Gross margin reached 29.9% in the third quarter
By Sherry Qin
SMIC, China's largest contract chip manufacturer, more than doubled profit and reported another quarter of record revenue thanks to spillover from the artificial-intelligence boom.
AI chips aren't Semiconductor Manufacturing International Corp. bread and butter but it is still printing money from the surge in demand for AI computing.
As leading manufacturers focus capacity on AI-related chips, SMIC is seeing bumper orders for less-advanced chips used to support AI data center operations and in consumer electronics.
SMIC's third-quarter results contained no evidence that the world's appetite for chips -- AI or otherwise -- is slowing. Net profit surged to $428.4 million from $191.8 million a year earlier, beating the $396.8 million expected in a Visible Alpha poll.
Revenue rose 34% to a record $3.19 billion, after topping $3 billion for the first time the previous quarter.
The AI buildout is squeezing global chip supplies and monopolizing capacity, forcing many international and domestic companies to look to China for mature-node chips used for power management, connectivity and peripheral logic.
Shanghai-based SMIC said Thursday that it has expanded production to meet customer demand, focusing on in-demand products that command higher prices.
In the third quarter, its gross margin reached 29.9%, exceeding company guidance for 26% to 28% thanks to a rise in wafer prices and a better production mix.
The company's strategy seems to be paying off.
SMIC has managed to narrow the market-share gap with Samsung Electronics, the world's second-largest chip foundry -- companies that manufacture chips designed by others.
TrendForce data show that SMIC's global market share rose to 5.4% from 5.0% in the second quarter, approaching Samsung's 5.9%, though both still trail TSMC's more than 70% position.
SMIC expects to sustain earnings momentum in the fourth quarter, guiding for revenue growth of 4% to 6% sequentially, and a gross margin of between 26% and 28%.
What investors make of the results, reported after market close on Thursday, remains to be seen when trading opens on Friday.
Shares of SMIC have lost steam in recent months as investors reassessed how long it will take for hyperscalers' aggressive AI capital-expenditure to deliver returns.
Its Hong Kong-listed stock lost 32% in the third quarter and has shed an additional 20% so far this quarter amid the broader selloff of chip makers and AI-related names.