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SMIC (00981.HK) Expects 1H24 Rev. to Grow 20%, But Warns Intensifying Price War in Lower-end Chips
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SMIC (00981.HK) Co-CEO Zhao Haijun said at the earnings call that the company's revenue for 1H24 is expected to grow 20% YoY due to better-than-expected customer orders, but the company is still cautiously watching whether and how the surge in orders in 1H will affect demand in 2H. He considered the outlook for 2H uncertain. SMIC's gross margins are expected to fall further to 9-11% in 2Q as more equipment is depreciated due to capacity expansion. It is expected that the overall trend of volume increase and ASP decrease will continue in 2Q. Revenue growth for the whole year is targeted to be over 8%. With a number of new plants coming on stream in the next few months, coupled with global oversupply, Zhao warned that the price war for some less advanced chips in the mainland market may become increasingly fierce. SMIC's profit margin has fallen to a record low since 2009 and is expected to continue falling in 2Q. Zhao added that the company is facing huge price pressure as its mainland competitors expand their production capacity, with orders totalling tens of millions of USD sometimes suddenly going to competitors. Prices for some standardised chips, particularly display chips and image sensors, are expected to fall further as competitors start up new production capacities for similar products. However, Zhao said SMIC has identified signs of global demand recovery, especially in China's smartphone market, where all mainland smartphone makers have aggressive plans this year. He believed that domestic chip production to meet domestic demand would be a global trend, and expected 2024-25 to be the peak of the chip industry's continued capacity expansion. He mentioned that it will take time for the market to absorb all the new capacity, but this will not be a problem for SMIC as it has been working closely with its customers in formulating its expansion plans. AAStocks Financial News |
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