By
Kseniia Klichova
April 18th, 2024
The revenue posted by SMIC is arguably one of the biggest signs of recovery for the Chinese economy.
Semiconductor Manufacturing International Ord Shs (HKG: 0981) the largest chipmaker in China has posted better-than-expected revenue for the 2022 financial year. As reported by CNBC citing the company’s published financials, it said its revenue came in at $7.2 billion, up 34% year-on-year.
The company’s earnings surprised analysts considering the fact that it has been placed under sanctions by the United States Government since 2020. As part of the Entity List, SMIC as it is called cannot do any active business with American suppliers or even customers. These sanctions, alongside the major strain in the broader chip industry over the past 2 years gave SMIC a significant headwind over the past year.
Amidst the obvious woes, the company said its gross margin came in at 38%. The 2022 fiscal year performance now stands as the second time the company will be recording a sales growth above 30%.
Despite its performance, the company is projecting a more conservative record across its top and bottom lines over the coming quarter. SMIC said it expects its revenue for the first quarter of this year to slump by 10 to 12%.
“Looking forward to 2023, in the first half of the year, the industry cycle is still at the bottom, the impact of external uncertainties is still complex,” the company said in a statement.
The company has maintained a dedicated client base despite its technology lagging behind its top competitors including Taiwan Semiconductor Mfg. Co. Ltd (TPE: 2330) and Samsung Electronics Co Ltd (KRX: 005930). The company’s inclusion on the Entity List has prevented it from accessing the latest chip technologies to compete globally.
Though not so pronounced, there was a subtle reduction in the demand for SMIC’s products and services, evidence of the reduced spending capacity from consumers as a whole.
SMIC Revenue Is a Positive Sign
The revenue posted by SMIC is arguably one of the biggest signs of recovery for the Chinese economy which has also been bedeviled by other inconsistencies including the series of new COVID-19 waves.
The earnings and the forecasts model the general sentiment in the broader chip ecosystem. With reduced consumer demand for smartphones and other high-end devices that utilize semiconductors, the number of other key players around the world have reduced capital injection into research and development in a bid to cut costs and stay afloat.
Only Samsung has maintained its research allocation according to an earlier report by Coinspeaker. The fund allocation is such that it can position itself right to gain its competitor’s market share when the much-anticipated recovery finally comes into being.
For SMIC, it projects its capital expenditures to stay the same for the year at $6.35 billion. As part of the aftermath of the uncertainty it is facing, the company plans to extend, by at least a quarter, the timeline for the launch of SMIC Jincheng, its new mass production plant.