The increase in orders for the Kirin 9000S does not appear to be helping SMIC's financial situation, as China's largest semiconductor manufacturer saw profits plunge by 80% in the third quarter of this year. It was the company's biggest quarterly revenue decline since 2019, when it fell 64%. Overall, the Chinese chip giant had total revenue of more than $1.621 billion and a profit of $93.98 million. Judging from these numbers, SMIC still has a lot of work to do if it wants to match Samsung's profitability, especially as U.S. export controls continue to make things difficult for the chipmaker.
Some industries are also cutting chip orders, leaving SMIC with little room for negotiation.
In addition to the Kirin 9000S chip used in Huawei's Mate60 series, SMIC also mass-produces chips for various other applications, including automobiles. Unfortunately, chip inventories are at elevated levels after three years of supply shortages. According to CNBC, due to low demand for these components, some customers began to tighten orders, which hurt SMIC's financial condition.
The company said: "In the Chinese market, the high product inventory problem that began in the third quarter of last year has been alleviated, and inventory has dropped to a relatively healthy level. However, the inventory of U.S. and European customers will still be at historically high levels."
Even Huawei’s next plan is currently unknown, because the Kirin 9000S currently uses a 7nm process. In order to become more competitive with its rivals, the former Chinese smartphone giant will eventually have to move its future Kirin SoCs to more advanced manufacturing processes, and the 5nm process is the obvious choice.
While this transformation may improve SMIC's financial prospects, its revenue won't materially improve until the manufacturer has a larger customer base. However, with Huawei estimated to ship 100 million smartphones in 2024, most of which are likely to be powered by SMIC's mass-produced Kirin chipsets, the situation may not be so bleak.