Editing by Greg Gao

SMIC, China’s largest and most important semiconductor giant, reported record revenue and profit margins for January and February on March 8 of $1.223 billion, a year-on-year increase of 59.1%; the net profit hit $309 million, an increase of 94.9%.

SMIC was added to Entity List by the US government in 2021. Despite the enormous challenges it faced since then, Zhao Haijun, co-CEO of SMIC, said his company made unremitting efforts to meet customer needs and alleviate the semiconductor shortage,  maintaining smooth communication with upstream suppliers and in-depth cooperation with its customers. It also quickly started new plant construction and expanded its capacity.

He also said recently that global chip shortage hurt automotive, power and electronic device industries in 2021, creating surging demands for chips. The industrial upgrading, stay-at-home economy caused by coronavirus pandemic, a growing trend of domestic substitution, the booming Internet of Things, electric vehicles, and new energy sectors contribute to the demands as well. 

In response to this week’s warning by the U.S. on possible punishment if SMIC violates sanctions on Russia, SMIC expressed that it has followed international rules well. 

In 2021, SMIC’s revenue jumped from $3.9 billion in 2020 to over $5.4 billion in 2021, making it the fastest-growing company among the global top four semiconductor foundries - TSMC，GlobalFoundries, UMC and SMIC. A number of its financial indicators, such as net profit margin and revenue, also hit record highs. SMIC successfully added a new production capacity equivalent to 100,000 pieces of 8-inch wafers per month and completed the construction of the main structure of its new project in Beijing last year.

In the fourth quarter of 2021, the company’s single-quarter sales revenue exceeded US$1.5 billion for the first time. The revenue and gross profit margins of its fabrication plants in various regions increased significantly, and new product tape-outs and diversified materials reserves in those plants also went smoothly.

Zhao Haijun predicts that following the robust market in 2021, there will be tremendous opportunities and daunting challenges in 2022. The mobile phone and consumer product markets lack development momentum, with supply and demand gradually reaching a balance. 

It is expected in China’s IC industry that there will be a structural capacity shortage in prospering markets such as the Internet of Things, electric vehicles, and mid-to-high-end analog ICs. Chip demands from application fields such as radio frequency, microcontroller, and power management are still strong. As a result , Zhao said that the transition from a purely foundry service-driven market to technology innovation and customer experience service-driven market will test SMIC’s strategic positioning, technological innovation speed, quality and completeness of product platforms, and customer loyalty.