China’s most important chipmaker, Semiconductor Manufacturing International Corp (SMIC), generated USD 1.42 billion in revenue for the third quarter, up 30.7% year-on-year and beating market expectations, the company said in its latest earnings release. SMIC’s Q3 results mark a new record for the company’s earnings.
The gross margins of state-backed SMIC climbed to 33.1% during the quarter, up 8.9 percentage points YoY. Both revenue and gross margin increases were driven by price increases and changes in production schedules to match consumer demand, the company said.
SMIC racked up USD 321.4 million in profits for the three months ended in September, up 25.3% YoY and beating estimates. The domestic market is increasingly important to the chipmaker, accounting for 66.7% of its Q3 revenues, a slight uptick from 63% in Q2 2021.
With that strong performance, SMIC revised its full-year revenue growth target, taking it to 39% from a 30% forecast in August. The company expects demand for its chips to sustain and its revenue growth to be above the industry average next year.
Since SMIC was placed on the US government’s sanctions list in late 2020, the chipmaker has faced “tremendous challenges in production and operations,” SMIC management said in the report. But the company has stabilized its supply chain continuity. Its 14 nanometer technology, which is implemented to make the most advanced chip in China, is steadily improving, the company said.
Multiple industries in the world’s largest manufacturing country have felt the pinch amid the global chip crunch. With the shortage set to persist, entities in China’s public and private sectors are trying to boost the country’s chip-making capacities and eventually achieve self-sufficiency.
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The Chinese government has set goals to meet 70% of its semiconductor needs by 2025. It has earmarked billions of dollars for chip design and production. Chinese internet conglomerates, including Tencent, Alibaba, and Baidu, are also developing their own semiconductors, despite not yet having the manufacturing capabilities.
Even though SMIC is blacklisted from importing chipmaking equipment, materials, and other relevant goods from the US due to its alleged ties with the Chinese military, China’s largest chipmaker can still access foreign technology, according to Reuters. In all, 188 licenses were granted to American companies to sell USD 42 billion worth of goods and tech to SMIC between November 2020 and April 2021, according to documents obtained from the United States Congress that were reviewed by Reuters.
At the moment, SMIC is overshadowed by its formidable rival, Taiwan Semiconductor Manufacturing Company, Limited (TSMC), which reported Q3 revenues of USD 14.9 billion last month.
SMIC also announced the resignation of its vice chairman Chiang Shang-Yi on Thursday. Chiang, a former executive of TSMC, joined SMIC in late 2020 after departing the USD 20 billion Hongxin Semiconductor Manufacturing Co (HSMC), an operation set up by a conman that went into bankruptcy.
Chiang left SMIC to spend more time with his family, according to the company’s filing.