Chinese firm sees 93.7% capacity utilization as modern tech demand drives chip shortages

Demand is high for mature-node chips for AI processors, and China’s Semiconductor Manufacturing International Corporation (SMIC) intends to raise the bar, according to the report. SMIC is a partially state-owned Chinese company that operates as the largest contract chipmaker in China and the third largest globally. It manufactures microchips for external tech companies based on their proprietary designs. It fabricates silicon wafers used in smartphones and consumer electronics, as well as automotive components, data centers, and Internet of Things (IoT) devices. But now, SMIC is facing a major demand inflection, driven less by smartphones and PCs and more by the infrastructure surrounding AI. Now, SMIC plans to expand its capacities in its factories, as customer demand for “mature-node chips” increases. The company told a Chinese media outlet that this year’s “global artificial intelligence infrastructure boom” revealed critical gaps in manufacturing across AI-related supporting chips. “Future wafer starts are far exceeding our previous expectations,” co-CEO Zhao Haijun said. Meaning: “the volume of new chip batches entering the production line.” SMIC might be adding new equipment soon SMIC is expanding to meet the ever-increasing AI demand. According to the report, SMIC announced it might be installing additional equipment at its locations, though they have yet to disclose any information about when, what, and where. What they have said reflects what the AI-driven world needs right now: supporting chips for servers and data centers. That includes logic chips, power-management products and optical module components. “Order for BCD (bi-polar-CMOS-DMOS) power-management products were visible through the end of 2027,” as per the report. Simply put, the company, though the third largest in the world, cannot meet the sudden increase in demand, as it had already practically reached its limit. “The foundry’s capacity utilisation rate reached 93.7 per cent in the second quarter, up from 93.1 per cent in the previous three months, according to its earnings report on Thursday. Wafer shipments rose 14.4 per cent quarter on quarter, while monthly production capacity increased to the equivalent of about 1.1 million 8-inch wafers,” as per the report. However, the company plans to invest in research and development as well, rather than push itself to “full operational limits.” But it has raised some of its prices for consumer electronics, though not across the board. Smartphone chips and display-driver integrated circuits remained untouched by the changes. The company expected to announce more price increases, as the volatile market continues to allow for shortages as well as demand. The company is benefiting from the demand “For the quarter ended June 30, SMIC reported revenue of US$3.01 billion, up 20 per cent sequentially and 36.1 per cent year on year. Gross margins expanded to 25.3 per cent from 20.1 per cent in the first quarter,” as per the report. The increase in their sales speaks to all three regions that the company serves, though China led that increase due to chip demand, overseas orders, and ongoing supply-chain localization. SMIC is benefiting from an unexpected surge in demand for mature-node chips driven by the rapid expansion of AI infrastructure. With capacity utilisation already near its practical limit, strong orders extending into 2027, and growing pricing power, the company is considering additional equipment to expand production. While weakness in smartphones and consumer electronics remains a challenge, the strength of AI-related demand, improving margins, and continued growth in China suggest a positive outlook for SMIC. Overall, the company is well positioned to benefit from the growing demand for semiconductor components that support the global AI boom. Get the latest in engineering, tech, space & science - delivered daily to your inbox.Originally from LA, Maria Mocerino has been published in Business Insider, The Irish Examiner, The Rogue Mag, Chacruna Institute for Psychedelic Plant Medicines, and now Interesting Engineering.