Since the second half of last year, demand in the semiconductor market has continued to decline; oversupply and under-demand have hit companies across the industry.
Semiconductor Manufacturing International Corporation (hereinafter referred to as "SMIC", Chinese: 中芯国际), headquartered in Shanghai, recently released its 2023 first quarterly report. In Q1 2023, the company achieved total operating revenue of CNY 10.21 billion (USD 1.47 billion), down 13.88% year-over-year; net profit attributable to its parent of CNY 1.59 billion, 44.04% lower than in the previous year.
Regarding the decline in revenue, SMIC stated that it was mainly due to the decrease in wafer sales volume and lower capacity utilization. In the main business analysis, SMIC disclosed that by region, the revenue share of China’s business was 75.5% in Q1 2023, up from 69.1% in Q4 2022, and 75.4% in Q1 2022. By application, the revenue share of smartphone businesses was 23.5% in Q1 2023, a slight decrease from the same period last year. The revenue shares of Internet of Things, consumer electronics and other businesses were 16.6%, 26.7% and 33.2%, respectively.
Founded in 2000, SMIC is one of the world's leading integrated circuit foundries and the largest foundry in Chinese Mainland. The company is mainly engaged in IC foundry business, as well as related design services and IP support, photomask manufacturing and other supporting services. Up until now, SMIC has three 8-inch fabs and three 12-inch fabs in Shanghai, Beijing, Tianjin and Shenzhen.
SMIC focuses on globalization strategy deployment. The company has established international marketing offices in Europe, the U.S. and Japan to provide customer service. In 2022, sales in overseas markets accounted for 26% of its overall sales. Meanwhile, the company has actively engaged in the United Nations Sustainable Development Goals and ESG concept. From 2010 to the end of 2022, SMIC's greenhouse gas emissions per unit of product have greatly decreased by 50%.
According to authoritative global market research firm Counterpoint Research, SMIC ranked fifth globally in terms of revenue share in the global semiconductor foundry market from Q1 2021 to Q4 2022, with a market share of 5% (the top four are TSMC, Samsung, UMC, and GlobalFoundries). This is only 1% away from UMC, which is in third place. Moreover, SMIC attaches great significance to R&D investment. According to the annual report, the company invested CNY 733 million in R&D in 2022, up 14.8% from CNY 638 million in 2021. The number of R&D personnel reached 2,326, with R&D personnel accounting for 10.8% of the group's headcount.
The major competitors of SMIC include Chinese companies such as TSMC (Chinese: 台积电) and UMC (Chinese: 联电), as well as international players such as GlobalFoundries from the U.S. and Samsung from South Korea.
Taking a glimpse into 2023, SMIC stated that while revenue may bottom out in Q2 2023, the magnitude of the recovery in the second half of the year is not yet clear. Overall, a full market recovery is still unforeseeable. The company expects sales revenue to decline in the low single digits year-over-year in 2023, with a gross margin of around 20%.
As of press time, SMIC closed at CNY 54.32 apiece, with a market cap of CNY 430.33 billion.