FX.co ★ SMIC reports its first quarterly drop in revenue

Chinese chip maker Semiconductor Manufacturing International Corp (SMIC) reported its first quarterly decline in revenue in more than three years. SMIC attributed the drop to low demand because of excess inventories and the negative impact of US sanctions.

Revenue in the January-March quarter came in at $1.46 billion, down 20.6% year-on-year. Previously, such a decrease in revenue occurred in the third quarter of 2019. In addition, the chip manufacturer's net profit contracted by 48% to $231.1 million.

Many analysts call SMIC the top manufacturer in China’s semiconductor industry. They are confident that this company will be a leader in the IT industry. This is the only company in the country that can compete with Taiwan's TSMC and Korea's Samsung.

However, key SMIC technologies are still lagging behind other global companies. Three years ago, the US blacklisted the chip manufacturer. As a result, the company lost access to important components necessary for the production of advanced chips. Apart from that, a sweeping set of export controls aimed at containing advancement among China's chip manufacturers also affected the company’s performance. The US Department of Commerce banned American companies from selling equipment and technologies for making microcircuits to China.

Nevertheless, SMIC managed to post record revenue in 2022. Although this year, the company failed to repeat the same result, analysts are optimistic about its long-term prospects. They reckon that the company's weak financial performance in early 2023 occurred because of problems in the global chip market. Other chip companies have recently faced similar difficulties. The main obstacles are oversupply and low demand. As a result, the profits of the world's largest manufacturers of microchips sank sharply.