By Liam Mo and Brenda Goh
BEIJING (Reuters) -SMIC, China’s largest contract chipmaker, said first-quarter revenue surged by a fifth as both domestic and global customers rebuilt inventories, but expressed caution about the outlook for demand in the second half of the year.
Revenue came in at $1.75 billion, the company said on Thursday. That topped an LSEG consensus estimate for a 16% gain from a year earlier and marked a second quarter in a row of growth after steep declines for much of 2023.
“Compared to the fourth quarter, our global customers were more willing to build up inventory…while in the domestic market, some customers managed to boost their market share and wanted to lock in orders to solidify their position,” Co-CEO Zhao Haijun said during an earnings call on Friday.
Domestic customers account for roughly 80% of SMIC’s revenue.
Zhao added, however, that the outlook was unclear and SMIC was monitoring whether its customers had overestimated demand for the second half. He predicted a much milder rate of more than 8% revenue growth for 2024 overall.
Shares in SMIC climbed 1.1% in Friday morning trade.
The company mostly makes basic chips largely used in less-sophisticated electronic products but has gained more attention after a teardown of a Huawei smartphone last year revealed an SMIC-manufactured chip that is one of the most advanced chips ever made in China. Huawei’s latest smartphone, the Pura 70, also features a chip produced by SMIC.
As tensions with the U.S. have escalated, China has poured massive amounts of capital into bolstering its chip sector in pursuit of technological self-sufficiency, leading to a huge expansion in production capacity.
China’s total integrated circuit output surged 40% to 98.1 billion units in the first quarter of 2024, official data showed. That in turn has led to concern that excessive capacity will fuel a new wave of cheap exports.
Zhao said he wasn’t concerned about oversupply, adding that SMIC’s plants are currently operating at high utilisation rates and are not facing a shortage of orders.
In contrast to the strong revenue growth, SMIC’s unaudited profit attributable to owners plunged 69% to $71.8 million, undershooting forecasts as the company logged significant depreciation costs for plant and equipment.
(Reporting by Liam Mo and Brenda Goh; Editing by Edwina Gibbs)
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