SHANGHAI - A hoped-for smartphone market recovery is another year out, and geopolitical tensions are fomenting a serious glut in global chipmaking capacity, warned Semiconductor Manufacturing International Corp (SMIC).
That outlook clashes with more upbeat comments from Samsung Electronics and Taiwan Semiconductor Manufacturing Co about mobile demand bottoming soon.
SMIC, China’s largest chipmaker, on Thursday reported its third consecutive fall in quarterly revenue, reflecting the depth of the downturn as well as Washington’s broadening campaign to curb China’s tech sector. That result disappointed investors who had hoped the surprise popularity of Huawei Technologies’ latest smartphones would help offset lost sales.
SMIC is one of the highest-profile companies at the heart of Beijing’s ambitions to build a world-class tech sector less reliant on American innovations. It helped Huawei build the seven-nanometer processor for the Mate 60 Pro, regarded as a breakthrough for two companies the United States blacklisted years ago over national security concerns. Riding nationalist fervour, the device sold out rapidly, taking business away from Apple’s iPhone.
No analysts invoked Huawei during Friday’s post-results briefing. Instead, SMIC executives spoke about how political tensions had spurred a global build-up of domestic chipmaking capacity. They didn’t name any countries, but the US, China, Japan and Europe are among those shelling out incentives to attract local manufacture.
SMIC’s shares slid as much as 6.6 per cent on Friday, their most in two months, after reporting a larger-than-projected 15 per cent fall in revenue to US$1.62 billion (S$2.2 billion) in the September quarter. Net income plunged 80 per cent, also missing estimates. Smaller rival Hua Hong Semiconductor fell more than 12 per cent – its biggest fall in over a year – as its own management warned about a weak fourth quarter after results missed estimates.
“From a global perspective, capacity will be excessive. It will take a lot of time to digest the new capacities built in recent years,” SMIC co-chief executive Zhao Haijun told analysts on a conference call.
Still, shares of SMIC had climbed roughly 40 per cent since Huawei introduced the US$900-plus Mate 60 Pro in late August, just as US Commerce Secretary Gina Raimondo – whose department oversees the complex network of restrictions on chips – was visiting China.
Huawei itself shows signs of resuming the growth that Washington’s sanctions derailed. State-backed SMIC is projected to return to growth in the peak December quarter, but its prospects may hinge on whether the US – which in October expanded existing curbs on China’s chip sector – is contemplating further sanctions. US lawmakers have called for more restrictions, seizing on Huawei’s unexpected breakthrough.
In the meantime, executives said SMIC continues to grapple with uncertainty in China’s smartphone market – the world’s largest.
Competition is intensifying in an arena already crowded with players from Xiaomi to Oppo and struggling to recover from a Covid-19-era slump.
Smartphone shipments fell 5 per cent in the third quarter and none of the top five players sold more phones than a year ago, according to research firm Canalys. Major Chinese smartphone makers rely on chips from Qualcomm and MediaTek, but those two firms also outsource manufacturing to overseas contractors such as TSMC and Globalfoundries.
“The current smartphone replacement cycle wasn’t because of new innovations,” Mr Zhao told analysts. “The overall smartphone shipment for next year should be on a par with this year.” BLOOMBERG
