-end orders are decreasing; on the other, "orders related to AI, memory, and mid- to high-end applications are increasing."
Zhao suggested that memory demand is being amplified by a sense of urgency and "some panic" within the industry.
Amid this environment, SMIC believes it is well-positioned in the current industry cycle due to its technological expertise and customer product portfolios in segments like BCD, analog, memory, MCUs, and mid- to high-end display drivers. The company plans to actively respond to urgent market needs to drive revenue growth in 2026.
Capacity utilization surged, with 12-inch capacity nearing full load. Despite the traditional slow season, SMIC's operational performance in Q4 2025 defied seasonal trends.
Data showed the company's overall Q4 revenue was $2.489 billion, a 4.5% increase from the previous quarter. Zhao revealed that even after adding 16,000 units of 12-inch wafer capacity during the quarter, capacity utilization remained high at 95.7%.
Specifically, "8-inch utilization exceeded full capacity overall, while 12-inch utilization was close to full capacity overall."
Zhao attributed this primarily to the "ongoing effect of industry chain transitions and iterations" and concentrated shipments of photomasks towards year-end. By the end of the quarter, the company's monthly capacity in 8-inch equivalent wafers reached 1.059 million, an increase of approximately 111,000 wafers compared to the previous year.
Capital expenditure for 2025 reached $8.1 billion, exceeding expectations, with high investment levels to continue in 2026. In response to strong customer demand and an optimized order mix, SMIC has chosen to maintain significant investment.
Zhao confirmed that the company's final capital expenditure for 2025 reached $8.1 billion, a figure that was "higher than initially expected at the start of the year." He explained that the increased spending was "primarily to address strong customer demand, changes in the external environment, and extended equipment delivery lead times."
For the 2026 outlook, the company provided positive growth guidance. Zhao stated that SMIC will actively respond to urgent market demand to "drive continued revenue growth in 2026."
Specific guidance figures include:
Revenue Expectations: Q1 2026 revenue is forecast to be roughly flat compared to Q4 2025; the full-year 2026 revenue growth target is set to be "higher than the average of comparable peers." Gross Margin: Q1 gross margin is projected to be between 18% and 20%. Capital Expenditure: The plan for 2026 is for capital expenditure to be "roughly in line" with the 2025 level of $8.1 billion, maintaining a steady pace of capacity expansion.
Zhao concluded that while facing challenges from cyclical fluctuations in the memory industry, the company's strengths in segments like BCD and mid- to high-end display drivers will support its ability to continue outperforming the broader market in 2026.
Comments