Chinese firm SMIC becomes the world’s second largest wafer foundry

SMIC becomes second largest wafer foundry with a 19.7% revenue increase to $1.75 billion.

: Shanghai-based SMIC has surpassed UMC and GlobalFoundries in quarterly revenue, making it the world's second largest wafer foundry. Despite US sanctions on Chinese chip development, SMIC's growth reflects China's push to boost its domestic semiconductor capabilities. The company's revenue mainly comes from China, but it faces challenges such as a significant net profit decline and high demand for its 12nm chip production line.

Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) has officially become the world’s second largest wafer foundry, according to its first quarter financial results, where it reported a significant 19.7% year-on-year revenue increase to $1.75 billion. This milestone not only signifies SMIC's leading position in the semiconductor industry by surpassing both United Microelectronics Corporation (UMC) and GlobalFoundries in quarterly revenue but also highlights the intense competition and rapid growth within the sector. However, despite its remarkable revenue growth, SMIC's quarterly net profit fell by 68.9% to $71.8 million, indicating a considerable profitability challenge amid dropping product prices and inventory backlogs in the semiconductor industry.

The advancements made by SMIC are particularly noteworthy against the backdrop of US sanctions aimed at limiting China's semiconductor development. These results underline the efforts by China to bolster its semiconductor production capabilities and reduce its reliance on foreign suppliers. SMIC’s achievement is a testament to China's accelerating pace in the global tech race, striving to catch up with industry leaders and innovators despite external pressures and trade restrictions. SMIC’s growth is significantly concentrated in the Chinese market, with 81.6% of its revenue derived domestically, ensuring a strong foothold in its local industry while navigating the complexities of international trade and sanctions.

Moreover, the demand for SMIC's 12nm chip production line nearly reaching its capacity highlights the urgent need for expansion and innovation within the company to meet the surging demand, especially from the smartphone and computer sectors. The industry's competitive landscape is further intensified with TSMC's advanced packaging capacities, such as Chip-on-Wafer-on-Substrate (CoWoS) and System-on-Integrated-Chip (SoIC), being fully booked for 2024 and 2025 due to AI-related demands from tech giants like Nvidia and AMD. This scenario underlines the critical importance of continuous advancement in semiconductor technology and capacity to sustain growth and meet the evolving needs of the global market.