According to Tech News Space , the first thing SMIC chose was to be ready to increase capital expenditure by 18% to $7.5 billion this year. Second, the company predicted an inevitable crisis related to overproduction of chips due to the expansion of local companies.
SMIC agrees to invest heavily before further US restrictions take effect from January 2024
SMIC’s third-quarter report also showed that net profit fell 80% year-on-year to $94 million, and revenue fell 15% to $1.62 billion. The drop in profit margin from 38.9% to 19.8% in the third quarter did not stop SMIC from adjusting its investment plan for the current year. The company now aims to raise its full-year revenue to $7.5 billion in 2023.
SMIC said it needed to increase capital expenditures to get suppliers to deliver everything the company needs faster than originally planned, as this was necessary in the face of increasingly complex geopolitical situations. Behind this was an allusion to the situation of the US tightening restrictions on the supply of chip manufacturing systems to China. As mentioned, suppliers are trying to meet as many orders from Chinese customers as possible before the next restrictions come into effect in January 2024, so SMIC has been ramping up operations and development since the end of 2020. SMIC head Zhao Haijun admitted that the volume of equipment deliveries for the company's needs by the end of the year must increase significantly compared to the original plan.
Haijun added that SMIC is currently building four new fabs in China, including Shenzhen, Beijing, Tianjin and Shanghai. The expansion of the Shenzhen fab has been completed and products are being produced on the new production line. Meanwhile, the Beijing fab is several quarters behind schedule due to equipment supply disruptions. The Shanghai production line is complete and construction has just begun in Tianjin.
The head of SMIC said that the smartphone market in terms of chip demand will remain at current levels next year and it is difficult to expect its growth. The increased local demand is due to the natural need of a certain segment of customers to upgrade from outdated smartphones.
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