Chinese chipmaker Semiconductor Manufacturing International Corporation (SMIC) released its latest financial report on May 12. The results are positive in the first quarter of 2022 with a 67% growth in turnover compared to 2021, for 1.84 billion dollars. However, Zhao Haijun, CEO of SMIC, announced that chip sales have drastically declined.
Chip sales plummeted like a stone »
SMIC sells its chips to many tech players, mainly smartphone manufacturers. Unfortunately, sales have plummeted like a stone Zhao Haijun said at the first quarter earnings announcement conference reports The Register. Surprising news in a context of shortage of semiconductors that is here to stay.
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The boss of SMIC gives several explanations for this phenomenon. First, smartphone makers announced that they still had 5 months of chips left. They intend to first deplete their reserves before placing new orders. Demand for chips also fell among PC and electronics makers, especially in China.
According to the CEO, the fall is more significant in China, as Chinese players have halted their purchases in response to strict lockdowns across the country. The health situation also led to the closure of the SMIC foundries, which were unable to operate at their maximum production capacity.
If the company finds itself in this paradoxical situation of falling demand despite the shortage, it is thanks to ” the planning and measures put in place by SMIC to prevent the shortage. During the previous six months, the company has carried out early optimization in its capacity allocation and has set up more production capacities “, details the latest financial report.
Minimum wage is maintained thanks to the international market
Unlike its competitors who focus on the Chinese market, in a logic of self-sufficiency desired by China, SMIC has the advantage of having an international clientele. This is what allows it to maintain good results, in particular because the American and European markets have quickly recovered according to Zhado Haijun.
However, even internationally, sales are not at their best. In 2020, SMIC suffered sanctions from the US Department of Commerce. It limited the share of chip sales tied to the North American market from 27.7% to 19.6% between 2020 and 2021.
The war in Ukraine is not unrelated to this sharp drop in demand according to SMIC. Chinese companies are under US pressure not to do business with Russia. The CEO of SMIC also believes that the Ukrainian population is no longer affected by the sale of non-essential products such as smartphones or PCs.
Between the war and the health situation in China, SMIC anticipates a drop of 200 million in sales of smartphones produced by its customers in 2022. If the health situation does not deteriorate, SMIC should be able to maintain its production and will be ready to respond to demand, which will recover over the course of the year.