SMIC posted a drop in second-quarter revenue on persisting weak chip demand

Semiconductor Manufacturing International Corp. posted on Thursday a drop in second-quarter income towards a backdrop of ongoing U.S. sanctions and a sluggish restoration in world chip demand.

Here are SMIC’s second-quarter outcomes versus Refinitiv consensus estimates:

• Revenue: $1.56 billion, vs. $1.55 billion anticipated
• Net revenue: $402.76 million, vs. $184.2 million anticipated

SMIC stated that second-quarter income totaled $1.56 billion, down 18% from the $1.9 billion logged in the identical interval of final yr. Net revenue was $402.76 million, down by 21.7% from the $514.33 million recorded within the second quarter of 2022.

SMIC is China’s largest foundry, manufacturing semiconductor chips that different corporations design. The Chinese agency competes with the likes of Taiwan’s TSMC and South Korea’s Samsung, however analysts say its know-how is a number of generations behind.

The Chinese foundry has been the goal of U.S. sanctions since 2020. It was positioned on an U.S. commerce blacklist that restricts its entry to key overseas know-how, which might permit it to supply cost-efficient superior chips.

SMIC has not been capable of get hold of excessive ultraviolet lithography machines, which solely Dutch agency ASML is at present able to making. Without EUV machines, SMIC is unable to supply superior chips on a big scale at decrease prices.

An ongoing hunch in demand for sure chips that go into shopper merchandise, corresponding to reminiscence, has additionally badly impacted SMIC, in addition to the likes of TSMC and Samsung.

The Semiconductor Industry Association stated that world gross sales of semiconductors totaled $124.5 billion throughout the second quarter of 2023. This represents a 4.7% improve from the primary quarter however is 17.3% under the second quarter of 2022.

In the second quarter of 2023, SMIC revenues elevated by 6.7% quarter-on-quarter and logged a gross margin of 20.3% — in step with the corporate’s steering of a 5-7% income hike and a 19-21% gross margin vary.

SMIC stated quarterly income elevated as a result of its 12-inch wafer fabs — processing amenities answerable for producing semiconductors — met “relatively full” capability.

“The capacity demand of 12-inch were relatively full, while the customer demand of 8-inch were weak. The utilization rate for 8-inch was lower than 12-inch, but still better than the industry average,” SMIC stated on Thursday.

The Chinese agency expects shipments to extend additional within the third quarter.

“Third quarter’s revenue is expected to grow by 3%-5% sequentially, and gross margin is expected to be in the range of 18%-20%,” it added.

The firm expects its income within the second half of the yr will likely be “better than that in the first half” and goals to “strengthen our technology R&D and platform development, verify new products quickly, arrange the supporting capacity as soon as possible, and fully prepare for the next round of growth cycle.”