US-China tech war: top Chinese chip maker SMIC to invest record US$5 billion in capacity expansion after profits doubled in 2021

SMIC reported net profits of US$1.7 billion in 2021, more than double the previous year, despite difficulties in developing more advanced chips due to US sanctions

Analysts said hot demand for 5G smartphones, smart vehicles and consumer electronics helped SMIC achieve its record results

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SMIC headquarters in Shanghai, China, March 23, 2021. Photo: Bloomberg

Published: 3:00pm, 11 Feb 2022Updated: 11:06am, 12 Feb 2022

China’s biggest semiconductor foundry has set aside a record amount for capacity expansion in 2022, after its profits more than doubled in 2021 thanks to strong demand for chips.

Semiconductor Manufacturing International Corp (SMIC) has earmarked US$5 billion for capital expenditure this year, up from US$4.5 billion in 2021. The investment could boost its monthly capacity by 130,000 to 150,000 8-inch equivalent wafers, the company said.

The bigger investment plan came after SMIC reported that net profits in 2021 hit US$1.7 billion, more than double the previous year’s US$716 million, despite the fact that the company was put on a US trade black list in December 2020.

The US decision to put the company on the so-called Entity List cast a shadow over SMIC’s development of advanced technology nodes, but has not disrupted its operations for mature technologies, chief financial officer Gao Yonggang said during the earnings call on Friday.

The US sanctions barred SMIC from importing the most advanced chip making tools, which hindered its development of chips below the 10-nanometre node – the technology typically used in the latest smartphones – and forced the company to focus on the more mature 28-nm nodes used for automotive and industrial applications.

Analysts said hot demand for 5G smartphones and smart vehicles, as well as consumer electronics that has boomed amid the pandemic, helped SMIC achieve its record results, despite the challenges posed by US sanctions.

“The company has made great efforts to cope with changes in the policy environment, which increased its production costs,” said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation under China’s Ministry of Commerce.

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