Chinese chip powerhouse SMIC saw Q1 revenue fall to $1.46 billion as it continues to withstand chip shortages and US trade sanctions.
Semiconductor Manufacturing International Corporation (SMIC) has seen its revenue fall according to its latest quarterly figures. On Friday, the Chinese chipmaking giant posted revenue of $1.46 billion for Q1 2023 amid challenging macroeconomic parameters. In addition to being down 20.6% year-on-year (YoY), SMIC’s latest revenue haul represents the first income deficit in over three years. The last time the Shanghai-based semiconductor maker experienced a sales decline was in Q3 2019.
SMIC’s revenue fall also extended to its net profit, which plunged 48% YoY to $231.1 million. As mainland China’s largest contract chip maker, SMIC hopes to eventually catch up with regional rivals, especially Taiwan Semiconductor Manufacturing Company (TSMC). However, SMIC’s ambitions to boost China’s domestic semiconductor industry suffered a setback when the company incurred US sanctions in 2020. At the time, Washington placed SMIC on a trade blacklist called Entity List, effectively cutting the leading East Asian chipmaker off from essential production resources. As a result, SMIC has struggled to manufacture more advanced, cutting-edge semiconductors competitively.
Despite production trailing TSMC and Samsung, as well as constraints posed by US sanctions, SMIC posted record revenue throughout last year. In February, the company reported a full-year 2022 revenue of $7.2 billion, representing a 34% increase from last year. Furthermore, SMIC saw a gross margin of 38%, its second year of sales growth above 30%.
SMIC Exec Chalks Up Revenue Fall to Global Chip Shortage Also Affecting Other Semiconductor Players
SMIC executives attributed the latest income drop to waning demand due to the sustained chip shortage. On an earnings call, the company’s co-chief executive Zhao Haijun admitted that prospects for recovery in the year’s second half remained unclear. SMIC’s declining earnings also came amid business and operational outlook revisions by other leading chip manufacturers such as TSMC and Samsung.
The impact of the global chip glut saw TSMC recently update its 2023 revenue forecast from slight growth to a lower single-digit decline. Meanwhile, US semiconductor powerhouse Intel (NASDAQ: INTC) anticipates a loss of 4 cents a share in Q2 2023. Intel’s grim outlook came after the Santa Clara-based company reported its most significant quarterly deficit last month. However, Intel CEO Pat Gelsinger remained optimistic at the time by focusing on bright spots in the chipmaker’s agenda. Emphasizing that Intel’s bleak first-quarter financial outing alluded to the company’s steady transformational progress, Gelsinger explained:
“While we remain cautious on the macroeconomic outlook, we are focused on what we can control as we deliver on IDM 2.0: driving consistent execution across process and product roadmaps and advancing our foundry business to best position us to capitalize on the $1 trillion market opportunity ahead.”
Intel’s chief financial officer David Zinsner also assessed its performance, explaining that it surpassed top and bottom line expectations. Furthermore, at the time, the CFO added that Intel remained committed to exercising discipline in expense management. Zinsner said the tech giant would continue driving efficiencies and cost savings.
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SMIC, the largest semiconductor manufacturer in China and the world’s fourth largest, has reported a 20.6% year-on-year drop in revenue in the first quarter of 2023. The news marks the third consecutive quarter of revenue losses, and highlights the impact of the US government’s tech ban on the Chinese tech giant.
In a statement to shareholders on Wednesday, SMIC reported an unexpected net loss of $361 million for the period and noted that it was the company’s first loss in three years. The decrease in revenue stems primarily from restrictions imposed by the US Department of Commerce on Semiconductor Manufacturing International Corporation (SMIC) in 2020.
The restrictions, which prevent the company from buying parts and technology from US suppliers, have made it difficult to compete with its foreign rivals, who do not face similar constraints. In addition, the mounting costs of developing semiconductors and expanding manufacturing capabilities is another factor contributing to the fall in revenue.
SMIC’s chief executive, Liang Mong-song, said the firm was “resolutely committed to overcoming the challenges” posed by the US restrictions, with plans to invest in research, development and new technology. The company is also looking to expand its production capacity, with plans to increase wafer manufacturing to 886,000 pieces per month from August 2023.
Mr. Liang has also highlighted the potential opportunities for collaboration between SMIC and local companies or alternative suppliers. He believes that local companies can be an important source for services and components, which could help SMIC maintain a competitive edge.
Despite the negative impact of the US restrictions, SMIC is optimistic that it can grow its revenues over the next twelve months and aims to bring the recent losses to an end.
