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SMIC posted a drop in second-quarter income on persisting weak chip demand Get hold of US

BEIJING, CHINA – DECEMBER 04: A brand hangs on the constructing of the Beijing department of Semiconductor Manufacturing Worldwide Company (SMIC) on December 4, 2020 in Beijing, China. (Photograph by VCG/VCG through Getty Photos)

Vcg | Visible China Group | Getty Photos

Semiconductor Manufacturing Worldwide Corp. posted on Thursday a drop in second-quarter income in opposition to a backdrop of ongoing U.S. sanctions and a sluggish restoration in world chip demand.

Listed below are SMIC’s second-quarter outcomes versus Refinitiv consensus estimates:

  • Income: $1.56 billion, vs. $1.55 billion anticipated
  • Internet earnings: $402.76 million, vs. $184.2 million anticipated

SMIC said that second-quarter revenue totaled $1.56 billion, down 18% from the $1.9 billion logged in the identical interval of final yr. Internet earnings was $402.76 million, down by 21.7% from the $514.33 million recorded within the second quarter of 2022.

SMIC is China’s largest foundry, manufacturing semiconductor chips that different corporations design. The Chinese language agency competes with the likes of Taiwan’s TSMC and South Korea’s Samsung, however analysts say its know-how is a number of generations behind.

The Chinese language foundry has been the goal of U.S. sanctions since 2020. It was positioned on an U.S. commerce blacklist that restricts its entry to key overseas know-how, which might permit it to provide cost-efficient superior chips.

SMIC has not been capable of acquire excessive ultraviolet lithography machines, which solely Dutch agency ASML is at present able to making. With out EUV machines, SMIC is unable to provide superior chips on a big scale at decrease prices.

An ongoing stoop in demand for sure chips that go into shopper merchandise, comparable to reminiscence, has additionally badly impacted SMIC, in addition to the likes of TSMC and Samsung.

The Semiconductor Trade Affiliation mentioned that global sales of semiconductors totaled $124.5 billion in the course of the second quarter of 2023. This represents a 4.7% improve from the primary quarter however is 17.3% beneath the second quarter of 2022.

Restoration underway

Within the second quarter of 2023, SMIC revenues elevated by 6.7% quarter-on-quarter and logged a gross margin of 20.3% — according to the corporate’s guidance of a 5-7% income hike and a 19-21% gross margin vary.

SMIC mentioned quarterly income elevated as a result of its 12-inch wafer fabs — processing services liable for producing semiconductors — met “comparatively full” capability.

“The capability demand of 12-inch have been comparatively full, whereas the shopper demand of 8-inch have been weak. The utilization price for 8-inch was decrease than 12-inch, however nonetheless higher than the business common,” SMIC mentioned on Thursday.

The Chinese language agency expects shipments to extend additional within the third quarter.

“Third quarter’s income is anticipated to develop by 3%-5% sequentially, and gross margin is anticipated to be within the vary of 18%-20%,” it added.

The corporate expects its income within the second half of the yr might be “higher than that within the first half” and goals to “strengthen our know-how R&D and platform improvement, confirm new merchandise rapidly, organize the supporting capability as quickly as attainable, and totally put together for the following spherical of progress cycle.”

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