SMIC sees prolonged chip glut, signals cautious expansion outlook
Semiconductor Manufacturing International Corp (0981.HK) , China’s largest chipmaker, warned on Friday that overcapacity in mature node chips will persist through 2025 and that it was turning cautious on building new capacity.
The global semiconductor industry has struggled to recover since late 2022, when pandemic-driven shortages turned into oversupply, with many end users, including automakers, still working through excess inventory.
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Still, SMIC, which mainly produces mature node chips for less sophisticated electronics devices, and other Chinese chipmakers have ramped up production over the past years amid ongoing trade tensions with the United States and its allies.
“Industry utilisation rates are hovering around 70%, well below the optimal level of 85%, indicating significant overcapacity. This situation is unlikely to improve significantly, if not worsen further,” co-CEO Zhao Haijun said in the company’s third-quarter earnings call.
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For the September quarter, SMIC’s revenue rose 34% to $2.17 billion, in line with market expectations of $2.2 billion, according to LSEG data.
SMIC attributed part of its sales growth to China’s localization push, which has prompted customers, especially international clients, to move chip production to domestic manufacturers.
However, Zhao said this substitution trend would slow in 2025 as domestic suppliers have already captured a substantial portion of the market.
The company’s annual capital expenditure surged to $7.3 billion in 2023, up from $4.5 billion in 2021.
Zhao indicated that current oversupply conditions would lead SMIC to take a more cautious approach toward capacity expansion.
“We have not announced any new projects, and we are not currently discussing any new ones,” Zhao said, marking a potential shift in strategy for China’s largest contract chipmaker.
Source: www.reuters.com
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