SMIC's Q3 operating profit rises 33% as investment income weakens
SMIC's operating gains were outweighed by a $308 million decline in net other income. Its Q4 forecast points to higher sales but a lower gross margin.
SMIC increased third-quarter operating profit by 32.9% from the preceding quarter to $710.1 million, yet its profit before tax fell 16.3% to $677.9 million. The reversal came below the operating line: net other income swung from a $275.9 million gain to a $32.1 million loss, led by weaker results from associates and a joint venture.
The figures in the chipmaker's November 12 release point to a stronger operating quarter alongside weaker investment-related earnings. But the improvement also needs context: government funding helped operating income, and SMIC expects its gross margin to fall in the fourth quarter even as sales rise. SMIC's original quarterly results and guidance
The $308 million swing below operations
Semiconductor Manufacturing International Corp., which makes chips for other companies, reported revenue of $3.19 billion for the three months ended September 30. Sales rose 6.1% from the June quarter, which SMIC attributed mainly to higher wafer shipments. Its shares trade in Hong Kong under 00981 and on Shanghai's STAR Market under 688981.
Gross margin rose to 29.9% from 25.3%. SMIC attributed that improvement to higher factory utilization and a change in product mix. Its reported utilization rate reached 97.3%, compared with 93.7% in the prior quarter.
Those gains did not survive intact to the pretax line. Operating profit increased by about $176 million, but net other income deteriorated by $308 million. The difference explains the $132 million sequential decline in pretax profit.
The largest component was SMIC's share of results from associates and a joint venture, which moved from a $193.8 million profit to a $23.0 million loss. SMIC linked the change to lower investment gains at associates and explained that some associates are investment funds whose portfolio valuations affect their earnings. That is different from a fall in the profit earned by selling wafers.
The separate other-gains line also fell, from $64.0 million to $5.8 million, primarily because of changes in the fair value of equity securities, according to SMIC. These valuation effects should not automatically be read as realized cash losses.
Government funding helped the operating result
There is a limit to treating operating profit as a pure measure of factory performance. SMIC's other operating income rose to $155.0 million from $112.6 million. The company said the change was primarily due to government funding recognized during the quarter.
That income is already included in the $710.1 million operating-profit figure. It is separate from the net other-income line that turned negative below it. Combining the two would obscure both the manufacturing improvement and the support included in reported operating profit.
Profit attributable to shareholders was $428.4 million, down 10.6% from the preceding quarter but up 123.4% from a year earlier. The year-over-year gain and sequential decline are both real; they answer different comparison questions.
Q4 outlook: higher sales, lower margins
For the fourth quarter, SMIC forecasts revenue growth of 4% to 6% from Q3 and a gross margin of 26% to 28%. That margin range is 1.9 to 3.9 percentage points below the September quarter's result.
The forecast makes the next operating question more specific. Higher sales alone will not establish that Q3's margin improvement can be sustained: SMIC's own outlook points to retaining less gross profit from each dollar of revenue. The results release does not explain the expected margin decline. That explanation, alongside the level of government funding recognized, matters more for judging repeatable operating earnings than assuming investment gains will return.
Source note: SMIC's November 12, 2026 exchange-filed release. Results are unaudited and prepared under IFRS; amounts here are US dollars. Comparisons are with Q2 2026 unless identified as annual. Fourth-quarter figures are management guidance, not reported results.