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BEIJING, CHINA – DECEMBER 4: A logo is displayed on the building of the Beijing branch of Semiconductor Manufacturing International Co., Ltd. (SMIC) on December 4, 2020 in Beijing, China. (Photo courtesy of VCG/VCG, Getty Images)
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Semiconductor Manufacturing International Corporation on Friday warned of stiff competition in the chip industry after first-quarter profits fell short of expectations.
“The industry is becoming increasingly competitive, and the pricing of commodity products basically follows market trends,” SMIC said in an earnings call on Friday.
“The company fulfills its mission [long-term view] “Through building a high-quality technology platform that will take a generation or two leap forward here in mainland China,” SMIC said.
SMIC, China’s largest contract chipmaker, is seen as critical to Beijing’s ambitions to reduce overseas dependence in the domestic semiconductor industry as the United States continues to rein in China’s technological capabilities. SMIC is lagging behind Taiwan TSMC Analysts say the same is true for South Korea’s Samsung Electronics.
The company’s first quarter Net incomeLSEG analysts’ average estimate was $80.49 million, which was a decrease of 68.9% year-over-year to $71.79 million.
Gross profit margin decreased to 13.7% Sales for the quarter were the lowest the company has recorded in nearly 12 years, according to LSEG data.
SMIC said first-quarter sales rose 19.7% from a year earlier to $1.75 billion as customers bought up chips. This easily exceeded LSEG’s forecast of $1.69 billion.
“In the first quarter, IC [integrated circuits] The industry is still in the recovery phase, and customer inventories have gradually improved. “Compared to three months ago, we have noticed that our global customers are more proactive in increasing their inventory,” SMIC said on Friday.
The company said customers were building up inventories to prepare for competition and meet market demand, and some rush orders were reported in the first quarter as some production lines were operating near maximum capacity. It added that it was unable to fulfill the orders.
SMIC’s chips are used in cars, smartphones, computers, IoT technology, and more. More than 80% of its revenue in the first quarter came from Chinese customers, the company said.
get ready for competition
The company said it is prioritizing investments in areas such as capacity building and research and development activities to strengthen its competitiveness and expand its market share.
”[To] “In order to ensure that the company maintains its leading position in the fierce market competition and to best protect the interests of investors…the company does not plan to pay a dividend for 2023,” SMIC said. Stated.
“We believe that as long as there is demand from our customers and the readiness of our technology and capacity, we can ultimately emerge bigger, better and stronger, despite intense competition.”
The company expects second-quarter sales to rise 5-7% from the first quarter due to strong demand, but gross profit margins could fall further to 9-11%.
SMIC said, “Depreciation and amortization expenses are expected to increase each quarter as production capacity scales up.As a result, gross profit margin is expected to decline sequentially.”