Fall of the Titan: China's biggest chip maker SMIC saw profits fall by over 25% YoY
China’s chip manufacturing industry has been hit with a ton of sanctions by the US and its allies. With dwindling resources and no access to new chip-making tech from Netherlands and Japan, it seems that the fall of the Chinese semiconductor is here.
Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chip producer, reported earnings fell by more than one-fourth in the fourth quarter as consumer demand for smartphones and laptop computers fell.
Profits plummeted more than 26 per cent year on year to US$425.5 million in the three months ended December 31, the Hong Kong-listed foundry announced on Thursday. Quarterly sales was $1.6 billion, a 15 per cent decrease from the previous quarter but a 2.6 per cent increase from the previous year.
Surprisingly though, total revenue for 2022 increased nearly 34 per cent to US$7.27 billion, compared with US$5.44 billion in 2021, SMIC said.
The fall – Why Chinese chip manufacturers are in danger
SMIC stated in November that decreased consumer electronics demand will weigh on its business forecast into the first half of 2023.
According to Canalys, global smartphone shipments decreased 11 per cent last year to less than 1.2 billion devices, the lowest level in a decade. According to Counterpoint Research, personal computer shipments are down 15 per cent.
Also read: New low for Chinese smartphone industry, sales in 2022 plunge to lowest level in over a decade
The semiconductor sector has been suffering significant headwinds throughout the world, with worldwide semiconductor sales down over 15 per cent year on year to US$130.2 billion in the fourth quarter, according to Semiconductor Industry Association figures.
Intel, which forecast a 20 per cent drop in sales in 2022, has been contemplating big layoffs that might affect one-fifth of its workforce in some departments, Bloomberg reported in October, citing anonymous sources.
Samsung Electronics, the South Korean memory chip leader, saw its quarterly earnings fall by more than two-thirds to an eight-year low in the fourth quarter of 2022.
2023 will continue to be dreary – falling demand, difficult progressions
According to SMIC, the semiconductor sector will likely continue at the bottom of the cycle in the first half of 2023, which might reduce the company’s first-quarter sales by up to 12 per cent compared to the December quarter.
According to Canada-based research firm TechInsights, SMIC, China’s leading foundry, has been employing the 7-nanometer process to create semiconductors since at least last year, bringing the Chinese business one step closer to Intel, Samsung, and Taiwan Semiconductor Manufacturing Co.
The US-China tech war: How the US ensured China doesn’t get Dutch tech
While SMIC never publicly admitted or denied the breakthrough, it did indicate that the Shanghai-based company was able to make inroads into advanced nodes below 10-nm without the highly advanced extreme ultraviolet machines manufactured by Dutch chip equipment giant ASML, which stopped exporting such tools to China in 2019 due to US pressure.
Also read: In a major blow to China, Netherlands and Japan decide to side with US over chip sanctions on China
SMIC, which was admitted to the US Commerce Department’s Entity List in late 2020, is now constructing four mature 28-nm foundries in China, including one in Shanghai and one in Tianjin, with plans to open in the next five to seven years.
A glimmer of hope
The new foundry in Shenzhen had commenced production by the end of 2022, while trial production had begun in another foundry in Beijing, where mass production is projected to be delayed by one to two quarters due to a delay in the purchase of specific equipment, according to the firm on Thursday.
Last year, SMIC raised its monthly capacity to 714,000 8-inch equivalent wafers, while total capital investment was $6.35 billion. It stated that the extra budget was to prepay for the acquisition of equipment for its four new wafer foundries, which would give additional capacity equivalent to 340,000 12-inch wafers per month.
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