According to the 2023 performance data released by SMIC, its revenue fell by 8% year-on-year61%, net profit decreased by 60% year-on-year25%。Such a decline is truly surprising. The reasons for this can be analyzed from two aspects.
First of all, 2023 is at the bottom of the semiconductor industry, with sluggish market demand, reduced orders, and low capacity utilization. According to the data, SMIC's 8-inch monthly production capacity at the end of last year was 8060,000 pieces, with an average annual capacity utilization rate of only 75%. This means that a quarter of the capacity is idle, and the fab tends not to shut down, and even if the capacity is idle, the machines will continue to run, which undoubtedly has an impact on the bottom line.
Secondly, other fabs are fighting for orders, which has led to a decline in wafers, which has affected SMIC's profits. According to data analysis, in the case of sluggish demand, manufacturers such as Samsung and UMC often adjust wafers**, sometimes even cutting prices by 10% or 15%. The global electronics market has been sluggish since 2022, with declining demand and fewer orders, and in order to compete for orders, fabs have had to downgrade** to attract more orders. The first in the entire industry has declined, and naturally, the profits of manufacturers are also declining, and SMIC, as one of them, is naturally not immune.
For a long time, it has been widely believed that China is facing a huge gap in chip production capacity, and as long as domestic wafer factories are fully expanding, there will be no problem of idle capacity, and domestic manufacturers are waiting for the release of domestic production capacity. Some academicians once said that compared with the current actual domestic wafer demand and the current production capacity, there is still a gap equivalent to at least 8 SMIC's production capacity in 2025, so at least there is no need to worry about overcapacity.
However, judging from the current situation, once the global wafer fabs collectively start a war, domestic wafer fabs may not be able to stand alone. After all, all chip manufacturers are pursuing high-quality and low-cost products. Therefore, while expanding production, it is necessary to comprehensively consider the capacity growth of the global industry and the demand of the industry. Once there is overcapacity, manufacturers will still face significant pressure.
However, it is gratifying that the chip industry will begin to recover in 2024, which means that SMIC's difficult period should be nearing the end. In the future, it is very likely that good days will be ushered in. In this regard, we have reason to be confident in the future of the chip industry.
Against the backdrop of a global fab war, SMIC's sharp decline in profits is not surprising. This also highlights the fierce competition among peers and the market demand that is sensitive to the highest level.
To solve the challenge of China's chip production capacity, we should not simply rely on expanding production capacity, but should pay more attention to improving product quality and reducing costs. In the competition of the global chip industry, we need to think about how to improve the competitiveness of Chinese chip manufacturers and focus on independent innovation and technological breakthroughs. For example, the market position of Chinese chip manufacturers can be improved by increasing R&D investment, attracting high-end talents, and improving the level of manufacturing technology.
In addition, with the recovery of the global electronics market, especially the rapid development of 5G, artificial intelligence and other fields, the demand for the chip industry will show new growth momentum. Therefore, while expanding production capacity, it is also necessary to pay close attention to market changes and technological progress, adjust the industrial layout in a timely manner, and ensure the sustainable development of China's chip industry.
In summary, SMIC's profit decline is mainly due to sluggish market demand and fierce competition among peers. For the challenge of China's chip production capacity, we need to comprehensively consider the development of the global industry, enhance our competitiveness, and pay close attention to market demand and technological changes to ensure the sustainable development of China's chip industry. It is hoped that in the future competition, Chinese chip manufacturers can achieve greater success and make greater contributions to global scientific and technological progress.