SMIC’s Profit Exceeds Estimates

The quarterly profit of Semiconductor Manufacturing International Corp. (SMIC) exceeded preliminary expectations.

SMIC’s Profit Exceeds Estimates

The result of the mentioned chip maker turned out to be impressive in large part due to the steady demand for Huawei brand smartphones. The devices of this company power on components of the microcircuit firm, based in Shanghai.

SMIC’s net profit for the fourth quarter of last year was recorded at $174.7 million. At the same time, analysts expected this figure to be $139.1 million. The revenue of the Shanghai-based chip manufacturer for the last quarter of 2023 was fixed at $1.68 billion. Experts expected that this figure would be equal to $1.66 billion.

For the whole of last year, SMIC’s revenue amounted to $6.32 billion. In 2022, this figure was fixed at $7.27 billion. The company’s net profit in 2023 amounted to $902.5 million. In 2022, this figure was $1.82 billion.

SMIC is currently the leading contract chip manufacturer in China. This company produces 7-nanometer microcircuits that can be used as components in smartphones and laptops. SMIC is still lagging behind the industry leader, which is Taiwan Semiconductor Manufacturing Co.

The Chinese chipmaker largely contributed to Huawei’s triumph last year, associated with the debut of the new flagship smartphone Mate 60 Pro, equipped with 7-nanometer processors. SMIC helped the mentioned brand to return to the 5G mobile phone market after several years of being under pressure from sanctions from the United States, which limited the firm’s access to advanced chips and became a factor in the negative impact on its smartphone business.

Shipments of Huawei mobile phones in the fourth quarter of last year showed an increase of 36% year-on-year. The relevant information was published by the research company IDC at the end of January.

Currently, Huawei’s share of the Chinese smartphone market is 13.9%. At the end of 2022, this figure was 10.3%. This week, Counterpoint Research reported that Huawei became the best-selling smartphone brand in the Chinese market during the first two weeks of the current year.

The cost of SMIC shares in Hong Kong has fallen by 25% since the beginning of 2024. This dynamic is driven by economic problems in the financial center and mainland China.

The bulk of SMIC’s business is related to the production of less complex semiconductors, which are used as components in a wide range of devices, including electric vehicles and household appliances.

Bloomberg Intelligence analyst Charles Shum says that sluggish demand for the mentioned components is a factor of pressure on margins. According to him, China is currently experiencing stagnation in demand for mature node chips, which is a reflection of the negative situation in the consumer electronics market and the slow recovery in smartphone sales. The expert notes that this problem is a strategic shift by SMIC towards filling the production capacities of commodity-type microcircuits with lower margins, which are characterized by lower order volumes. In his opinion, this shift is exacerbating the problems with gross margin.

As we have reported earlier, Huawei Drives China Stock Boom.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.