The SMIC was hit by American sanctions but its activity continued to grow. However, China’s biggest chipmaker still faces a challenge to catch up with rivals such as TSMC.
Qilai Shen | Bloomberg | Getty Images
China’s largest semiconductor manufacturing company minimum wage posted its first quarterly revenue decline in more than three years on Friday as a chip glut and lack of demand continue to plague the industry.
SMIC, or Semiconductor Manufacturing International Co., posted revenue of $1.46 billion in the first quarter of the year, down 20.6% year-on-year. The last time the company saw sales decline was in the third quarter of 2019.
Net income fell to $231.1 million, down 48% year-over-year.
SMIC is China’s biggest chipmaker and is seen as a key hope for Beijing’s ambitions to boost its domestic semiconductor industry and catch up with rivals like Taiwan. TSMC and South Korea Samsung.
However, the company’s technology is still years behind these big companies. In 2020, the SMIC was placed on a US commercial blacklist called the Entity List. And last year, Washington introduced sweeping export restrictions aimed at cutting China off from cutting-edge chip technology and equipment. In effect, these edges have cut SMIC off of the key tools needed to fabricate more advanced chips.
Despite the headwinds, the SMIC recorded record turnover for the whole of 2022.
But the latest economic crisis comes amid a tough chip market with overabundant supply and lack of demand that has hit companies in the industry. More than 50% of minimum wage income comes from manufacturing chips for smartphones and other consumer electronics. Smartphone and PC shipments fell in the first quarter.
Samsung, the world’s largest memory chip maker, saw its profits plunge in the first quarter.
However, SMIC expects its second-quarter revenue to recover and grow between 5% and 7% quarter-on-quarter. Many other chipmakers have forecast a recovery in the second half.
“For Q2, it also guided its sales to recover earlier than its peers,” Sze Ho Ng, an analyst at investment bank China Renaissance, told CNBC. “The domestic market recovery is happening earlier than overseas,” Ng said.