China’s top chip maker SMIC posts record revenue, profits for 2022 despite US sanctions
- SMIC’s revenue grew 33.6 per cent year on year to US$7.2 billion in 2022, while net profits reached US$1.8 billion, both record amounts
- R&D spending equalled 10.1 per cent of total revenue, down for a third year from 11.7 per cent and 17.3 per cent in 2021 and 2020, respectively
China’s top chip foundry Semiconductor Manufacturing International Corp (SMIC), which has been on a US trade blacklist for more than two years, said it posted record revenue and profits for 2022, thanks to strong demand for legacy chips in the world’s second-largest economy.
In 2022, the second full year the Shanghai-based company was restricted from importing key chip-making tools, SMIC saw its revenue grow 33.6 per cent year on year to US$7.2 billion, while net profits attributable to shareholders reached US$1.8 billion, both record amounts, according to its annual report released on Tuesday.
Its gross profit margin, a key indicator of profitability, reached 38 per cent last year, up from 30.8 per cent in 2021. Despite the growth, SMIC’s gross margins are still lower than industry leaders like Taiwan Semiconductor Manufacturing Co, which had a gross margin of more than 60 per cent in the December quarter.
SMIC said it derived 74 per cent of its total 2022 revenue from China, up four percentage points compared to 2021, adding that the production capacity of its domestic fabs is still short of market demand, while its technology level lags behind global peers.
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“SMIC’s margins have been protected, in part, by the semiconductor shortage, especially in mature nodes, over the past two years,” said Arisa Liu, research fellow and director focusing on semiconductors at the Taiwan Institute of Economic Research.
She added that a capacity build-up in mature nodes in China could eventually lead to a glut and price war, as global chip demand falters. She also expects US sanctions to bite into SMIC’s top and bottom lines this year and next.