SMIC Outlook: Increasing Performance Certainty

SMIC (Semiconductor Manufacturing International Corporation) is standing at the starting point of a new round of price increases. Following the first round of wafer foundry price increases in the third and fourth quarters of 2025, the second round of price increases is expected to take effect in the second quarter of 2026. Coupled with full capacity operations, the company's performance certainty in the next two quarters is strengthening.

Tomorrow, SMIC will release its Q1 report after the market closes, and will hold a Q1 performance briefing from 8:30 AM to 9:30 AM on May 15th.

For the first quarter, SMIC had previously guided for revenue and gross margin to be consistent on a sequential basis, but the market expects the actual results to be slightly increased. Looking ahead to the second quarter, revenue is expected to increase slightly on a sequential basis, and gross margins are expected to be consistent or slightly increased. The management, during the market communication for Q1 2026, showed strong confidence in continuing to advance price increases, which also provides upward potential for the profit expectations in the second half of the year.

Advanced Process Technology: Heavy Investment Period, Performance Release Still Needs Time

For SMIC in 2026, the core task for advanced process technology is to significantly expand capacity. The capacity ramp-up implies that depreciation pressure will significantly increase, and in the short term, advanced process technology has not yet entered the performance release phase, with contributions to the financials mainly reflected as cost burdens during the investment period.

Mature Process Technology: Price Increases Offset Depreciation, Demand Structure Optimization

The good news is that the prosperity of the mature process technology side is sufficient to form an effective hedge. Unlike the demand structure in 2025, which was mainly focused on restocking, the incremental demand for 2026 is switching to special purpose chips, automotive-grade chips, and the general industrial sector, with more solid terminal pull. The combination of price increases and improvement in demand structure is expected to digest the additional depreciation brought about by the expansion of advanced process technology, maintaining a stable overall profit level.

Against the backdrop of the continuous ramp-up of domestic computing power, advanced process technology unlocks long-term growth potential, while mature process technology anchors short-term profit certainty, SMIC's dual-track logic is unfolding simultaneously.