BEIJING, CHINA – DECEMBER 04: A logo hangs on the Beijing branch constructing of Semiconductor Manufacturing International Corporation (SMIC) on December 4, 2020 in Beijing, China. (Photo by VCG/VCG via Getty Images)
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Semiconductor Manufacturing International Corporation warned on Friday of intense competition within the chip industry after its first-quarter profit fell in need of expectations.
“Competition in the industry has become increasingly fierce and pricing of commodity products largely follows market trends,” SMIC said Friday through the company’s earnings call.
“The company fulfills its requirements [long-term view] by building high-quality technology platforms that leapfrog by one to two generations here in mainland China,” SMIC said.
SMIC, China’s largest contract chipmaker, is seen as crucial to Beijing’s ambitions to scale back foreign dependence of its domestic semiconductor industry because the US continues to limit China’s technology power. SMIC lags behind Taiwan TSMC and South Korea’s Samsung Electronics, analysts said.
The company’s first quarter Net incomeThe price fell 68.9% year-on-year to $71.79 million, in comparison with LSEG analysts’ average estimate of $80.49 million.
Gross margin fell to 13.7% within the quarter — the bottom the corporate has ever recorded in nearly 12 years — based on LSEG data.
Revenue was $1.75 billion in the primary quarter, up 19.7% from a yr earlier, as customers stocked up on chips, SMIC said. This significantly exceeded the LSEG estimate of $1.69 billion.
“In the first quarter, the IC [integrated circuits] The industry was still in the recovery phase and customer base was gradually improving. “Compared to three months ago, we have found that our global customers are more willing to build inventory,” SMIC said on Friday.
Customers are constructing inventory to organize for competition and reply to market demand, the corporate said, adding that it was unable to meet some rush orders in the primary quarter as some production lines ran near maximum capability.
SMIC’s chips are present in cars, smartphones, computers, IoT technologies and others. More than 80% of first-quarter sales got here from customers in China, it said.
Prepare for competition
In order to expand competitiveness and increase market share, the corporate says it’s prioritizing areas reminiscent of capability constructing and R&D activities for investment.
“[To] “Ensure that the corporate maintains its leading position within the fierce competition available in the market and maximizes the protection of investor interests… the corporate plans to not pay dividends for 2023,” SMIC said.
“We believe that despite fierce competition, we can ultimately be bigger, better and stronger as long as our customers’ demand exists along with our technology and capacity readiness.”
The company expects second-quarter revenue to rise 5% to 7% in comparison with the primary quarter as a result of strong demand, while gross margin could decline further to 9% to 11%.
“Along with the expansion of capacity, depreciation is expected to increase from quarter to quarter. Therefore, gross margin is expected to decline sequentially,” SMIC said.
