China's Biggest Chipmaker Is Raising Prices And Says They Are Still Too Low

On August 14, 2026, China's top foundry, Semiconductor Manufacturing International Corp, said AI-related demand would continue to underpin orders for its production, and that it had raised prices for its most sought-after capacity. Co-CEO Zhao Haijun said on an earnings call that SMIC raised prices following negotiations with customers in the first quarter, and that it would charge more for wafers processed in the third quarter.

The unusual part was the argument for going further. Zhao said the company had reached top-tier industry standards, and noted that since there is still a big gap between industry-leading wafer prices and SMIC's current prices, it needs to negotiate with customers for fairer pricing.

The numbers behind the confidence are strong. SMIC posted revenue above $3 billion for the first time in the second quarter, reaching $3.01 billion, up 20% from the previous quarter and 36.1% from a year earlier.

In plain terms, a foundry told its customers that prices went up, will go up again, and should probably be higher than that.

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SMIC is China's largest contract chipmaker, building chips designed by other companies. It is the only Chinese foundry able to mass-produce logic chips such as CPUs and GPUs on a 7-nanometre process.

Its factories are close to full. Monthly production capacity rose 1.7% quarter-on-quarter to 1.1 million 8-inch-equivalent wafers, with utilisation reaching 93.7%, slightly up from the first quarter, and the company added 8,000 wafers of monthly 12-inch capacity during the period.

Demand has outrun its own planning. Executives said orders had risen sharply from what they had projected earlier this year, as the boom in AI infrastructure spending created a supply crunch, and the company is actively weighing additional production equipment. SMIC shares rose 5% after the call.

The story is who holds leverage. When utilization sits near full and orders exceed forecasts, a foundry can reprice mid-relationship instead of competing on cost. That is a structural shift, not a one-quarter bump.

It also lands directly in margins. Revenue climbing 36 percent year over year while prices rise means growth is coming from both volume and rate, which is the most profitable combination a manufacturer can have.

The cost travels downstream. Chipmakers pay more for wafers, device makers pay more for chips, and eventually the increase reaches the price of phones, PCs, and servers.

The pricing power is uneven. Smartphone chips and display driver ICs were excluded from the increases given weak market conditions, which shows customers in soft segments can still refuse. Raising prices also invites customers to design around SMIC or qualify a second supplier.

Capacity is the other risk. Adding equipment takes years and enormous capital, and if AI demand cools by the time new lines run, today's shortage becomes tomorrow's glut. SMIC also operates under export restrictions that limit its access to the most advanced manufacturing tools, capping how far up the technology ladder it can climb regardless of demand.

The results matter because they show the long stretch of cheap chips ending, with pricing power sitting on the supply side across the industry. The real impact depends on whether demand holds long enough to justify new capacity, and how much of the increase ends up in the price of finished devices.

Disclosure: This content is for educational and informational purposes only and does not constitute investment advice or recommendations. You should always conduct your own research or consult a qualified financial advisor before making investment decisions.