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[News] SMIC’s Net Profit Halved Last Year, Faces Further Reductions This Year
China’s leading semiconductor foundry, SMIC International, announced its fourth-quarter financial results on February 6th. While the quarter’s revenue exceeded expectations, a significant drop in gross margin led to a sharp decrease in net profit by less than 50% to below USD 1 billion last year.
SMIC issued a warning, further revising down the gross margin for the first quarter of this year to around 10%, with single-digit figures at the lower end.
During the fourth quarter, SMIC International saw a revenue increase of over 3.5% to more than USD 1.678 billion, marking the only quarter of revenue growth last year. Net profit plummeted by 54.7% to nearly USD 175 million.
The gross margin of 16.4% was almost halved compared to the same period in 2022 and experienced a significant decline from the previous three quarters, reaching its lowest point of the year.
In the full year of 2023, SMIC International experienced a revenue decline of over 13% to USD 6.3 billion, with a net profit decrease of 50.4% to USD 900 million. The gross margin was approximately halved to 19.3%.
Regarding the decline in net profit, SMIC cited various factors including the industry downturn, weak market demand, high industry inventory, and fierce competition among peers, all contributing to reduced capacity utilization and decreased wafer shipment for the group.
Additionally, the group experienced a period of high investment during the financial reporting period, leading to increased depreciation compared to the previous year.
Looking ahead to the first quarter of this year, SMIC estimates a quarter-on-quarter revenue growth of up to 2%. For the first-quarter gross margin guidance, SMIC has provided a range of 9% to 11%, indicating a decrease of approximately 33% to 45% from the low point of 16.4% in the fourth quarter of last year.
SMIC also anticipates that, under the assumption of no significant changes, this year’s revenue growth will not be lower than the average of comparable peers, showing a mid-single-digit increase compared to last year. The capital expenditure scale is expected to remain roughly flat compared to last year.
The significant downward revision in gross margin guidance has drawn attention to SMIC’s strategic moves. According to a report by the Financial Times, SMIC is intensifying its collaboration with Huawei by establishing a new production line in Shanghai dedicated to producing chips for Huawei’s future flagship smartphones, focusing on the 5-nanometer process.
However, industry sources cited by the report have also indicated that SMIC’s prices for 5-nanometer and 7-nanometer processes are 40% to 50% higher than TSMC’s, and the yield less than one-third of TSMC’s.
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(Photo credit: SMIC)
Please note that this article cites information from Financial Times.
