Semiconductor Manufacturing International Corp (SMIC), mainland China’s biggest contract chip maker, has become the world’s third-largest integrated circuit (IC) foundry by sales for the first time on the back of strong domestic demand, despite rigid sanctions imposed by the United States government. Shanghai-based SMIC, which was added to the U.S. trade blacklist in 2020, accounted for 6% of global chip foundry revenue in the first quarter, according to a report by tech research firm Counterpoint. It ranked SMIC behind industry leader Taiwan Semiconductor Manufacturing Co (TSMC), with a 62% global market share, and Samsung Electronics, with a 13% share.
SMIC’s sales are expected to record double-digit growth in the current quarter amid a recovery in domestic demand for image sensors, power-management chips and display driver ICs, according to Counterpoint. The company’s latest ranking reflects how the strategic pivot to serve clients in its home market has helped reduce the impact of U.S. tech sanctions and managed to overcome the global semiconductor market’s typical seasonal sales slowdown in the first quarter.
SMIC generated 82% of its total USD1.75 billion first-quarter revenue from mainland clients, up from 75.5% in the same period a year earlier and 80% in the December quarter, according to the Chinese chip maker’s latest financial results published earlier this month. A third-party teardown of Huawei Technologies’ Mate 60 Pro 5G handset last September found that SMIC was behind the advanced processor used in the smartphone released in late August, which prompted calls in Washington for an investigation of how that chip was made in China amid existing U.S. tech restrictions. Both SMIC and Huawei have continued to stay mum about the Mate 60 Pro’s mainland-fabricated Kirin 9000s processor.
Counterpoint’s latest foundry tracker report said the sector had a 5% quarter-on-quarter revenue decline in the first three months of the year because of a slower recovery in demand for non-artificial intelligence (AI) semiconductors, such as those used in smartphones, Internet-of-Things (IoT) devices, and automotive and industrial applications. “We’ve observed more evidence that the AI demand is real, with increasing capital expenditure by cloud service providers adopting AI hardware first and followed by enterprises,” Counterpoint Analyst Adam Chang said. The demand for AI chips is predicted to remain strong this year and is likely to extend to 2025, while non-AI semiconductor demand remains sluggish, he said.
On the impact on SMIC of a potential cut off from Dutch chip-making equipment supplier ASML, Counterpoint Associate Director Brady Wang said: “Although this is a hypothetical scenario, the impact will be tangible.” “The extent and duration of this impact will hinge significantly on the available inventory of repair parts,” Wang said. “If the inventory levels are high, the negative effects might be mitigated more swiftly, whereas lower inventory could prolong and intensify these effects, potentially leading to more significant disruptions in service or operations,” the South China Morning Post reports.
