Semiconductor Manufacturing International Corp (SMIC), China’s primary chip manufacturer, acknowledges positive signs in the global semiconductor industry following a year-long slump. Despite a surge in orders from smartphone and PC manufacturers late last year, SMIC remains cautious about sustained growth.
SMIC Market Skepticism and Share Fluctuations
CEO Zhao Haijun expresses concern that the recent increase in orders might be akin to “eating away next year’s food in advance.” This skepticism stems from the possibility that orders for the second half of the year might have been fulfilled in the first half, raising apprehensions about a potential decline later.
This cautious outlook triggered over a 4% dip in shares during morning trading, in contrast to the 1.28% rise in the Hang Seng Index. Additionally, the company reported a 55% decline in fourth-quarter profit, falling short of analyst expectations.
The semiconductor industry faced challenges last year, transitioning from a pandemic-driven chip shortage to a surplus as the economy slowed and demand diminished. Despite optimism for recovery in 2024, SMIC remains vigilant due to uncertainties surrounding sustained demand for semiconductor products.
SMIC gained international recognition last year for assisting Huawei in developing domestically advanced chips. The company’s swift capacity expansion, with capital expenditure reaching $7.47 billion through 2023, has piqued interest. However, SMIC anticipates relatively flat capital expenditure this year.
Strategic Focus and Global Constraints
Constrained by U.S. technology export limitations, SMIC has prioritized the production of mature technology chips used in sectors like autos and weapons, missing out on the AI applications surge that benefited some competitors.
Addressing concerns about potential overcapacity, Zhao asserts that remains competitive due to long-term cooperation with customers. He emphasizes the company’s growth potential, highlighting that its facilities constitute only 5% of global production capacity.
In its financial update, SMIC discloses a fourth-quarter net income of $174.68 million, down from $385.53 million a year ago, falling short of the $277 million average estimate in an LSEG analyst poll. The quarter’s revenue rose 3.5% to $1.68 billion, slightly surpassing the average revenue estimate of 1.66 billion yuan, with nearly 81% of revenue originating from the Chinese market.
For the first quarter of this year, SMIC anticipates a gross margin between 9%-11%, compared to the 16.4% recorded in the fourth quarter. These insights offer a nuanced perspective on cautious optimism and the broader dynamics of the global semiconductor industry.
Read More Innovation – Tech Foom
