SMCIC saw a decline in its second-quarter revenue due to the ongoing U.S. sanctions and a slow revival of global demand for chips. As China's foremost foundry, SMIC is responsible for producing chips that are designed by other firms. The company was put on a U.S. trade blacklist which curbs its connection to necessary foreign technology since 2020.
On Thursday, Semiconductor Manufacturing International Corp. (SMIC) reported a drop in second-quarter revenue amid U.S. sanctions and the sluggish deman for chips across the globe. Although revenue totaled $1.56 billion, a decrease of 18% compared to the same period last year, net income was $402.76 million - a decline of 21.7% from the figures reported in the second quarter of 2022.
SMIC, China's largest foundry producer of semiconductor chips, competes with Taiwan's TSMC and South Korea's Samsung. It has faced challenges due to its technology being several generations behind and the impact of U.S. sanctions that restrict its access to essential foreign technologies. Consequently, the company is not able to obtain the necessary Extreme Ultraviolet Lithography Machines (EUV) from Dutch firm ASML, and thus is unable to manufacture more advanced chips on a significant scale with lower costs.
Meanwhile, a slump in demand for some chips used in items like memory devices is affecting SMIC, together with the likes of TSMC and Samsung. According to the Semiconductor Industry Association, global sales of semiconductors totaled $124.5 billion in the second quarter of 2023 - a 4.7 per cent growth from Q1 but 17.3% lower than the second quarter of 2022.
For the quarter ended June 30, 2023, SMIC reported 6.7% quarter-on-quarter revenue growth and a gross margin of 20.3%, in line with its guidance for a 5-7% rise in revenue and a 19-21% gross margin band. The better-than-expected results were attributed to "relatively full" capacity utilization at SMIC's 12-inch wafer fabs, which are processing facilities responsible for producing semiconductors. In contrast, the company noted a weaker demand for 8-inch devices with a utilization rate lower than 12-inch levels, yet still above the industry benchmark.
The Chinese firm is anticipating that shipments will grow further in the third quarter. It stated that the revenue is expected to expand by 3%-5% on a quarter-by-quarter basis, and gross margin should be somewhere between 18%-20%. Additionally, the company is optimistic that the second half of the year will bring in more revenue than the first half. In order to increase their chances of success, it plans to invest in tech R&D and platform development, rapidly test out new products, and ensure that they have all the necessary resources available for the upcoming growth cycle.
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