SMIC's gross profit and net profit both cut in half, admitting that it is under great pressure

SMIC announced its fourth quarter and full-year financial reports for 2023. Both its gross profit margin and net profit fell sharply and were cut in half. Officials also admitted that they were under great pressure. In the fourth quarter of 2023, SMIC’s revenue was US$1.6783 billion, an increase of 3.5% both quarter-on-quarter and year-on-year.Gross profit was US$275.0 million, a decrease of 14.5% month-on-month and a year-on-year decrease of 47.0%.The gross profit margin was 16.4%, a decrease of 3.2 percentage points month-on-month and a year-on-year decrease of 15.6 percentage points.

For the whole year of 2023, SMIC's unaudited total revenue was US$6.3216 billion, and the profit attributable to the company's owners was US$902.5 million, a decrease of 13.1% and 50.4% respectively compared with 2022.; Annual gross profit margin was 19.3%.

By the end of 2023, SMIC's monthly production capacity will be 806,000 8-inch (200mm) wafers, with an average annual capacity utilization rate of 75%.

SMIC explained that the main reasons for the decline in performance were: in the past year, the semiconductor industry was at the bottom of the cycle, global market demand was weak, industry inventories were high, destocking was slow, and competition among peers was fierce.

Affected by this,SMIC's average capacity utilization rate decreased, the number of wafer sales decreased, and the product mix changed.

In addition, SMIC is in a period of high investment, and depreciation will increase compared with 2022.

Zhao Haijun, co-CEO of SMIC, said at the performance meeting that in 2024, it will still face challenges from macroeconomics, geopolitics, industry competition and old product inventories. "With the gradual improvement of customer inventories and the continued rebound in demand for mobile phones and the Internet, the company has achieved peaceful and moderate growth. However, from the perspective of the entire market, the intensity of demand recovery is not enough to support a comprehensive and strong rebound in semiconductors."

Zhao Haijun admitted,In 2024, the capacity utilization rate of the chip foundry industry will be difficult to return to the high level of previous years in a short period of time. As SMIC continues to invest, its gross profit margin will be under high depreciation pressure, but it will always aim to achieve sustained profitability.

SMIC expects revenue in the first quarter of 2024 to be flat or increase by 2% quarter-on-quarter, with gross profit margins of 9-11%.