By Che Pan and Brenda Goh BEIJING, Feb 11 (Reuters) – Semiconductor Manufacturing International Corp，China's largest contract chipmaker, said on Wednesday that its depreciation will increase about 30% in 2026 as it expands capacity to meet strong domestic demand. "We maintained high capital spending, which drove rapid revenue growth but also placed considerable depreciation pressure on gross profit margins," SMIC's CO-CEO Zhao Haijun said during an earnings call, citing efforts to capitalise on demand from Chinese chip designers. The semiconductor supply chain – previously based on overseas design and manufacturing for the Chinese market – shifted to Chinese production throughout the year, Zhao said. Analog circuits saw the fastest transition, followed by display drivers, image sensors and memory, microcontrollers (MCUs), and logic chips. SMIC would add about 40,000 12-inch equivalent wafers in new monthly capacity by the end of this year, Zhao said. It added 50,000 12-inch wafers in monthly capacity in 2025. Zhao said strong AI memory demand was squeezing supply to other sectors, especially mid-to-low-end phones, causing memory shortages and pressure on manufacturers to increase prices. China remained SMIC's biggest market, accounting for 87.6% of its revenue in the fourth quarter, up slightly from the third quarter, while the U.S. contributed 10.3%, down slightly from 10.8%. The company pre-purchased critical equipment while ancillary equipment remained pending, creating timing mismatches, Zhao said. As a result, already-acquired equipment might not translate into full production capacity this year. China's Semiconductor Manufacturing International Corp (0981.HK) reported a 60.7% jump in fourth-quarter profit on Tuesday, beating analyst estimates. SMIC's net profit reached $172.85 million, above the $170.3 million expected, according to LSEG data. Revenue rose 12.8% to $2.49 billion, beating forecasts of $2.42 billion. SMIC's monthly production capacity increased 3.5% quarter-to-quarter to 1.06 million eight-inch equivalent wafers, with utilisation rates – measuring a foundry's production intensity – reaching 95.7%, flat from the third quarter. SMIC shipped 2.51 million 8-inch equivalent wafers in the fourth quarter, up 0.6% from the previous quarter. SMIC's capital spending for 2025 reached $8.1 billion, up 10.5% from 2024 and higher than the company's original projection earlier last year. SMIC expects its revenue for the first quarter this year to be flat compared to the fourth quarter. Zhao said he expected SMIC's 2026 capital spending to be the same as 2025's levels. (Reporting by Che Pan and Miyoung Kim; Editing by Stephen Coates)
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