SMIC increases Q1 net income by 110 percent

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SMIC increases Q1 net income by 110 percent from 2019
Image: SMIC

Semiconductor Manufacturing International Corporation (SMIC) recently revealed it increased its first-quarter net income by 110 percent from 2019. The company noted its upswing in profitability is due to a surge in demand and a better product mix.

The firm also forecasts continued revenue growth in the second quarter, an outlook supported by it reportedly inking a supply deal with Huawei.

SMIC’s Q1 Financial Results

In the first quarter, SMIC made $904.9 million, an increase of 35.3 percent from the sales it made in the first three months of 2019. The manufacturer also generated $51.3 million in net income last quarter, up significantly from 2019’s $24.3 million. CEOs Dr. Zhao Haijun and Dr. Liang Mong Song said their corporation’s March period revenue represented a “historic high.”

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The semiconductor maker also improved its gross margin by 7.2 percent and brought its earnings per share up from $0.01 to $0.06 from the year previous.

SMIC attributed its impressive quarterly intake to the expansion of its communications and consumer electronics chip business. The firm’s segment breakdown revealed both divisions experienced growth of 5.9 and 2.9 percent, respectively, last period.

The company also saw a change in its revenue sources; its U.S. sales dropped by 6.8 percent, but its purchases from Mainland China and Hong Kong jumped by 7.7 percent.

SMIC’s Bright Future

For the second quarter, SMIC’s chief executives forecast a gross income range of $932 million to $950.1 million. The company expects robust orders for its portfolio of memory chips, fingerprint sensors, and power management components. The firm also noted its clients had responded positively to its 14 nm chips, which it introduced last November.

Though not mentioned in its Q1 earnings report, SMIC’s near-term growth likely has to do with it becoming a Huawei supplier.

Last month, the South China Morning Post reported the Sino conglomerate recently sought to bring its semiconductor manufacturing in-country. In the past, the corporation relied on the Taiwanese Semiconductor Manufacturing Company (TSMC) to fabricate the chipsets used in its smartphones. However, new international trade restrictions may force the firm to end its relationship with the chipmaker.

Huawei reportedly tasked SMIC with producing its Kirin 710A mobile processors in anticipation of losing access to TSMC. The semiconductor corporation’s fourth-quarter commentary suggests the telecommunications company was pleased with the results of its smartphone chipset order. As such, the Shanghai-based manufacturer could eventually handle all of the handset giant’s mobile CPU fabrication needs.

Given that Huawei shipped over 238 million smartphones last year, SMIC’s new quarterly revenue record may easily be broken in the next reporting period.

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