SMIC's Margin Gains More from Wafer Price Hikes than Product Mix

Dow Jones08-14

0525 GMT - Wafer price hikes are contributing more to SMIC's improving gross margin than its product mix optimization, says SMIC co-CEO Zhao Haijun in a post-earnings call with analysts. SMIC's 2Q gross margin rose to 25.3%, topping its previous guidance. The chip foundry can adjust production capacity to supply products that are in high demand and at higher prices, Zhao says. "If logic demand is low, we could use the capacity for microcontroller units or specialty memory." Price hikes by SMIC are expected to gradually reflect in the company's earnings in the coming quarters, he says. Many wafers shipped in 2Q were priced when they were produced in 4Q or 1Q. Wafers produced and shipped in the current quarter will have higher prices, he adds.

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The chip foundry can adjust production capacity to supply products that are in high demand and at higher prices, Zhao says. \"If logic demand is low, we could use the capacity for microcontroller units or specialty memory.\" Price hikes by SMIC are expected to gradually reflect in the company's earnings in the coming quarters, he says. Many wafers shipped in 2Q were priced when they were produced in 4Q or 1Q. 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