The United States continues to restrict China’s access to advanced chip technology, while China’s largest chip manufacturer, Semiconductor Manufacturing International Corporation (SMIC), announced a substantial year-on-year drop in profits in the second quarter.
In recent years, the U.S. has taken measures to cut off China’s access to advanced chip technology and has strengthened restrictions on semiconductor exports to China.
Listed in both Hong Kong and Shanghai, SMIC has been a major target of these measures.
In a statement to the Hong Kong Stock Exchange on Thursday, SMIC reported that its attributable net profit for the second quarter was $164.6 million, a 59.1% decrease compared to the same period in 2023.
Computer chips support most sectors of the modern economy and are increasingly crucial for national security, being present in everything from TVs, cars to weapons and satellites.
For national security reasons, the U.S. Department of Commerce announced on December 18, 2020, that dozens of Chinese companies would be added to the trade control blacklist. The Department of Commerce specifically mentioned China’s largest chip manufacturer, SMIC, and restricted its access to key U.S. technology. While the U.S. imposes sanctions, the Chinese Communist Party continues to invest heavily in developing domestic semiconductor industry.
Despite Beijing pouring billions of dollars into the industry, SMIC, as a top Chinese enterprise, still lags far behind Taiwan Semiconductor Manufacturing Company (TSMC) in terms of technological performance. TSMC provides over half of the world’s chips.
TSMC reported a 40% increase in revenue in the second quarter, mainly attributed to strong demand for advanced chips in artificial intelligence and high-performance computing sectors.
SMIC stated that its revenue for the second quarter increased to $1.9 billion, a 21.8% year-on-year growth. However, the company’s capital expenditure for this quarter was $2.25 billion.
Bloomberg reported on June 10 that, buoyed by its most advanced chip manufacturing capabilities, TSMC’s stock price on the Taiwan Stock Exchange soared by 48% this year, whereas SMIC’s dropped by 7.5%. The annual performance gap between these two stocks is expected to reach the largest level since 2005.
U.S. officials have indicated that if SMIC produces high-end chips for sanctioned company Huawei, it “may” violate U.S. laws, and the government is conducting an assessment.
(This article references reports from Agence France-Presse and Reuters)