❯ SMIC quarterly revenue grows about 34% as capacity utilization reaches 97.3%

Revenue and profit increase year over yearSMIC reported third-quarter revenue of $3.190 billion on November 12, up 33.9% year over year and 6.1% sequentially. Profit attributable to owners was about $428.4 million, up 123.4% from a year earlier. Gross margin reached 29.9%, above the previous quarter’s 25.3% and earlier guidance of 26%–28%.

Wafer shipments raise factory loadingSMIC manufactures wafers for chip designers, with revenue affected by shipments, capacity use and product mix. Eight-inch-equivalent wafer sales increased 5.7% sequentially, while utilization rose from 93.7% to 97.3%. The company attributed sequential revenue growth to higher shipments and margin improvement to utilization and changes in product mix.

Capacity additions meet the next demand cycleMonthly capacity reached approximately 1.117 million eight-inch-equivalent wafers. Quarterly capital spending was $1.094 billion, down from $1.836 billion in the second quarter. SMIC expects fourth-quarter revenue to grow 4%–6% sequentially and gross margin of 26%–28%. With existing factories approaching full utilization, further growth depends on both capacity additions and the mix of incoming orders.

▮ SIGNALAs utilization approaches full capacity, gains from simply loading factories more heavily diminish, making the match between new capacity and higher-value orders more consequential for SMIC.