Despite US Sanctions... China's SMIC, with Record Profits, Plans $5 Billion Investment This Year

China's Largest Foundry SMIC Plans Capacity Expansion
Despite US Sanctions, 5G and Automotive Demand Boosted Last Year's Net Profit Increase

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Hyeyoung] SMIC, China's largest foundry (semiconductor contract manufacturer), will invest $5 billion (approximately 5.98 trillion KRW) this year.

According to Taiwan's Taipei Times and major foreign media on the 12th, SMIC announced that it will make a new investment of $5 billion this year to increase semiconductor production capacity. This is about 600 billion KRW more than last year's investment of $4.5 billion (approximately 5.38 trillion KRW), marking the largest scale ever.

Through the new investment, SMIC plans to raise its monthly semiconductor production capacity. SMIC expects to gradually increase production from the current level of 130,000 units based on 8-inch wafers to 150,000 units.

Despite US government sanctions, SMIC's performance surged significantly last year. The company reported a net profit of $1.7 billion (approximately 2.035 trillion KRW) last year, more than doubling from $716 million the previous year.

This is analyzed to be due to the rapid increase in demand for 5th generation (5G) mobile communication smartphones, smart vehicles, and home appliances.

Headquartered in Shanghai, SMIC plays a leading role in China's "semiconductor rise." According to TrendForce, a Taiwanese market research firm, SMIC ranked 5th globally in revenue in the first quarter of last year.

The US placed SMIC on the Department of Commerce's sanctions list in 2020 during the Donald Trump administration. As a result, SMIC has faced difficulties introducing advanced processes, such as being unable to receive equipment from ASML, the world's only producer of extreme ultraviolet (EUV) lithography machines.

While the world is focusing on semiconductor dominance, China is fully supporting domestic semiconductor companies including SMIC and Tsinghua Unigroup by promoting the semiconductor rise. The Chinese government spares no effort in providing exceptional support such as tax reductions, incentives, and subsidies to semiconductor companies. Shanghai, where SMIC's core production facilities are located, recently announced a policy to provide subsidies of up to 30% for equipment investments in semiconductor materials and equipment.

This movement applies not only to large companies but also to small and medium-sized semiconductor-related companies, leading to a "small giant" nurturing strategy. The Chinese Ministry of Finance has allocated 10 billion yuan (approximately 1.879 trillion KRW) in support funds for small and medium enterprises, aiming to establish 10,000 small giant companies by 2025.

China is making advances in various advanced technology fields such as 5G, cloud, artificial intelligence (AI), autonomous driving, drones, and space development, but it has yet to close the gap in the semiconductor sector. In 2021, China's semiconductor import value was $350 billion (approximately 419 trillion KRW), accounting for about 13% of China's total imports.

This content was produced with the assistance of AI translation services.