SMIC (Trans): GPM peaked at 29.9%, to ease in Q4

Dolphin Research's compiled Trans of $SMIC(00981.HK) Q3 2026 earnings call

I. Key takeaways

1) Guidance

a) Q4: revenue up 4%–6% QoQ, GPM at 26%–28%, in line with last quarter's range.

b) Full year: based on unaudited 9M results and the mid-point of Q4 guide, revenue to exceed $12.0bn (+~30% YoY). GPM around 26% (+~500bps YoY), with total depreciation up ~30% YoY.

2) Key financials this quarter

a) P&L: revenue $3.19bn (+6.1% QoQ). GPM 29.9% (+460bps QoQ), OP $710mn, EBITDA $2.04bn with EBITDA margin at 63.9%, attributable net profit $428mn.

b) Vol/mix/ASP: wafer shipments topped 3.0mn (8-inch standard logic equivalent) for the first time, +5.7% QoQ. Avg. selling price rose 1.8% QoQ.

3) Balance sheet and cash flow

a) Period-end total assets $59.1bn, including cash $13.4bn. Total liabilities $20.4bn, including interest-bearing debt $14.9bn, and total equity $38.7bn.

b) Capital leverage ratio 38.5%, net capital leverage 3.9%.

c) CFO net inflow $1.182bn, CFI net outflow $2.104bn, CFF net inflow $910mn.

4) GPM drivers and CapEx risks

a) Q3 GPM beat: rush orders from customers led to fewer engineering/R&D lots. Monthly capacity added ~20k wafers (8-inch equivalent), lifting utilization by 360bps QoQ to 97.3% and output grew high single digits QoQ, diluting unit cost and offsetting a 2.3% QoQ rise in depreciation.

b) Q4 GPM to ease: depreciation and raw material cost pressures continue to build, with more engineering/R&D lots, and a mild utilization decline on top of ongoing capacity additions.

c) Global tool supply remains tight, with some deliveries extended and timing uncertain. This will not derail this year's ramp plans but could cause timing volatility in full-year CapEx execution.

II. Earnings call details

2.1 Management commentary

1) Demand and revenue drivers

a) Versus three months ago, pull-ins for AI-adjacent chips such as BCD, specialty memory, and controllers exceeded expectations, driving Q3 revenue above the high end of guidance.

b) On supply, new lines were qualified faster with flexible allocation of existing capacity. On pricing, staged price adjustments were implemented with customers, and product mix kept improving.

2) Revenue mix

a) By region: China 90.8%, U.S. 7.8%, Europe/Asia 1.4%. China revenue rose 7% QoQ, as domestic demand grew faster than the company average and capacity was reallocated accordingly.

b) By wafer size: 12-inch and 8-inch contributed 79% and 21% of revenue, respectively, a stable mix, with revenue up 9% and 4% QoQ. Capacity expansion is centered on 12-inch.

3) End markets

a) Mix: smartphones 14%, PC & tablet 18%, consumer electronics 41%, connectivity & wearables 7%, industrial & auto 19%.

b) Softer segments: smartphones and consumer electronics fell 8% and 1% QoQ, with demand still soft.

c) Counter-cyclical growth: PC & tablet, industrial & auto, and connectivity & wearables were broadly flat at the market level, but the firm grew QoQ by 26%, 26%, and 18% on domestic supply-chain reshoring and early platform bets.

d) Platform example: BCD now spans low/mid/high-voltage, with top-tier AEC-Q100 Grade 0 support. Products cover BMS, AFE, SBC, digital isolation, isolated sensing and power, and smart power switches, focusing on higher value-add demand.

4) Q4 outlook

a) Seasonality returns in Q4, but results should remain resilient. Weakness in smartphones and some consumer orders will be offset as multi-platform capacity is flexed toward specialty memory, BCD and other higher value-add products.

b) Shipments are expected to be stable. Mix shifts and market-based pricing should lift ASP.

5) Mid- to long-term views

a) Visibility rests on two points: AI is likely to extend the semiconductor up-cycle, though growth drivers and cycle shape will differ, and localization across the value chain is ongoing.

b) Strategy: stay aligned with Chinese customers' innovation pace, sharpen specialty and custom process advantages, and expand per customer demand to build leadership with a high value-add, high-quality portfolio.

c) Operating goals: hold EBITDA, i.e., cash generation, steady while improving cost control and operational efficiency.

2.2 Q&A

There were five Q&A exchanges. The transcript lists both questions and answers only as foreign language without English translation, and the live dialogue was in Chinese, so content cannot be reconstructed. To avoid fabrication, this section is omitted; please provide the original Chinese transcript if completion is needed.

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