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In a nutshell: SMIC introduced that the strict lockdowns in China, coupled with the continued warfare in Ukraine, have brought on demand for smartphones and PCs to drop significantly. This would possibly not assist with the worldwide chip disaster both, as the corporate’s factories in Shanghai are pressured to function at a decreased capability.
SMIC CEO Zhao Haijun informed analysts that demand for smartphones, PCs, and residential home equipment has decreased dramatically.
SMIC is at present the most important contract chipmaker in China and the fifth largest globally, with a 5.3 p.c market share final yr.
Zhao claims that the warfare in Ukraine is partially in charge for the gross sales stoop, as many firms have stopped promoting their merchandise in Russia, whereas Ukrainian residents have minimize down on non-essential spending.
Nonetheless, the strict lockdowns in China are impacting SMIC’s clients essentially the most, with the CEO claiming that Chinese language smartphone distributors would scale back shipments by 200 million items this yr, forcing them to cancel chip orders.
Because of this smartphone chips are going to take up solely 29 p.c of the foundry’s complete manufacturing capability, versus 50 p.c final yr.
The lockdowns are additionally affecting SMIC’s manufacturing as the corporate has a number of factories in Shanghai, which it solely managed to maintain open because of a closed-loop system (studies say over 60 p.c of employees are sleeping and residing within the factories).
Despite the fact that the corporate is taking measures to scale back the influence of those lockdowns and the elevated costs of uncooked supplies, it nonetheless expects a 5 p.c manufacturing loss within the second quarter.
It is price noting that SMIC noticed excellent monetary ends in the primary quarter, particularly contemplating the US sanctions it has been dealing with. It posted $1.84 billion in income, a 67 p.c enhance year-on-year, and a internet revenue of $447 million, up 182 p.c YoY.
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