SMIC Warns of Difficult 2023 After Fourth Quarter Slowdown

What’s new: China’s leading chipmaker Semiconductor Manufacturing International Corp. (688981.SH/00981.HK) warned of a gloomy outlook for 2023, even as it shrugged off a lackluster fourth quarter to post strong 2022 revenue growth of 33.6%.

Better known as SMIC, the firm generated $7.27 billion in 2022, missing analysts' average estimations from Yahoo Finance but hitting the low end of guidance set in November. The firm’s profit attributable to shareholders was $1.82 billion, a 6.8% increase in 2022, according to its earnings result posted on Thursday. 

In the fourth quarter alone, it posted a 15% quarterly revenue drop, due to “the decrease in capacity utilization and sales volume.” The capacity utilization, a measure of productivity, for the fourth quarter was 79.5%, lower than 92% for the whole year. Zhao Haijun, co-CEO of SMIC, said during an earnings call on Friday morning that such a decline was caused by the downturn in consumer electronics.

The firm gave conservative guidance for 2023, with an annual revenue decline by a low-teens percentage and around 20% for the gross margin.

Background: SMIC is the largest contractor chipmaker on the Chinese mainland and the fifth worldwide, accounting for 5.3% of the global foundries market by the third quarter of 2022, according to Taiwanese semiconductor consultancy TrendForce.

The firm’s revenue is mainly from electronics, including smart home devices and smartphones, the Thursday earnings report noted. SMIC has sought to expand its production capacity in mature tech nodes and two of its four planned 12-inch wafer labs are in production. However, sweeping U.S. chip curbs in October will likely curtail SMIC’s efforts to develop its cutting-edge chips.

Related: Chipmaker Hua Hong Plans $4 Billion JV to Boost Production

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Ward Zhou (nanyuzhou@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)

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