SMICs revenue will fall 10 this year but capital

SMIC’s revenue will fall 10% this year, but capital expenditures will remain at last year’s levels

As the flagship of China’s custom chip manufacturing sector and the fourth-largest player in the global custom manufacturing market, SMIC has long been the target of US sanctions that bar it from accessing advanced Western hardware and software. SMIC expects to end this year with sales down 10%, but capital expenditures will remain at the same level as last year.

    Image source: DigiTimes

Image source: DigiTimes

Considering that many large contract manufacturers have to reduce their capital expenditures this year, this stability can be considered an achievement for SMIC. In addition, SMIC is the second largest investment item among contract manufacturers with $6.4 billion included in this expense item. Only TSMC will be able to spend more, although in this case it’s $32 billion, but against the backdrop of a 12% year-over-year cost reduction.

Accordingly DigiTimesAt a recent shareholders’ meeting, SMIC CEO Zhao Haijun described the situation in the Chinese semiconductor industry in the last six months in a rather pessimistic tone. Inventories of mobile and PC components remain high and demand in some product lines, particularly in the area of ​​mature lithography, continues to fall. The automotive sector and the direction of industrial automation remain stable in terms of demand, but cannot compensate for the overall decline in sales in terms of their share.

In the ending half year, SMIC expects a profit of 3 billion US dollars, according to the results of the full year, the turnover will reach 6.5 billion US dollars, which will be 10% less than the result of the previous year. For the current year, the company expects to keep the profit margin at the level of around 20%. At the same time, SMIC management considers it necessary to prepare for the beginning of a new growth cycle in the semiconductor market.

The head of SMIC considers human resources as one of the main values ​​of the company, half of the 20,000 employees are engineering specialists. Management values ​​them and tries to ensure competitive compensation. This keeps staff turnover low, as explained by the CEO of SMIC.

Last quarter, smartphones accounted for 23.5% of SMIC’s sales, consumer electronics for 26.7%, industrial automation for just 16.6%, and all other products for about a third of total sales. Over the past year, the company has become more independent of the smartphone and consumer electronics market, but this is more evident in the smartphone business, which accounted for up to 28.7% of SMIC’s sales in the first quarter of last year.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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