At this historic moment, SMIC surpassed UMC-GF to become the world's second-largest pure-play foundry

Wan Da-hsien

2024-05-15 20:30Published in Heilongjiang Science and Technology Creators

SMIC is in for a historic moment.

According to the financial report for the first quarter of 2024, SMIC's sales revenue reached US$1.75 billion, up 4.3% quarter-on-quarter and 19.7% year-on-year, with a gross margin of 13.7%, both exceeding guidance and performing well.

In addition, such performance has enabled SMIC's quarterly revenue to surpass UMC and GF for the first time, with the two international giants earning $1.71 billion and $1.549 billion respectively in the first quarter. This means that SMIC has officially become the world's second largest pure-play wafer foundry, second only to TSMC, which is really gratifying!

In fact, it is only a matter of time before it surpasses UMC and GF. For example, according to statistics from TrendForce, a market research agency, in the fourth quarter of 2023, TSMC led the global foundry market with a share of 61.2%, Samsung ranked second with 11.3%, followed by UMC with 5.8%, GF with 5.4%, and SMIC with 5.2%.

In other words, the gap between SMIC and UMC is not large.

Judging from the financial report, in terms of revenue, China is 81.6%, accounting for the highest proportion, and the company's business is still dominated by domestic customers. Among them, the mobile phone business accounted for the highest proportion, reaching 31.2%, consumer electronics ranked second with 30.9%, followed by computers and tablets and Internet and wearables, and the fifth was industrial and automotive, which are all hot areas nowadays. Especially with the rise of new energy vehicles, domestic automotive chips will continue to come out, and the business in this area will also rise.

In terms of actual shipments, in the first quarter of 2024, SMIC shipped 1.79 million 8-inch equivalent wafers, an increase of 7% quarter-on-quarter. The capacity utilization rate was 80.8%, an increase of 4% quarter-on-quarter. Although it is still at a low level, it has rebounded and the momentum is good.

In terms of wafer size, 12-inch wafers accounted for 75.6% of revenue, 8-inch accounted for 24.4%, and 12-inch accounted for a very high proportion. In fact, in the first quarter of this year, SMIC received some urgent orders, mainly for consumer electronics such as mobile phones, but the 12-inch production line was close to full load, and after coordination with customers, the delivery time of computers, tablets and other products was delayed.

In fact, generally speaking, for wafer foundries, the first quarter of each year is the traditional off-season, and this period also involves the impact of annual maintenance and other factors, but SMIC's performance is still very bright.

Of course, although in terms of revenue, the performance has increased, but in terms of profit, SMIC has declined, specifically the profit of 71.79 million US dollars, down 58.9% month-on-month and 68.9% year-on-year. Gross margin was 13.7%, down 7.1 percentage points from 20.8% in the same period last year, and down 2.7 percentage points from 16.4% in the previous quarter.

As for the decline in gross profit margin, SMIC said that it was mainly due to changes in product mix, increased depreciation and reduced investment income.

Therefore, although SMIC became the world's third largest wafer foundry after TSMC and Samsung in the first quarter of this year, it still needs to continue to work hard in terms of gross profit margin and net profit.

But let's not forget that in the context of being added to the Entity List by the United States, it is not easy to achieve such results. Good lithography machines are not available, key components and raw materials are limited, and it is very difficult to expand production lines and production capacity. In short, SMIC is currently in a state of restraint and needs to wait for an opportunity to break through.

Recently, a chip expert in Taiwan Province said that Liang Mengsong is the world's most powerful chip master, and he is the first to make 3nm equivalent chips under the condition of limitations. In other words, SMIC has absolutely no problems with technology, but it may not have the right tools in its hands.

Once SMIC can completely let go of its hands, I believe it will be able to make waves in the global wafer foundry market.

This depends on the continuous development and improvement of the semiconductor industry, especially when the domestic lithography machine can be commercially delivered, I believe that SMIC's performance will be further improved. Because we ourselves are the world's largest chip demand market, and we are currently undergoing the localization and substitution project of chips, we are fully capable and necessary to achieve self-production and self-sales.

In addition, with the popularization of 5.5G and the Internet of Things, and the development of the era of the Internet of Everything, the demand for domestic chips will increase significantly, and domestic wafer factories will continue to get good development opportunities. In fact, now we can predict that the era of Chinese chips will come soon. Okay, that's all for today, remember to follow and see you tomorrow.

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