SMIC's Q1 net profit increased by 166.5% year-on-year, wafer sales remained stable, but Q2 outlook is cautious | Financial Report Insights

SMIC's revenue in the first quarter of 2025 reached USD 2.247 billion (approximately RMB 16.3 billion), a quarter-on-quarter increase of 1.8% and a year-on-year increase of 29.4%; wafer sales grew by 27.7%. However, the company's outlook for Q2 is cautious, expecting a quarter-on-quarter revenue decline of 4-6%.

On the 8th, SMIC announced its first-quarter report for 2025:

• Q1 revenue reached USD 2.247 billion (approximately RMB 16.3 billion), a quarter-on-quarter increase of 1.8% and a year-on-year increase of 29.4%;
• Net profit was RMB 1.36 billion, a significant year-on-year increase of 166.5%;
• Gross margin was 22.5%, roughly flat quarter-on-quarter;
• Capital expenditure for the first quarter was RMB 10.16 billion, a quarter-on-quarter decrease of 14.3% and a year-on-year decrease of 36%;
• Net cash flow from operating activities was -RMB 1.17 billion, compared to +RMB 3.57 billion in the same period last year.

Strong Growth in Wafer Sales, Efficient Capacity Utilization

From the operational data, SMIC sold 2.292 million wafers (8-inch equivalent) in the first quarter, a quarter-on-quarter increase of 15.1% and a year-on-year increase of 27.7%, indicating that market demand remains strong.

At the same time, the company's capacity utilization rate increased to 89.6%, up 4.1 percentage points from the previous quarter, marking a continuous recovery in capacity utilization over recent quarters.

In terms of regional distribution, the China market remains the company's main source of revenue, accounting for 84.3%, although this is a decrease from 89.1% in the previous quarter; the U.S. market's share increased from 8.9% in the previous quarter to 12.6%.

In terms of product applications, the consumer electronics sector accounted for the highest share at 40.6%, with smartphone applications accounting for 24.2%, remaining flat from the previous quarter but significantly down from 31.2% in the same period last year. The industrial and automotive sectors accounted for 9.6%, with increases both quarter-on-quarter and year-on-year.

From a process perspective, the revenue share of 12-inch wafers was 78.1%, while 8-inch wafers accounted for 21.9%, indicating that the company's business structure is still dominated by advanced processes.

Cautious Outlook for Q2

Despite the impressive Q1 performance, SMIC's expectations for the second quarter are relatively conservative. The company expects Q2 revenue to decline by 4% to 6% quarter-on-quarter, with a gross margin between 18% and 20%, a significant decrease from 22.5% in the first quarter.

The company's management commented:

“The company believes that the second half of the year presents both opportunities and challenges. The company will enhance its ability to respond and resist risks, and the main focus is to maintain composure, excel in its core business, and perform well in the present.”