China’s top chipmaker SMIC, opened a new tab, said the global semiconductor sector was seeing some bright spots following a year-long recession, but growth would be modest since demand recovery was insufficient to enable a “strong and comprehensive” turnaround.
While Semiconductor Manufacturing International Corp (SMIC) began seeing an increase in orders from smartphone and personal computer manufacturers late last year, co-CEO Zhao Haijun told analysts on a conference call on Wednesday that it was unsure whether this would continue.
“We’re concerned that it is a case of ‘eating away next year’s food in advance,'” he said in Chinese.
“We are worried that there will be a decline in the second half of the year because all the orders for the second half of the year would have been shipped in the first half, so we are still quite cautious.”
Shares in the company tumbled more than 4% in morning trade, compared to a 1.28% rise in the Hang Seng Index (.HSI), after it issued a cautious forecast and announced a 55% drop in fourth-quarter profit, which underperformed analyst forecasts.
The global semiconductor sector experienced a downturn last year after a pandemic-driven chip scarcity transformed into a glut as the economy slowed and demand for these products fell.
Optimism is rising that the industry would recover in the coming year due to increased demand for semiconductor-based products, such as smartphones and other consumer electronics, in places such as China.
SMIC gained international attention last year when analysts said that the company helped Huawei (HWT.UL) produce one of the most advanced semiconductors ever manufactured domestically in China.
SMIC has also received notice for its rapid capacity increase. Through 2023, capital expenditure was $7.47 billion, 17.6% greater than in 2022. The business started late on Tuesday and it expects capital expenditure to remain essentially flat this year compared to previous year.
SMIC, hemmed in by US technology export restrictions, has primarily focused on establishing facilities to produce mature technology chips, which are extensively utilised in areas such as automobiles and weaponry, and hence has not benefited from the increase in artificial intelligence applications that some of its overseas rivals have.
When asked about the prospect of overcapacity, Zhao stated that SMIC believed it would remain competitive since its plans were built on long-term collaboration with clients, and that it still had room for expansion because its facilities accounted for only 5% of world production capacity.
SMIC said late Tuesday that its fourth-quarter net income was $174.68 million, down from $385.53 million the previous year and falling short of the average analyst estimate of $277 million in an LSEG poll.
Revenue for the quarter increased 3.5% to $1.68 billion, slightly more than the poll’s average revenue expectation of 1.66 billion yuan. Almost 81% of that revenue came from the Chinese market.
