SMIC has been hit with U.S. sanctions but its business has continued to grow. However, China’s biggest chipmaker still faces a challenge catching up with rivals such as TSMC.
Qilai Shen | Bloomberg | Getty Images
China’s biggest semiconductor manufacturing firm SMIC on Friday posted its first decline in quarterly revenue in more than three years as a glut in chips and lack of demand continues to hit the industry.
SMIC or Semiconductor Manufacturing International Co., posted revenue of $1.46 billion in the first quarter of the year, down 20.6% year-on-year. The last time the company saw a sales decline was in the third quarter of 2019.
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Net profit fell to $231.1 million, down 48% year-on-year.
SMIC Is China’s most important chipmaking company and seen as a key hope to Beijing’s ambitions to boost its domestic semiconductor industry and catch up with rivals like Taiwan’s TSMC and South Korea’s Samsung.
However, the company’s technology is still years behind those leading companies. In 2020, SMIC was put on a U.S. trade blacklist called the Entity List. And last year, Washington introduced sweeping export restrictions aimed at cutting China off from advanced chip tech and equipment. Indeed, these curbs have cut SMIC off from the key tools required to make more advanced chips.
Despite the headwinds, SMIC posted record revenue for the whole of 2022.
But the latest business slump comes amid a difficult chip market with a glut of supply and lack of demand that has hit companies across the industry. Over 50% of SMIC’s revenue comes from making chips that go into smartphones and other consumer electronics. Both smartphone and PC shipments declined in the first quarter.
Samsung, the world’s largest maker of memory chips, saw its profit plunge in the first quarter.
However, SMIC forecast its second-quarter revenue to recover and rise between 5% and 7% quarter-on-quarter. Many other chipmakers have forecast a recovery in the second half of the year.
“For 2Q, it also guided its sales to recover earlier than its peers,” Sze Ho Ng, analyst at investment bank China Renaissance, told CNBC. “The domestic market recovery is happening earlier than overseas,” Ng said.
