SMIC posts record revenue but warns of overcapacity

China's largest chipmaker Semiconductor Manufacturing International Corp (SMIC) has posted record quarterly revenue thanks to strong domestic demand for legacy chips amid a call by US lawmakers for a further crackdown on SMIC. 

However, the Shanghai-based company said that overcapacity in mature node chips will persist through 2025 and that it was turning cautious on building new capacity.

“Industry utilisation rates are hovering around 70%, well below the optimal level of 85%, indicating significant overcapacity. This situation is unlikely to improve significantly, if not worsen further,” co-CEO Zhao Haijun said in the company’s third-quarter earnings call.

Current oversupply conditions may lead SMIC to take a more cautious approach toward capacity expansion. “We have not announced any new projects, and we are not currently discussing any new ones,” Zhao said. 

The third quarter revenue of China’s top chip foundry was up 34% from a year earlier to USD 2.17 billion. Net profit for the quarter touched USD 148.8 million, up 58.3% from the same period last year. 

“The company achieved for the first time more than USD 2 billion in quarterly revenue during the third quarter, representing a record high,” SMIC said in a statement.  

It shipped a total of 2,122,266 eight-inch equivalent wafers last quarter, as its capacity utilisation rate rose to 90.4%.

Meanwhile, Michael McCaul, chair of the US House of Representatives’ Foreign Affairs Committee, has urged the US Department of Commerce to check up on SMIC’s facilities and find out whether the company is illegally producing chips for Huawei. 

“There is growing evidence that SMIC is violating US export control laws,” McCaul wrote to the Commerce Department’s Bureau of Industry and Security (BIS) under secretary Alan Estevez. If China is not willing to immediately agree to a “comprehensive audit of all SMIC facilities and its books,” McCaul said, “BIS should pause all existing licenses for SMIC.”