China's Largest Semiconductor Company SMIC Reports 80% Plunge in Q3 Net Profit

Despite Huawei Smartphones Using SMIC Chips Gaining Popularity,
Sales Continue to Decline

China's largest foundry (semiconductor contract manufacturing) company SMIC (Semiconductor Manufacturing International Corporation) saw its third-quarter net profit plunge 80% amid sluggish smartphone sales and tightened U.S. technology restrictions on China, Bloomberg reported on the 9th.

According to the report, SMIC's third-quarter net profit was $94 million (approximately 124 billion KRW), down 80% from the same period last year. Third-quarter revenue fell 15% to $1.62 billion (about 2.13 trillion KRW), missing market expectations of $1.64 billion. SMIC has experienced declining revenue for three consecutive quarters.

Bloomberg pointed out that expectations that the strong sales of Huawei's latest smartphone, the Mate 60 Pro, would offset SMIC's revenue decline have not materialized. The Mate 60 Pro, released at the end of August amid intense U.S. scrutiny, is known to be equipped with an advanced 7nm (nanometer, one billionth of a meter) process processor made by SMIC using equipment from the Dutch company ASML. SMIC reportedly combined ASML's immersion deep ultraviolet (DUV) lithography equipment, which had not been subject to export restrictions to China, with products from other companies to manufacture the chip.

Bloomberg noted, "SMIC, at the core of China's semiconductor rise, is expected to recover growth in the peak fourth quarter, but this depends on whether the U.S. considers additional sanctions."

Charles Shum, an analyst at Bloomberg Intelligence, forecasted, "Strong demand for Huawei devices, from servers to mobile phones, emphasizes local support for Chinese-made chips and could potentially enable SMIC to maintain production capacity beyond expectations."

However, uncertainty remains in the Chinese smartphone market. According to market research firm Canalys, China's third-quarter smartphone shipments declined by 5%, and none of the top five manufacturers sold more than last year. Bloomberg stated, "In the long term, it remains to be seen whether the government's overt support for Chinese semiconductor companies will increase SMIC's profits."

Meanwhile, at its earnings briefing on the same day, SMIC announced it had adjusted its annual budget to $7.5 billion (approximately 9.9 trillion KRW), an 18% increase from the previous year. Although it did not disclose detailed spending, Co-CEO Zhao Haijun said, "The scale of equipment deliveries by the end of this year will be much larger than initially expected."

[Image source=Reuters Yonhap News]

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