This is not investment advice. The author holds no positions in any of the stocks mentioned.
Chinese AI Chip Industry Soars Amid Government Support
Cambricon, a prominent Chinese chip manufacturer, has posted extraordinary growth, with a staggering 43-fold increase in revenue as Beijing intensifies its push to decrease reliance on foreign semiconductor technologies. In its latest fiscal report, the company revealed revenue soaring to RMB 2.9 billion, a significant leap from previous yearly figures. Notably, Cambricon’s profit has reached RMB 1 billion, nearly doubling last year’s earnings of RMB 530 million.
As the second-largest player in China’s burgeoning AI chip ecosystem, Cambricon is positioned just behind Huawei, which continues to dominate the market with its top-performing Ascend AI accelerators. The firm’s robust growth is part of an overarching strategy directed by the Chinese government to foster a self-sufficient semiconductor industry.
Financial Highlights and Product Line Expansion
The latest earnings report, released yesterday, highlighted Cambricon’s revenue of RMB 2.88 billion for the first half of the year, reflecting an exceptional annual growth. On the profit front, the company achieved RMB 1 billion, marking a notable recovery from a loss of RMB 530 million during the same period the previous year.
Currently, Cambricon boasts a diversified range of seven AI chips. Among these is the MLU690, rumored to be in the early stages of production. Additionally, the company offers the MLU590 as a mid-tier product, with the MLU370 series recognized as their latest available options.
Manufacturing Process and Technology Insights
Reports from various Chinese forums indicate that the MLU590 chips are constructed using a 7-nanometer manufacturing technology, likely sourced from Semiconductor Manufacturing International Corporation (SMIC).It’s also suggested that TSMC could be involved, as previous iterations of chips utilized TSMC’s 7-nanometer technology.
An impressive 99.6% of Cambricon’s RMB 2.88 billion revenue in the first half derived from its cloud computing sector. This clearly underscores the surge in demand stimulated by governmental initiatives aimed at bolstering the domestic semiconductor market.
Commitment to Research and Development
Committed to innovation, Cambricon has invested RMB 456 million in research and development during the first half of the year, which constitutes 15.9% of its operating revenue. Although this percentage has decreased since the company turned profitable, the absolute investment remains steady, indicating a continued focus on advancement and competitiveness in the industry.
Future Prospects and Stock Performance
Following the earnings announcement, Cambricon has initiated plans to raise RMB 3.98 billion to further capitalize on the robust domestic demand for AI chips. The firm also reported a profitable first quarter with net earnings of RMB 355 million, marking a significant rise from RMB 227 million in Q1 of the previous year. Revenue for that quarter reached RMB 1.1 billion, a staggering increase of 4, 230%.
Reflecting this growth trajectory, Cambricon’s stock has surged by 112% year-to-date, including an impressive 94% gain since early August. Over the past year, shares have skyrocketed by 462%, underscoring the burgeoning demand for Chinese-made AI chips.
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