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Top Chinese chipmaker SMIC’s Q3 sales hit record high amid tightening US export controls

Written by Wency Chen Published on 

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SMIC’s FinFET N+1 process saw a breakthrough in the reported quarter, with revenue for the foundry reaching USD 1.1 billion.

Semiconductor Manufacturing International Corporation (SMIC), a state-owned chip manufacturer, booked a record-high USD 1.1 billion in revenue for the third quarter, up 32.6% year-on-year (YoY) and 15.3% quarter-on-quarter (QoQ), but estimated sales for the next quarter is set to decrease by 10% to 12% QoQ, according to the company’s earnings released on Wednesday.

For the reported quarter, the profit attributable to SMIC was USD 255 million, representing a YoY increase of 122.6% and a QoQ increase of 85.5%. Meanwhile, the company’s gross profit was USD 262 million during the same period, an increase of 5.4% QoQ from USD 248.6 million in the last quarter and 54.3% YoY, as its gross margin climbed to 24.2% from last year’s 20.8%, compared to last quarter’s 26.5%. SMIC sits on a large cash pile of USD 12.3 billion, compared to USD 7 billion in the last quarter and USD 4.7 billion in the same period last year.

“Demand for non-FinFET technology application platforms continues to be strong, with significant growth from applications such as power management, RF signal processor, fingerprint sensor, and image signal processor,” said Dr. Zhao Haijun and Dr. Liang Mong Song, SMIC’s co-CEOs, in the earnings report. FinFET, also known as a Fin Field Effect Transistor, is a type of non-planar, or “3D”, transistor used in the design of modern processors. The technology enables some foundries, like Taiwan Semiconductor Manufacturing Company (TSMC) to approach 2nm process nodes.

“Our FinFET technology addresses a diverse range of applications, and the yield of our first-generation FinFET technology has achieved industry standards, while our second-generation FinFET technology is entering small-volume risk production.”

The stock of SMIC (HKEX:0981; SSE: 688981) is rallying on Thursday on the strong financial results. Shares rose 3.12% to HKD 23.15 (USD 3.0) and 1.84% to RMB 62.49 (USD 9.43), in Hong Kong and Shanghai’s bourses, respectively.

In September, it was reportedly that the Trump administration was considering whether to include SMIC to the Commerce Department’s “entity list”, a step that would require US companies to go through permissions before selling technology and products to the Chinese chipmaker, moving to imposing restriction on Chinese companies amid the worsening China-US relationship.

“As a foundry, SMIC serves a diverse mix of customers both domestically and abroad. Since its inception, SMIC strictly operates in compliance with the laws and regulations of all jurisdictions in which it operates,” read the company’s filing. “We continue to actively communicate with suppliers, customers and relevant agencies, and evaluate the overall impact of US export restrictions on our production and operation. Currently, the company is operating as usual, and though the export restrictions will have an impact on us, in the near-term we believe it is manageable. We will continue to follow up on this matter and further evaluate the impact.”

Last month, Chinese chip designer Innosilicon completed a chip tape-out the testing based on SMIC’s FinFET N+1 process, which is very similar to the 7nm process in terms of power and stability but doesn’t require a EUV lithography machine.

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