The logo is displayed in the Beijing branch building of Semiconductor Manufacturing International Corporation (SMIC) held in Beijing, China on December 4th, 2020.
VCG | Visual China Group | Getty Images
Shares in Semiconductor Manufacturing International Corporation, China’s largest contract chip maker, fell nearly 7% on Friday. First quarter revenue I missed the estimate.
After trading Thursday, the company reported revenues for the quarter were $2.24 billion, an increase of about 28% from the previous year. Meanwhile, shareholder profits increased 162% year-on-year to $188 million.
However, both figures missed an LSEG average estimate of $2.34 billion in revenue and net profit of $225.5 million. Company’s own predictions.
During a revenue call on Friday, a representative from SMIC said they missed the original guidance because of revenue. “Production fluctuations” that combines the average selling price have decreased. The impact is expected to extend into the second quarter, they added.
For the current quarter, chipmakers forecast revenue and fell sequentially from 4% to 6%. Total margins are expected to fall within the 18% to 20% range, compared to 22.5% in the first quarter.
Still, in the first quarter, Smic wafer shipments increased 15% from the previous quarter, up about 28% year-on-year.
In the revenue call, Smic thought that growth into customer shipments would be brought about by changes in geopolitics and increased demand driven by government policies such as domestic trade programs and consumption subsidies.
Another positive indication for the company was that capacity utilization for the first quarter (an percentage of available total manufacturing capacity used at any time increased by 89.6% and a quarter of 4.1%.
“The nearly 90% utilization of SMIC reflects strong domestic demand for semiconductors that are likely to be driven by smartphone and appliance production,” said Washington-based semiconductor and technology analyst Ray Wang, adding that the demand is also reflected in the company’s quarterly revenue growth.
Meanwhile, the company said in its revenue call, “currently in a critical period of capacity construction, deployment and continuous market share growth.”
However, Smic’s first quarter research and development spending fell to $148.9 million, down from $217 million in the last quarter.
Amid growing demand, it will be important for SMIC to continue to increase capacity, Simon Chen, principal analyst in semiconductor manufacturing at Informa Tech, told CNBC.
SMICs generate most of their revenue from older generation semiconductors, often referred to as “mature nodes” or “legacy” chips.
State-sponsored chipmakers are important to Beijing’s ambitions to build a self-sufficient semiconductor supply chain with the government It will send billions of dollars into such efforts. Over 84% of first quarter revenue came from Chinese customers.
“We’ve seen increased supply chain localization conversions and increased manufacturing demand,” the representative said Friday.
However, according to chip analysts, the ability of chip makers to increase capacity ahead of time is limited, although they are used in applications that require higher levels of computing performance and high yield efficiency.
This is due to US-led export controls, which will prevent access to some of the world’s most advanced chip manufacturing equipment from Netherlands-based ASML.
Nevertheless, chipmakers appear to have made several breakthroughs. The advanced chips produced by SMIC include a wide range of Huawei products, especially 60 Pro Smartphone 60 And some AI Processor.
In a call to revenue, the company also said it would closely monitor the potential impact of the US-China trade war on its demand, noting its lack of visibility later this year.
Felixley, an equity analyst with Morningstar, focused on semiconductors, told CNBC that the impact of US tariffs is limited in most revenue from Chinese customers.
US customers account for around 8-15% of their revenue per quarter, but chips are typically consumed and consumed by Chinese products and end users.
“There could be some disruption in the supply of chemicals, gas and equipment, but the company is working on Chinese and other non-US alternatives,” he added.
Smic’s Hong Kong listed stock has been gaining more than 32.23% since the start of the year.
