In its third-quarter 2022 earnings report , China’s largest chip maker Semiconductor Manufacturing International Corp ( SMIC ) expressed skepticism about the likelihood of business picking up in the short term, but stressed that it remains hopeful for the medium to long term. growth period.
The COVID pandemic has lowered employee turnover and recent graduates have shown great interest in working in the semiconductor industry. Although the new US trade regulation expressly prohibits US citizens from contributing to the development of advanced semiconductor technologies in China (especially companies on the Entity List), SMIC co-CEO Zhao Haijun said the company’s talent pool is in the best condition ever.
Many university graduates with bachelor’s and master’s degrees aspire to us. We have accepted many good recruits, and there are ample sources of talent. Our total workforce last year was 15,000-16,000 and this year we are already over 20,000.”
In the next 5-7 years, SMIC plans to increase the monthly capacity of the new production lines of the 5 subsidiaries to 340,000 units of 12 -inch wafer equivalent. Capital expenditure has increased from $5 billion to $ 6.6 billion for 2022, according to SMIC’s announcement ; it does not include Tianjin Fab, as the firm must pay in advance for equipment with a long lead time before arrival. SMIC continues to prioritize increased production over GlobalFoundries ( GF), which recently announced the start of layoffs and the suspension of hiring. SMIC is trying to procure equipment with a significant lead time to ensure that the expansion is completed on schedule.
SMIC reported that customers weren’t particularly interested in writing down designs and starting trial production, and that stocks of smartphones and consumer electronics were still being slowly eaten up. The company has been hit hard by the recent cyclical downturn in consumer demand because more than 60% of its revenue comes from smartphones, smart home and consumer electronics.
SMIC’s dependence on its home market has increased due to US restrictions on the sale of sophisticated semiconductor technology to China and its listing of legal entities . 70% , up from 66.7% a year earlier, of the company’s sales in the third quarter of 2022 came from mainland China and Hong Kong . SMIC said it is currently evaluating the impact of the new rules passed in the US on Oct. 7. She claimed to be in constant contact with suppliers and working to clarify ” some of the definitions in the new rules “.
The firm expects its fourth-quarter sales to fall sequentially by 13% to 15% in 2022 , and its gross margin to fall 30% to 32% from 38.9 % in the third quarter. Inventory value rose 17.2% QoQ to $1.7 billion . Financial statistics point to a modest increase in China’s dependence on SMIC, spurring future innovation.