The SMIC overtakes its rivals thanks to strong local demand

0

Article by: Alan Patterson

SMIC is the beneficiary of Chinese IC companies with few other places to go for foundry services.

Semiconductor Manufacturing International Corp. (SMIC), China’s largest chipmaker, saw 39% growth in 2021, leading other foundries to strong domestic demand.

The company’s 2021 revenue of $5.4 billion was up 39% from a year earlier, more than double the 18.5% growth of Taiwan Semiconductor Manufacturing Co. (TSMC ) and other leading foundries.

SMIC benefited from strong demand in China, the world’s largest and fastest growing chip market. Chinese domestic electronics firms such as telecom giant Huawei are turning to local suppliers like SMIC after the US blocked TSMC from selling advanced products to Huawei amid a US tech war and China.

[Download] Efficient design of a user-friendly EDT decompressor

“Global chip shortages and high demand for local and indigenous manufacturing have presented the company with a rare opportunity, while entity listing restrictions have created many obstacles for the company to grow,” the company said. SMIC in a press release. “The company rose to the challenge, tackled the difficulties with precision and performed well.

In August 2020, the U.S. Department of Commerce added 38 Huawei subsidiaries to its list of business entities required to obtain export licenses to purchase advanced U.S. chip technologies. The rules specifically targeted Huawei and its chip design unit HiSilicon which was TSMC’s second largest customer in 2020. The United States also put SMIC on the Entity List later that year.

The United States has banned exports of key semiconductor technologies to China and blacklisted Chinese companies suspected of using American know-how to develop the world’s first hypersonic missiles.

Growth engines

Smartphones, smart home products and other consumer electronics were the top three drivers of SMIC growth. The company’s most advanced process technology, 28nm FinFET, accounted for 18.6% of SMIC’s sales in the fourth quarter of 2021.

28nm technology lags several generations behind foundry leader TSMC, which in Q4 2021 derived half of its revenue from 7nm and 5nm products. TSMC is ramping up 4nm production this year.

SMIC plans to spend $5 billion in 2022 to expand existing facilities and roll out three new manufacturing projects.

By comparison, TSMC plans to increase capital spending this year by up to $44 billion to meet demand, which the company says could increase by up to 20% over the next few years.

While SMIC’s revenue growth leads TSMC, the Chinese foundry’s 35% gross margin in Q4 2021 was eclipsed by TSMC’s 53% margin in the same period.

The minimum wage has undergone several recent management changes. The company announced several resignations at board level last year even as business soared.

Industry veteran Chiang Shang-Yi stepped down as vice chairman last year. Liang Mong Song, previously Executive Director and Co-CEO, has stepped down as Executive Director to focus on continuing his leadership role at the company. Chiang and Liang previously held senior R&D positions for TSMC.

This article was originally published on EE time.

Alan Patterson worked as a broadcast journalist in Asia for most of his career. Besides EE Times, he has served as a reporter and editor for Bloomberg News and Dow Jones Newswires. He lived for more than 30 years in Hong Kong and Taipei and covered technology companies in the greater region of China at that time.

Share.

About Author

Comments are closed.