December 25, 2024

BEIJING, CHINA – DECEMBER 4: A sign hangs on the Beijing branch building of Semiconductor Manufacturing International Corporation (SMIC) on December 4, 2020 in Beijing, China. (Photo credit: VCG/VCG, Getty Images)

VCG | Visual China Group | Getty Images

Semiconductor Manufacturing International Corporation The chip industry warned of fierce competition on Friday after first-quarter profits fell short of expectations.

“Competition in the industry is increasingly fierce, and commodity pricing basically follows market trends,” SMIC said on the company’s earnings call on Friday.

“The company realizes its (long-term vision) by building a high-quality technology platform that spans one to two generations in mainland China,” SMIC said.

SMIC, China’s largest contract chipmaker, is seen as critical to Beijing’s ambitions to reduce the domestic semiconductor industry’s dependence on foreign countries as the United States continues to curb China’s technological prowess.SMIC lags behind Taiwan British Semiconductor and South Korea’s Samsung Electronics, according to analysts.

Company Season 1 net incomee plunged 68.9% from a year earlier to $71.79 million, compared with the average LSEG analyst estimate of $80.49 million.

Gross profit margin fell to 13.7% Profit margins for the quarter were the company’s lowest in nearly 12 years, according to London Stock Exchange Group (LSEG).

SMIC said that its first-quarter revenue was US$1.75 billion, a 19.7% increase from the same period last year as customers stocked chips. That easily beat LSEG’s estimate of $1.69 billion.

“In the first quarter, the IC (integrated circuit) industry was still in the recovery stage, with customer inventories gradually improving. Compared with three months ago, we noticed that global customers were more willing to accumulate inventory,” SMIC said on Friday.

Customers are increasing inventories to cope with competition and respond to market demand, the company said, adding that some emergency orders were unable to be filled in the first quarter as some production lines were near maximum capacity.

Be prepared for competition

The company said it is prioritizing investment in areas such as capacity building and R&D activities in order to enhance competitiveness and increase market share.

SMIC said: “To ensure that the company maintains its leading position in the fierce market competition and protects the interests of investors to the greatest extent…the company plans not to pay dividends in 2023.”

“We believe that as long as customers have demand and our technology and production capacity are prepared, we can eventually become bigger, better and stronger, even if the competition is fierce.”

The company expects second-quarter revenue to grow 5% to 7% compared with the first quarter due to strong demand, while gross profit margin may further decline to 9% to 11%.

SMIC said: “With the increase in production capacity, depreciation is expected to increase quarter by quarter, so gross profit margin is expected to decline quarter-on-quarter.”

The company was placed on a U.S. trade blacklist in 2020 because companies must apply for licenses to sell products to SMIC, limiting its ability to acquire certain U.S. technology.

An analysis of the Mate 60 Pro smartphone launched last year by Chinese tech giant Huawei in response to US sanctions disclose It runs on a 7nm chip manufactured by SMIC. The smartphone also appears to support 5G connectivity, despite U.S. attempts to block Huawei from using key technologies including 5G chips.

TSMC and Samsung started mass production of 7nm wafers in 2018 and are currently producing 3nm wafers – smaller size means more advanced technology.

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