May 15, 2023: China’s most prominent semiconductor manufacturing firm SMIC posted its rather decline in quarterly earnings in over three years as a glut in chips and lack of demand persists in hitting the industry.
Semiconductor Manufacturing International Co. posted earnings of $1.46 billion in the initial quarter of the year, down 20.6% year-on-year. The previous time the company experienced a sales refusal was in the last quarter of the year 2019.
Net profit reached $231.1 million, which decreased 48% yearly.
SMIC Is China’s most crucial chipmaking company. It is critical to Beijing’s ambitions to improve its domestic semiconductor market and catch up with rivals such as Taiwan’s TSMC and South Korea’s Samsung.
Therefore, the firm’s technology is still years behind leading firms. In 2020, SMIC was placed on a U.S. trade blocklist called the Entity List. And the previous year, Washington introduced sweeping export restrictions to cut China off from advanced chip tech and equipment. Indeed, these curbs have slashed SMIC off from the critical tools required to make more advanced chips.
Despite the headwinds, SMIC posted record earnings for the whole of 2022.
Regarding 50% of SMIC’s revenue comes from making chips into smartphones and other consumer electronics. Both smartphone and PC shipments came down in the initial quarter. But the recent business slump comes amid a problematic chip market with a glut of supply and lack of demand that has reached firms across the industry.
Samsung, the world’s significant maker of memory chips, saw its profit decrease in the initial quarter.
However, SMIC forecasts its second-quarter earnings to recover and rise between 5% and 7% quarter-on-quarter. Many different chipmakers have forecast a recovery in the year’s next half.
“For 2Q, it guided its sales to catch up earlier than its peers,” Sze Ho Ng, an investment bank China Renaissance analyst, stated. “The domestic market recovery is occurring earlier than overseas,” Ng stated.
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