If SMIC's (688981) Q3 financial report in mid-November shows capacity utilization still above 90%, will Piotech's (688072) inventory increase first, or will AMEC's (688012) contract liabilities increase first?

If SMIC's (688981) Q3 financial report in mid-November shows capacity utilization still above 90%, will Piotech's (688072) inventory increase first, or will AMEC's (688012) contract liabilities increase first?

What increased first is inventory, and Tuojing's inventory is already increasing. AMEC's contract liabilities are not a question of "first or not"—they fell all the way from 43.89 yi yuan at the end of Q3 2025 to 22.64 yi yuan at the end of Q3 this year, declining for four consecutive quarters, a drop of 48%.

This race is already half run. Tuojing disclosed its Q3 report on October 29, AMEC disclosed on October 31, and both companies' figures at the end of Q3 are on the table. The only one that has not yet reported is SMIC, which will disclose its Q3 results after market close on November 12 and hold a briefing at 8:30 a.m. on November 13 (advance notice announcement dated October 31, No. 2026-033). So the question now is not who increased first, but what the things that increased each indicate.

Ninety-percent utilization is old news

SMIC's capacity utilization was 92.5% in Q2 2025, 95.8% in Q3, 95.7% in Q4, 93.1% in Q1 2026, and 93.7% in Q2, above ninety percent for five consecutive quarters, with a full-year 2025 average of 93.5%. This is a state line that has persisted for more than a year, not a sudden change waiting to be confirmed. Using it as a trigger condition is itself one step behind.

What truly carries incremental information is capital expenditure. In the results announcement on February 10 this year, the company's 2026 guidance was capital expenditure roughly flat with 2025's 81.0 yi US dollars; in the first half it actually spent only 34.0 yi US dollars (15.63 yi in Q1, 18.36 yi in Q2). Backing out from this guidance, the second half requires about 47.0 yi US dollars, nearly forty percent more than the first half. The equipment orders corresponding to this money land from Q4 to Q1 next year.

At the same time, Q2 revenue increased 20% quarter-on-quarter, but the Q3 guidance gives only 2% to 4% quarter-on-quarter growth—output is constrained by capacity, not weakening demand.

Inventory moves first

High utilization, capacity expansion, orders. After orders are placed, they land through two legs: advance payments coming in are recorded as contract liabilities, equipment built and shipped to customer plants is recorded as goods shipped, and only after acceptance is completed is it converted into revenue. Which leg moves first depends on payment terms and acceptance rhythm, not on utilization.

Tuojing's acceptance terms are written very plainly:

After the customer completes the relevant equipment testing and issues acceptance documents, the company recognizes the sales revenue of that equipment accordingly.

At the end of the half-year, Tuojing's inventory was 88.33 yi yuan, of which goods shipped were 44.42 yi yuan, accounting for half—machines waiting for acceptance documents in customer plants. But of the 10.07 yi yuan net increase in the first half, the increment was not in goods shipped (up only 0.80 yi), but in work in progress plus finished goods, which together increased 7.98 yi—machines are being built in the workshop and have not yet left the factory.

This chain is raw materials, work in progress, finished goods, goods shipped, revenue, advancing segment by segment. The first-half buildup in the middle segment means that in the second half through the first half of next year it will successively become goods shipped and revenue. The inventory line item naturally runs ahead of revenue and contract liabilities. The Q3 figures match up:

Tuojing's single-quarter inventory in Q3 increased 5.80 yi yuan, and contract liabilities decreased 6.12 yi yuan; AMEC's single-quarter inventory increased 14.18 yi yuan, and contract liabilities decreased 5.08 yi yuan. The direction for both is completely consistent: inventory up, contract liabilities down.

AMEC's inventory structure shows which step it has reached. At the end of the first half, inventory was 76.66 yi yuan, only 4.96 yi more than the beginning of the year, but in the first half consolidated AMEC Zhonggui brought in 5.28 yi of inventory, and after excluding that there was almost no organic increase. All the increase was in raw materials (24.02 yi to 31.20 yi), while goods shipped actually fell from 35.69 yi to 31.78 yi—it is buying materials and delivering, not accumulating backlog. The real jump was in Q3, 14.18 yi in a single quarter, while accounts payable increased 11.42 yi in the same single quarter; the corroborating evidence for material stocking is here.

The contract liabilities indicator is failing in 2026

Dividing contract liabilities by trailing twelve-month revenue, Tuojing fell from 74.4% to 60.1%, and AMEC fell from 24.6% to 15.5%. Both are declining at the same time, and by no small margin, showing that this is not a question of any company's order-winning ability, but that wafer fabs' payment terms are shifting toward the back end: fewer advance payments, more payment after acceptance.

In the first three quarters, AMEC's accounts receivable increased 17.09 yi, accounts payable increased 17.44 yi, and contract liabilities decreased 7.80 yi. Delivery is accelerating, procurement is accelerating, and only advance receipts have not kept up. Using contract liabilities as a leading indicator of orders will keep being wrong in 2026—what it measures now is whether customers are willing to pay first, not how many orders customers have placed.

Tuojing's inventory moving first also has a layer of business attribute: thin-film deposition equipment has high per-unit value and a long process verification cycle, and the half-year report specifically lists the "risk of a relatively long product acceptance cycle." The more advanced the equipment, the longer the time from arrival at the plant to issuance of acceptance documents, and the longer inventory is held. This has nothing to do with whether SMIC's utilization is high or low; it has to do with which generation of process it is adopting.

Under what circumstances I am wrong

The strongest opposing case is this: the decline in contract liabilities is an accounting illusion. AMEC's new equipment does not collect advance payments during the customer-side verification period for first tools, and memory customers have generally switched to payment after acceptance, so this line item naturally fails during the ramp-up of new products. If newly signed orders in Q4 bring back advance payments, contract liabilities will suddenly jump—at that time the half-sentence "inventory increases first" still holds, but "contract liabilities will not increase" would be wrong.

Three numbers: if any one appears, I admit I am wrong:

• SMIC's third-quarter utilization rate fell below 90%, and second-half capital expenditure totaled less than 47 billion USD
• Piotech's fourth-quarter inventory did not increase or declined quarter-on-quarter
• AMEC's fourth-quarter contract liabilities increased by more than 5 yi yuan in a single quarter

Sources: SMIC "Announcement of the Notice to Convene the 2026 Third Quarter Results Briefing" 2026-10-31, announcement no. 2026-033; SMIC "Unaudited Results Announcement for the Three Months Ended December 31, 2025" 2026-02-11, Cninfo AN202602101819856950; SMIC "Unaudited Results Announcement for the Three Months Ended September 30, 2025" 2025-11-14, Cninfo AN202511131780613694; SMIC "Unaudited Results Announcement for the Three Months Ended June 30, 2026" 2026-08-14, Cninfo 1225471507; Piotech "2026 Third Quarter Report" 2026-10-29, Cninfo 1225636861; Piotech "2026 Semi-Annual Report" 2026-08-21, Cninfo AN202608201828211656; AMEC "2026 Third Quarter Report" 2026-10-31, Cninfo 1225646685; AMEC "2026 Semi-Annual Report" 2026-08-20, Cninfo 1225482884.