Recently, the world's major semiconductor giants have not been very comfortable. Recently, it was reported that with the impact of last year's decline in global chip demand continuing to expand, many chip companies' fiscal revenue in the first quarter of this year has declined.
According to the first quarter financial reports released by major companies, Qualcomm's first-quarter revenue fell by 12%, and its net profit fell to 2.2 billion, while Intel was even worse, with revenue falling by more than 36% and even a net loss of $2.8 billion. Nvidia and AMD, Micron and other companies are similar, of which NVIDIA is slightly better, and there is $1.6 billion in revenue, ADM and Micron two brothers and sisters, losing $140 million and $200 million respectively.
TSMC, which grew rapidly in revenue last year, also experienced a decline in revenue in 2023, while ASML, the world's largest lithography machine company, although its revenue is still growing, has not received many new orders this year, and next year's life is not very good.
After the collapse of revenue, these chip companies began to cut their spending budgets. For example, TSMC cut $8 billion, Intel cut $3 billion, and Qualcomm cut $1 billion. Not only have they cut their budgets, but these chip companies have begun to close production lines and stop lithography machine orders because of the decline in chip demand and the inability to sell chips. For example, TSMC cut four percent of lithography machine orders.
In the midst of global chip companies, SMIC has a lot of good news, and recently reported that ZTE International not only maintained capital expenditure in 2022, but also publicly stated that it will expand production. Recently, there is another problem worthy of attention and deep thought, that is, the 14nm foundry information on SMIC's official website suddenly disappeared, and only 28nm and above chips were introduced.
What do these two points mean, and where does SMIC have the confidence to support its capital spending when the chip market is weak, and why did it suddenly change its plans?
SMIC's advance layout
There are two main reasons why SMIC was able to keep the capital expenditure of the previous year unchanged when global chip demand fell and many semiconductor companies cut their budgets, on the one hand, SMIC is backed by the Chinese market, one of the world's largest chip markets, and on the other hand, it is inseparable from SMIC's advance layout.
While many chip companies around the world have focused on the field of advanced processes of 14nm and below, SMIC has discovered the growth trend of mature process chips of 28nm and above brought about by the development of smart vehicles, laid out in advance, expanded many chip fabs producing 28nm and above processes, and invested heavily in technology, achieving the world's top yield rate.
After that, as SMIC expected, the demand for chips in the 14nm and below process continued to plummet, but the demand for chips in the 28nm and above process did not decline but rose, bringing a huge market.
After that, SMIC stopped expanding when TSMC and other foundries flooded the 28nm and above process chip market, and focused on 14nm and below process chips, making many significant progress.
Today, SMIC has not only completed the research and development of 7nm chips, but also started the research and development of 5nm chips, and also began to produce chips with N+1 process on a small scale, and has achieved the expected results in terms of yield rate.
SMIC's advance layout has helped SMIC maintain sustained growth, revenue and expanding production scale in the context of plummeting chip demand.
Why did SMIC suddenly change its plans?
Many people do not understand SMIC's change of plan to stop the expansion of wafer foundry in mature processes of 28nm and above, but in fact, SMIC is in order to develop advanced processes and maintain sustainable profitability.
With the influx of TSMC and other wafer foundry companies, although the mature process chip market has not yet been occupied, but when the expansion plan of these wafer foundry companies is completed, the mature process chip market will inevitably have a situation where the supply of chips is greater than the demand for chips.
Under this circumstance, the benefits brought by continuing to expand the mature process chip foundry will inevitably be reduced, even if SMIC has excellent results in the yield rate in the field of mature process chips, it is not worth the loss. What's more, SMIC's productivity in the field of mature process chips is already good enough, according to relevant data, SMIC will have a production capacity of 700,000 8-inch wafers by the end of this year.
Under such circumstances, SMIC's vigorous development of advanced processes is obviously more conducive to future development and layout. At present, because SMIC has kept a low profile and has not announced many R&D results, we can only learn that SMIC has completed the R&D of 7nm chips and started the R&D task of 5nm chips. As for the R&D progress in N+1 and N+2, there is still relatively little news.
However, from some news revealed so far, SMIC's technology research and development in the field of advanced processes is also making rapid progress and has achieved many good successes.
Written at the end: SMIC's current main market is still in the Chinese market, and SMIC's R&D and production focus will change with the changes in the Chinese market. At present, the demand for chip foundry at 14nm and below in the Chinese market is low, but this demand is growing, so SMIC's development goals have also changed, which is why SMIC can maintain a strong growth trend. What do you think about that?