Semiconductor Manufacturing International Corp Reports 38.4% Profit Decline
BEIJING, China - Semiconductor Manufacturing International Corp (SMCI), China's leading contract chip manufacturer, reported a substantial 38.4% year-over-year decline in its fourth-quarter net income.
SMIC's profit, which is attributable to shareholders, amounted to $107.6 million for the October-December period, falling short of analysts' projections of $193.45 million, based on LSEG data.
Despite the profit decline, SMIC's revenue grew by 31.5% to $2.2 billion, exceeding market expectations of $2.18 billion. The company's operations primarily cater to the manufacturing of mature-node chips used in consumer electronics and home appliances, while advanced manufacturing projects such as Huawei's smartphone chips contribute only marginally to its revenue.
Amidst ongoing U.S. export controls limiting access to cutting-edge chipmaking technologies, Chinese foundries like SMIC have shifted their focus towards mature-node chips. This strategic move has proven advantageous, allowing Chinese manufacturers to capture market share in this segment and pose a challenge to incumbents like Taiwan's Powerchip.
To enhance its production capacity and solidify domestic semiconductor capabilities in China, SMIC has significantly increased its capital investments in recent years. Its capital expenditure surged from $4.5 billion in 2021 to $7.3 billion in 2023, indicative of its aggressive expansion strategy. In line with this, the company allocated an additional $7.33 billion for capital investments in 2024.
However, these substantial investments have impacted profitability, leading to a decline in SMIC's gross margin. From over 30% in 2021-2022, the company's gross margin dropped to around 20% in 2023. SMIC reported a gross margin of 22.6% for the fourth quarter of 2024, a modest improvement from 16.4% during the same period a year prior.