SMIC'S Net Profit In The Second Quarter Increased By More Than 6 Times, Increased Capital Expenditure And Expanded Production Capacity

On August 6, SMIC released its first financial report after landing on the science and technology innovation board, with both revenue and net profit increasing, and both reached new highs.

In the second quarter of 2020, SMIC's international sales revenue reached $938 million, an increase of 18.7% year-on-year; the net profit attributable to the parent company was $138 million, a year-on-year increase of 644.2%, a new record in a single quarter; the gross profit was $248 million, with a year-on-year increase of 64.5%, and the gross profit rate was 26.5%.

In the second quarter of 2020, SMIC's revenue and net profit reached new highs. Picture vision China

Zhao Haijun and Liang Mengsong, joint chief executives of SMIC, pointed out that although the macro environment is still changing, chip demand is still strong. In the second quarter, the demand for mature technology application platform was strong, the income of consumer electronics increased significantly, and the advanced process business was steadily promoted. The company's capacity utilization rate remains high, the expansion capacity will be gradually released, and the revenue is expected to continue to grow in the third quarter.

At the same time, SMIC is accelerating the expansion of production capacity, raising its capital expenditure this year from $4.3 billion to $6.7 billion. At the performance presentation meeting on August 7, SMIC executives said that on the one hand, the funds were used for the construction of advanced technology, on the other hand, the expansion of mature technology. "Now the equipment procurement is normally purchased according to the demand. It is estimated that the monthly production capacity of 14nm will reach 15000 pieces by the end of the year, 30000 pieces per month for 8-inch wafers and 20000 pieces for 12 inch wafers per month."

In addition, with regard to the impact of the US ban, Liang Mengsong said: "we absolutely abide by international regulations. There will be many other customers ready to enter our limited production capacity, so the impact should be controllable."

When the plant is built and expanded

First of all, let's take a look at the composition of revenue in the second quarter. From the perspective of application, the revenue of communication products accounted for the highest proportion of 46.9%, followed by consumer products, accounting for 36.9%. These two areas accounted for more than 83% of the revenue. When it comes to wafer revenue, the top three with the highest revenue share are 0.15/0.18 μ m (33%), 55 / 65 nm (30%) and 40 / 45 nm (15.4%). The most concerned 14 / 28 nm accounts for 9.1%.

Liang Mengsong pointed out that 14nm products have expanded from 4G mobile communication to artificial intelligence, Internet of things, automobile and other application platforms. The popularity of home office also drives the application of platforms. SMIC's next generation platform is in the stage of customer product verification. "There is a great opportunity for 14nm. Starting with 4G mobile terminal and extending to RF chips and WiFi 6 mobile chips, we have great business opportunities. We are confident Can fill capacity. ".

In the second quarter of 2019, the utilization rate was 98.5% in the second quarter, which also showed the utilization rate of 98.5% in the second quarter.

However, compared with TSMC and other large plants, SMIC's capacity is not large. At present, the production capacity is tight. SMIC continues to expand the production capacity of 28nm, 14nm and other processes. Recently, it has invested 28nm and above plants in Beijing, and 14nm capacity in Shanghai continues to climb.

About the new factory in Beijing, Gao Yonggang, CFO of SMIC, said: "Beijing plans to build a new factory mainly based on our thinking and analysis of the market. In the mature process, the market demand is huge, not only 28 nm, but also 40 / 45 nm, 55 / 65 nm and many other process nodes. Beijing has three mature 12 inch factories, with mature teams and solid customers, which is the premise and foundation. "

He also said: "Beijing company has explored a way to make the company operate well through multi node product operation. We will not build a single node factory, but follow the original successful mode. In fact, integrated circuits are accumulated in history. It took more than 10 years for the old factory in Beijing to make profits. It takes 20 years for an old factory to take off with a new one. SMIC just celebrated its 20th anniversary, and the new plant will not be as difficult as it was in the past. "

Gao Yonggang also stressed that there is a big demand gap in all aspects, not only for 28nm, nor for simple logic circuits, but also for many subdivided fields.

For example, 0.15/0.18 μ m, due to the arrival of 5g, the application demand is particularly large. Fingerprint identification and camera parts need 0.18 μ m part, and the demand gap is very large. In the international market, the core will also make a positive profit in the international market.

Everbright Securities report pointed out that SMIC's international revenue side is expected to grow rapidly. However, advanced process investment and capacity expansion lead to difficulties in improving profits in the short term. It is estimated that the year-on-year change rates of net profit in 2020-2022 will be - 16%, - 41% and 7% respectively.

US ban and localization

In addition to production capacity and advanced process, the outside world is also very concerned about the impact of the new US regulatory measures on SMIC. In particular, the chip supply of Hisilicon, a customer of Huawei, has been affected by the US ban. In the past, for example, in the aspect of 14nm, powerful customers like Huawei can help SMIC improve the yield and provide demand, so as to grow better. But now, if Huawei is limited, what will SMIC do?

According to Liang Mengsong's answer in the Q & a session of the performance meeting, SMIC believes that the impact can be controlled. "The development of advanced manufacturing process needs a partner customer. The process definition, mass production learning curve and future demand will bring great help. If there is any change in this aspect, we can find alternative solutions. We can overcome these challenges by dividing the whole technology development into many segments, with many different customers taking on different tasks. We are optimistic about advanced process development and demand. "

Zhang Xiaorong, President of the Institute of deep science and technology, told the 21st century economic report: "SMIC, as the industry leader, has important strategic significance for China's semiconductor industry and even the science and technology circle. In the context of controllable core industry, independent innovation is needed. However, under the impact of counter globalization, SMIC has encountered a big test on the growth path of enterprises. "

In the short term, he does not have to look forward to a breakthrough in the international market. The mobile chip manufactured by SMIC international 14 nm FinFET has realized large-scale mass production and commercialization. This process can support the development of 5g chips. In addition to mobile terminals such as mobile phones, it can maintain the industry for a period of time. How can the domestic chip industry break through in 8-10 years without the most advanced technology such as 7 / 5 nm? It is to concentrate resources on major issues. "

Recently, the State Council issued several policies to promote the high-quality development of integrated circuit industry and software industry in the new period, which is also beneficial to leading wafer foundry enterprises such as SMIC international and Huahong, which will further support industrial companies including integrated circuits, semiconductors, chips and software information.

In addition, when talking about the domestic semiconductor industry and the domestic semiconductor industry, Zhao said: "when talking about the domestic semiconductor industry, China's semiconductor industry is becoming more and more strong. We are still optimistic about the scale of R & D, but we need a lot of time for the establishment of China's ecological environment. "

He also stressed that SMIC is an international company and does not tend to use only one equipment. "We need to quickly establish scale and welcome local production, so as to ensure that the production chain will not be interrupted. However, the followers of the industry can not replace the leaders in one day. SMIC also welcomes foreign leading enterprises to build factories in China and establish a more stable supply chain. "

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