SMIC’s co‑CEO Zhao Haijun told investors on 11 February that the company expects to expand monthly capacity this year by an amount equivalent to about 40,000 12‑inch wafers compared with the end of last year. He noted that SMIC added roughly 50,000 12‑inch wafer equivalents in 2025 and will continue to invest heavily in 2026 to capture growing on‑shore manufacturing demand.
Zhao warned, however, that the timing of that new capacity is uncertain. Because of external factors the company accelerated purchases of some critical tools, but complementary supporting equipment has not all been bought; as a result, machines already acquired may not be sufficient to produce full rated output this year. That caveat reflects the practical challenge of turning ordered equipment into commercial wafer production when supply chains, installation and qualification all need to keep pace.
The spending binge has lifted revenue growth but brought a familiar consequence: higher depreciation. SMIC expects total depreciation to rise by roughly 30% year‑on‑year in 2026 as newly completed plants move out of their ramp‑up or “opening” phase and begin regular accounting of asset write‑downs. Management says it will try to blunt the profit impact by driving higher utilization and pursuing cost‑reduction measures internally.
For international readers, the numbers matter because SMIC is China’s largest pure‑play foundry and a focal point of Beijing’s push to bolster domestic chip manufacturing amid tight export controls on advanced equipment. Adding tens of thousands of 12‑inch wafer equivalents strengthens the country’s capacity for mainstream logic and analogue production used across automotive, industrial and consumer electronics supply chains.
Operationally, the firm faces two linked risks. First, front‑loading purchases in a constrained market can leave the company with tools that cannot be integrated into a finished production line until further kit arrives, delaying revenue from those investments. Second, heavy capital spending raises a break‑even utilization threshold: if fabs do not run at high throughput, depreciation and fixed costs will compress margins even as revenue grows.
Strategically, the expansion underscores a near‑term trade‑off for Chinese foundries: accelerate capacity now to secure equipment and meet policy objectives, while accepting short‑term margin pain as assets are written down. The medium‑term payoff—greater on‑shore supply for mature nodes—will depend on SMIC’s ability to convert installed tools into sustained output, to secure inputs and talent, and to maintain customer demand amid a cyclical semiconductor market.
Investors and customers should watch three indicators in the coming quarters: actual wafer starts and fab utilization rates, the pace of complementary equipment deliveries and qualifications, and gross‑margin trends as depreciation begins to hit the income statement. Those metrics will determine whether the company’s aggressive capex strategy yields durable capacity gains or a period of under‑utilised assets and margin pressure.