SMIC reported a contrasting operational picture in its latest business update. While the company's Q3 capacity utilization rate reached 95.8%—reflecting strong production demand—its Q4 revenue guidance of flat to 2% growth fell below market expectations. Management identified memory supply shortages and soaring prices as the primary factors dampening customers' willingness to place long-term orders.
The conservative outlook stems from mounting pressure across the smartphone supply chain. SMIC explained that severe memory supply imbalances and persistent price increases have created a dual challenge for device makers:
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Even with other components secured, missing memory chips halt final assembly
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High memory costs squeeze budgets for purchasing other semiconductors
This has led customers to adopt a "short-term stockpiling, long-term hesitation" approach—actively building memory inventories for immediate production while delaying 2026 Q1 order commitments due to supply uncertainty.
Despite these challenges, memory market volatility has created near-term opportunities. SMIC has prioritized rush orders for analog chips, NOR Flash, NAND Flash, and MCUs, temporarily reducing capacity allocation to non-urgent smartphone orders. The company noted that memory impacts are two-sided: boosting urgent orders in the short term while suppressing longer-term demand.
SMIC expects high memory prices to persist, noting that the memory market exhibits extreme price sensitivity—a mere 5% supply gap can trigger exponential price increases. With long validation cycles (over 16 months from tape-out to volume production) for new memory suppliers, established players are likely to maintain their market position.
The company's underlying performance remains solid. SMIC reported Q3 revenue of $2.382 billion (up 7.8% quarter-on-quarter) with gross margin improving to 22.0%. For Q4, it projects gross margin of 18%-20%, demonstrating continued cost control despite revenue headwinds.
ICgoodFind :SMIC's situation highlights broader industry challenges in memory supply-demand balance, with resolution depending on expanded production capacity.
