In a nutshell: SMIC introduced that the strict lockdowns in China, coupled with the continuing battle in Ukraine, have brought about demand for smartphones and PCs to drop significantly. This will not assist with the worldwide chip disaster both, as the corporate’s factories in Shanghai are compelled to function at a diminished capability.
SMIC CEO Zhao Haijun instructed analysts that demand for smartphones, PCs, and residential home equipment has decreased dramatically.
SMIC is presently the most important contract chipmaker in China and the fifth largest globally, with a 5.3 p.c market share final 12 months.
Zhao claims that the battle in Ukraine is partially in charge for the gross sales stoop, as many firms have stopped promoting their merchandise in Russia, whereas Ukrainian residents have lower down on non-essential spending.
However, the strict lockdowns in China are impacting SMIC’s clients essentially the most, with the CEO claiming that Chinese smartphone distributors would scale back shipments by 200 million models this 12 months, forcing them to cancel chip orders.
This signifies that smartphone chips are going to take up solely 29 p.c of the foundry’s whole manufacturing capability, versus 50 p.c final 12 months.
The lockdowns are additionally affecting SMIC’s manufacturing as the corporate has a number of factories in Shanghai, which it solely managed to maintain open due to a closed-loop system (reviews say over 60 p.c of staff are sleeping and residing within the factories).
Even although the corporate is taking measures to cut back the impression of those lockdowns and the elevated costs of uncooked supplies, it nonetheless expects a 5 p.c manufacturing loss within the second quarter.
It’s price noting that SMIC noticed excellent monetary ends in the primary quarter, particularly contemplating the US sanctions it has been dealing with. It posted $1.84 billion in income, a 67 p.c improve year-on-year, and a internet revenue of $447 million, up 182 p.c YoY.
