China’s biggest chipmaker SMIC warns of ‘fierce’ competition as it misses quarterly profit expectations

Published

1 year ago

May 10, 2024

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BEIJING, CHINA – DECEMBER 04: A logo hangs on the building of the Beijing branch of Semiconductor Manufacturing International Corporation (SMIC) on December 4, 2020 in Beijing, China. (Photo by VCG/VCG via Getty Images)

Vcg | Visual China Group | Getty Images

Semiconductor Manufacturing International Corporation on Friday warned of intense competition in the chip industry after its first-quarter profit missed expectations.

“Competition in the industry has been increasingly fierce and the pricing for commodity products basically follows the market trends,” SMIC said on Friday during the firm’s earnings call.

“The company fulfills its [long-term view] through constructing quality technology platforms that leap here in mainland China by one to two generations,” said SMIC.

SMIC, China’s biggest contract chip manufacturer, is seen as critical to Beijing’s ambitions of cutting foreign reliance in its domestic semiconductor industry as the U.S. continues to curb China’s tech power. SMIC lags behind Taiwan’s TSMC and South Korea’s Samsung Electronics, according to analysts.

The company’s first-quarter net income plunged 68.9% from a year earlier to $71.79 million, compared with LSEG analysts’ average estimate of $80.49 million.

Gross margin slid to 13.7% in the quarter – the lowest the firm has ever recorded in nearly 12 years – according to LSEG data.

Revenue for the first quarter was $1.75 billion, up 19.7% from a year earlier, as customers stocked up on chips, SMIC said. This handily beat LSEG estimate of $1.69 billion.

Intel CEO Pat Gelsinger on creating new foundry: 'We're creating two businesses inside of one Intel'

“In the first quarter, the IC [integrated circuits] industry was still in the recovery stage and customer inventory gradually improved. Compared to three months ago, we have noticed that our global customers are more willing to build up inventory,” SMIC said on Friday.

Customers are building up inventory to brace for competition and respond to market demand, the firm said, adding that it was unable to fulfil a few rush orders in the first quarter as some production lines were running at near maximum capacity.

SMIC’s chips are found in automobiles, smartphones, computers, IoT technologies and others. More than 80% of its revenue in the first quarter came from customers in China, it said.

Bracing for competition

In a bid to build up competitiveness and increase market share, the firm said it was prioritizing areas such as capacity construction and R&D activities for investments.

“[To] ensure that the company maintain its leading position in fierce market competition and maximize the protection of investor interest … the company plans not to pay dividends for the year 2023,” said SMIC.

“We believe that as long as there’s demand from customers along with our technology and capacity readiness, we can ultimately be bigger, better and stronger despite the fierce competition.”

The company expects second-quarter revenue to rise by 5% to 7% from the first quarter on strong demand, while gross margin could dip further to between 9% and 11%.

“Along with the increase in capacity scale, depreciation is expected to rise quarter by quarter. So the gross margin is expected to decline sequentially,” SMIC said.

Technology

More demand than supply gives companies an edge, Jim Cramer says

Published

6 hours ago

October 24, 2025

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More demand than supply gives companies an edge, Jim Cramer says

“Supply constrained,” are the two of the most important words CNBC’s Jim Cramer said he’s heard so far during earnings season and explained why this dynamic is favorable for companies.

“When you’re supplied constrained, you have the ability to raise prices, and that’s the holy grail in any industry,” he said.

Intel‘s strong earnings results were in part because of more demand than supply, Cramer suggested. He noted that the company’s CFO, David Zinsner, said the semiconductor maker is supply constrained for a number of products, and that “industry supply has tightened materially.”

Along with Intel, other tech names that are also supply constrained and performing well on the market include Micron, AMD and Nvidia, Cramer continued.

These companies don’t have enough product in part because the storage needs of artificial intelligence are incredible high, Cramer said. He added that he thinks demand has overwhelmed supply because semiconductor capital equipment companies didn’t manufacture enough of their own machines as they simply didn’t anticipate such a volume of orders.

Outside of tech, Cramer said he thinks airplane maker Boeing and energy company GE Vernova are also supply constrained, adding that he thinks the former will say it’s short on most of its planes when it reports earnings next week. GE Vernova is supply constrained with its power equipment, like turbines that burn natural gas, he continued, which is the primary energy source for the ever-growing crop of data centers.

GE Vernova and Boeing are also set to be winners because they make big-ticket items that other countries can buy from the U.S. to help close the trade deficit, Cramer added.

“In the end, we have more demand than supply in a host of industries and that’s the ticket for good stock performance,” he said. “I don’t see that changing any time soon.”

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Technology

3 takeaways from Intel earnings: Cash flow, foundry progress and hardware surprise

Published

11 hours ago

October 24, 2025

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3 takeaways from Intel earnings: Cash flow, foundry progress and hardware surprise

Wall Street remains skeptical on Intel despite its return to profitability

Intel snapped a losing streak of six straight quarterly losses and returned to profitability in the third quarter.

In its first earnings report since the Trump administration acquired a 10% stake in the company, the U.S. chipmaker posted strong revenue, noting robust demand for chips that it expects to continue into 2026.

Client computing revenue, which includes chips for PCs and laptops, grew 5% year over year, benefiting from PC market stabilization and artificial intelligence PC prospects.

CEO Lip-Bu Tan said in a call with analysts Thursday that artificial intelligence “is a strong foundation for sustainable long-term growth as we execute.”

The chip strength and demand were bright spots, but there were areas of concern as well, with the company’s foundry business still needing a big break.

Here are three takeaways from the chipmaker’s Q3 report:

Cash flow

“We significantly improved our cash position and liquidity in Q3, a key focus for me since becoming CEO in March,” Tan said on a call with analysts Thursday.

Intel landed an $8.9 billion investment from the U.S. government in August, along with $2 billion from Softbank, but has not yet received the $5 billion tied to a deal with Nvidia. The company expects that deal to close by the end of Q4.

With all of those transactions completed, plus the Altera sale, Intel will have $35 billion in cash on hand, CFO David Zinser told CNBC.

The U.S. government is the company’s biggest shareholder, and Intel stock is up more than 50% since Aug. 22, when Commerce Secretary Howard Lutnick announced the deal.

“Like any shareholder, we have to keep in touch with them,” Zinser said of the U.S. stake. “We don’t tell them how the numbers are going before the quarter. We generally talk to them like Fidelity,” another Intel shareholder.

Stock Chart IconStock chart icon

Intel 3-month stock chart.

Foundry

The firm’s foundry remains a work in progress.

Revenue fell 2% over the year before, and it has yet to land a major customer.

Intel now has two fabs running 18A nodes, which are designed for AI and high-performance computing applications.

“We are making steady progress on Intel 18A,” Tan said of its latest chip technology. “We are on track to bring Panther Lake to market this year.”

Zinser said the more advanced 14A nodes won’t be put in supply until the company has “real firm demand.”

Old stuff still selling

Zinser said the company’s older chipmaking processes, or nodes, have continued to do well, “and that was probably the part that was more unexpected.”

Zinser said the chipmaker met some of the central processing unit (CPU) demand with inventory on hand, but they will be behind in Q1, “probably Q2 and maybe in Q3.”

The supply crunch has been with older Intel 10 and 7 manufacturing technologies.

Many customers are opting for less advanced hardware to refresh their operating systems, demonstrating enterprises aren’t waiting for cutting-edge chips when proven technology gets the job done.