Semiconductor Manufacturing International Corp (SMIC), China's largest contract chipmaker, disclosed a 38.4% decrease in fourth-quarter profit compared to the previous year.
The profit attributable to SMIC owners was $107.6 million in the October-December quarter, falling short of analysts' expectations of $193.45 million, as per LSEG data.
Revenue experienced a 31.5% increase to $2.2 billion, surpassing market predictions of $2.18 billion, according to LSEG.
SMIC primarily focuses on mature-node chips for consumer electronics and home appliances. Advanced manufacturing projects like Huawei's smartphone chips contribute minimally to its revenue.
Due to U.S. export controls limiting access to advanced chipmaking technology, Chinese foundries such as SMIC have heightened their attention on this market sector.
This strategic shift has proven beneficial, with Chinese manufacturers progressively seizing market share in mature-node chips, akin to Taiwan's Powerchip.
SMIC has significantly raised capital investments in recent years to bolster production capacity, boosting China's domestic semiconductor capabilities.
The company's capital expenditure escalated from $4.5 billion in 2021 to $7.3 billion in 2023, showcasing its aggressive expansion approach. In 2024, SMIC invested an additional $7.33 billion, according to its latest financial report.
The substantial investments have compressed profitability, with SMIC's gross margin decreasing from over 30% in 2021-2022 to around 20% in 2023.
In the fourth quarter of 2024, SMIC reported a gross margin of 22.6%, an improvement from 16.4% a year earlier.