Tech war: China's top chip foundry SMIC posts record revenue despite US sanction warning

Tech war: China’s top chip foundry SMIC posts record revenue despite US sanction warning

Admin November 7, 2024

China’s top chip foundry, Semiconductor Manufacturing International Corp (SMIC), on Thursday posted record quarterly revenue on the back of strong domestic demand for “legacy chips”.

The Shanghai-based chipmaker said its third-quarter revenue rose 34 per cent from a year earlier to US$2.17 billion.

Net profit for the quarter reached US$148.8 million, up 58.3 per cent from a year earlier.

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“The company achieved for the first time more than US$2 billion in quarterly revenue during the third quarter, representing a record high,” SMIC said in a statement on Thursday.

The strong results show how SMIC continues to lead the domestic market in advanced processes for semiconductor production, while also remaining the only fab operator on the mainland that can process 7-nanometre chips.

People walk past the front gate of Semiconductor Manufacturing International Corp’s fabrication facility in Shanghai. Photo: EPA-EFE alt=People walk past the front gate of Semiconductor Manufacturing International Corp’s fabrication facility in Shanghai. Photo: EPA-EFE>

The chipmaker shipped a total of 2,122,266 eight-inch equivalent wafers last quarter, as its capacity utilisation rate – a measure of semiconductor fabrication activity – rose to 90.4 per cent, the company’s highest reading over the past six quarters. Its monthly capacity increased to 844,250 eight-inch equivalent wafers in the third quarter.

Revenue from Chinese customers also increased steadily over the past few quarters, with 86.6 per cent of revenue generated from mainland-based clients in the past quarter.

SMIC’s Hong Kong-listed shares closed up 4.83 per cent to HK$28.2 on Thursday.

The firm applied so-called multiple-patterning technology to make Huawei Technologies‘ Kirin 9000s chipset with its second-generation 7nm process, using existing chipmaking equipment from ASML.

These chipsets inside Huawei’s Mate 60-series smartphones marked a breakthrough for China’s advanced chipmaking efforts, angering the US government and igniting speculation about the effectiveness of Washington’s curbs on the country’s vast technology sector.

Workers seen at a cleanroom inside one of the chip-fabrication plants operated by Semiconductor Manufacturing International Corp. Photo: SMIC alt=Workers seen at a cleanroom inside one of the chip-fabrication plants operated by Semiconductor Manufacturing International Corp. Photo: SMIC>

Washington added SMIC to the US trade blacklist in December 2020, three months after the US applied a blanket ban on Huawei’s access to global foundry services. Following the US sanctions, SMIC was forced to cut ties with Huawei.

Following Donald Trump’s win in the US presidential elections, most analysts believe his administration will not loosen US tech export controls on China.

“The consensus view is that Trump will step up controls on China’s technology sector,” said Wang Jiping, a vice-president at research firm IDC China. “But this doesn’t rule out possibilities that some cooperation could occur.”

Still, US lawmakers have intensified calls for a further crackdown on SMIC. Michael McCaul, chair of the US House of Representatives’ Foreign Affairs Committee, called on the US Department of Commerce to check up on SMIC’s facilities and find out whether the company is illegally producing chips for Huawei, according to a Reuters report on Tuesday.

Over the past few years, SMIC has pivoted its business to domestic customers and suppliers. It has adopted a test-and-trial strategy in terms of buying equipment, which has allowed domestic semiconductor tools makers such as Naura Technology Group more opportunities to become a supplier for its production lines.

Hua Hong Semiconductor, another Chinese maker of legacy chips, on Thursday said its third-quarter revenue was down 7.4 per cent from a year earlier to US$523.6 million, citing a drop in the average selling price of products. Its net profit, however, shot up 222 per cent to US$44.8 million, according to a company statement.

Hua Hong’s Hong Kong-listed shares closed up 3.3 per cent to HK$23.2 on Thursday.

China’s output of integrated circuits – a broad measure of semiconductor products – expanded 26 per cent to 315.6 billion units in the first three quarters of 2024, according to the National Bureau of Statistics.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.