China’ top chip maker Semiconductor Manufacturing International Corp (SMIC) reported strong revenue growth in the second quarter as customers rushed to place orders amid rising geopolitical tensions, according to company data and its executive.
The Shanghai-based foundry’s second-quarter revenue rose 22 per cent year on year to US$1.9 billion, according to financial results published on Thursday. Profits came in at US$165 million, down 59 per cent from a year earlier but up 129 per cent from the first quarter.
Zhao Haijun, SMIC’s co-CEO told analysts on an earning call on Friday that “due to disruptions and changes in the supply chain brought [about] by the geopolitical tensions”, some customers took the opportunity to enter the industrial market, which resulted in “incremental demand” for the company.
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The company’s stock price in Hong Kong closed up 5.3 per cent to HK$16.64 (US$2.13) on Friday.
SMIC, which fabricated the 7-nanometre chip for Huawei Technologies last year, boasted a monthly capacity of 837,000 8-inch equivalent wafers during the second quarter, with its capacity utilisation rate rising to 85 per cent, up from 81 per cent in the first quarter and representing the highest reading since the third quarter of 2022.
A Kirin 9000s chip fabricated in China by SMIC, taken from a Huawei Mate 60 Pro smartphone, arranged in Ottawa, Ontario, Canada, on Sept. 3, 2023. Photo: Bloomberg alt=A Kirin 9000s chip fabricated in China by SMIC, taken from a Huawei Mate 60 Pro smartphone, arranged in Ottawa, Ontario, Canada, on Sept. 3, 2023. Photo: Bloomberg>
Chinese customers accounted for about 80 per cent of its revenue in the past five quarters, while in the past quarter the revenue share from America and Eurasia rose to 16 per cent and 3.7 per cent, respectively.
“Some overseas customers need to build up inventory to stabilise their market share and hedge against market risks due to geopolitical considerations, and respond to the demand of the Chinese market,” said Zhao, adding that some customers pulled in products from the second half to the first half.
Zhao predicted a quarterly revenue increase of up to 15 per cent.
“Capacity is particularly tight on certain 12 inch (300-millimetre) lines, as demand for localisation accelerated,” he said, providing fresh evidence that US export restrictions may have accelerated China’s chip industry development.
Reports that Washington is mulling even tighter restrictions on tech exports to China have cast a shadow over the country’s semiconductor sector. According to Bloomberg, the Biden administration has told the Netherlands and Japan that it would resort to the harshest available trade restrictions if companies such as ASML continue providing advanced chip-making technology to China.
In the first half, SMIC’s capital expenditure and fab construction costs totalled US$4.5 billion, compared with US$3.8 billion in the same period a year earlier. The company said it will add about 60,000 12-inch wafer equivalents in new capacity by the end of the year to meet growing customer demand, a faster expansion rate than its original plan of 30,000 to 50,000 12-inch wafer equivalents a year, according to Zhao.
Zhao did not mention the impact of US sanctions but said SMIC has been speeding up fab construction and demanding its suppliers to make faster deliveries.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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