Memory Shortage Spurs Market Anxiety as SMIC Warns of Q1 Ordering Slowdown

Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chip producer, reported on Friday that growing worries about insufficient supplies of memory chips are prompting customers to postpone purchases of other semiconductor components. This shift reflects how the rapid global expansion of AI-related chip production is tightening access to basic memory parts used in servers, PCs, and many consumer electronics. As these components become harder to secure, manufacturers have begun stockpiling, contributing to abrupt price increases. The key global suppliers of memory chips include Micron in the United States and South Korean companies SK Hynix and Samsung.

During an earnings call, co-CEO Zhao Haijun explained that uncertainty about upcoming memory chip availability is making buyers reluctant to place substantial orders for the first quarter of next year. He noted that many customers fear committing too early because fluctuations in memory supply can directly limit the number of finished products—such as smartphones or vehicles—they are able to produce. This uncertainty is likely to place manufacturers under pressure, both through unpredictable supply conditions and potentially higher prices, as consistent delivery cannot currently be guaranteed.

SMIC posted strong third-quarter results. Revenue climbed more than 9% from a year earlier to $2.38 billion, supported by solid demand inside China, while net profit rose over 28% to $191.75 million. Both figures came in above analyst expectations based on LSEG data. Production activity also intensified: utilization increased to 95.8%, up from 92.5% the previous quarter, and monthly capacity expanded by more than 3% to the equivalent of 1.02 million eight-inch wafers. The company shipped 2.5 million equivalent wafers during the quarter, a rise of more than 4% quarter-over-quarter. China remained SMIC’s dominant market at 86% of total revenue, slightly higher than in the prior quarter, while sales attributed to the United States dipped from 13% to 11%. Growth was especially strong in consumer electronics, reflecting rising local demand and greater market share for domestic customers.

Looking forward, Zhao warned that the current “super cycle” in the memory industry will intensify competition among foundries such as SMIC. Because memory chips are becoming more expensive, customers may try to negotiate lower pricing for other types of integrated circuits to balance their overall costs. SMIC’s capital expenditures reached $2.4 billion in the third quarter, up from $1.88 billion in the second, and the company expects spending in 2025 to match or potentially exceed this year’s investment levels.