SMIC just had its best quarter ever, and it didn't need better chips to get there.
The Shanghai foundry posted its first $3 billion quarter, with revenue up 36.1% year over year and net profit nearly tripling to $479.2 million, beating its own guidance on every metric. Utilization hit 93.7%, wafer shipments rose 14% quarter over quarter, and co-CEO Zhao Haijun told analysts SMIC is raising wafer prices again in the third quarter because demand for AI-related chips, including logic ICs, power-management parts, and optical transceiver components, now outstrips supply. China accounted for 90% of revenue, and rival Hua Hong reported similar strength, with utilization above 100% and revenue up 26.8%. CFO Wu Junfeng noted the profit jump included a one-time gain from a subsidiary, so the underlying growth is smaller than the headline suggests.
SMIC is the only Chinese foundry mass-producing 7nm-class logic, making it the sole domestic path to silicon for Huawei's Ascend accelerators and Cambricon's chips. US export controls that cut China off from TSMC and Samsung at the leading edge didn't just block access, they built SMIC a captive customer base with nowhere else to go, and Beijing's push for 70% domestic wafer sourcing this year locks that in further.
Pricing power built on a captured market is a different thing than pricing power built on better chips. SMIC's advanced-node yields, reportedly under a third per the Financial Times, are a reminder that sanctions solved SMIC's demand problem, not its technology problem.