[News] SMIC Sees Capacity Tightness Through 2027, Possibly into 2H28; Equipment Lead Times Stretch to 16–24 Months

China’s foundry leader SMIC has posted a record quarter, with Reuters reporting that its third quarter profit soaring 123.4% to $428.4 million, while revenue surged 33.9% YoY to $3.19 billion. Notably, citing SMIC co-CEO Zhao Haijun, IT Home adds that the momentum is expected to continue, as the industry broadly expects capacity to remain severely constrained throughout 2027, with shortages likely extending into mid-to-late 2028.

While AI-related memory supply and demand could reach a rough balance after mid-2028, computing chips and other supporting semiconductors may remain in short supply, according to Zhao, cited by IT Home.

Against this backdrop, Calian Press, citing Zhao, also highlights another key challenges for SMIC. As noted by the report, Zhao warned that tight global chipmaking equipment supplies, longer lead times and uncertain delivery schedules could disrupt SMIC’s full-year spending plans, although its 2026 capacity expansion remains on track.

He noted that surging industry demand, compounded by panic buying, has stretched equipment delivery times, affecting machinery SMIC had expected to receive this year, the report notes. Suppliers are now quoting lead times of 16–24 months for new equipment orders, according to Calian Press.

With capacity struggling to keep pace with demand, SMIC said it would adjust pricing in line with industry trends, prioritize the most capacity-constrained segments, and negotiate price increases with customers, Star Market Daily reports.

SMIC Sees 4Q Gross Margin Squeeze

SMIC’s third-quarter utilization rate climbed to 97.3% from 93.7% in the previous quarter, while gross margin improved to 29.9%, according to Star Market Daily and Ijiwei. However, the chipmaker expects gross margin to retreat to 26–28% in the fourth quarter, even as revenue is projected to grow 4–6% QoQ.

As highlighted by IT Home, SMIC expects shipments to remain steady, with a more favorable product mix and market-driven price adjustments lifting average selling prices (ASPs) in the fourth quarter. Yet rising depreciation and raw material costs, coupled with increased engineering and R&D wafer starts, are set to weigh on profitability. Utilization is also expected to edge lower despite continued capacity expansion.

For full-year 2026, Zhao expects revenue to exceed $12 billion, up nearly 30% YoY, IT Home reports. Gross margin is projected at around 26%, an improvement of approximately 5 percentage points from 2025, the report adds.

Notably, Reuters highlights that China remained SMIC’s dominant market, contributing 90.8% of quarterly revenue, up slightly QoQ, while the U.S. share edged down to 7.8% from 8.2%. The foundry giant would continue to expand capacity in response to growing customer demand, the report suggests.

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(Photo credit: SMIC)