EqualOcean has been informed that on the afternoon of August 10th, China's leading mainland foundry, SMIC, released its financial results for the second quarter of 2023, with revenue up 6.7% year-on-year to USD 1.56 billion, at the upper end of its guidance, and gross margin at 20.3%.

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Looking ahead to the third quarter, the company expects revenue to grow 3% to 5% sequentially, shipments to continue to increase, and revenue in the second half of the year to be better than the first half.

In the first quarter of 2023, SMIC was the No. 1 foundry in mainland China and the fifth largest in the world, with a market share of 5.3%, according to market research firm Tibco Consulting. The top four vendors were TSMC, Samsung, GeSilicon, and UMC, with shares of 60.1%, 12.4%, 6.6%, and 6.4%, respectively.

SMIC's revenue share by application in the second quarter was 26.8% for smartphones, 11.9% for IoT, 26.5% for consumer electronics, and 34.8% for others. In terms of the revenue share by region, China's revenue share increased to 79.6%, the U.S. accounted for 17.6% and Eurasia accounted for 2.8%.

Notably, SMIC's "other income" grew significantly from USD 193 million in the first quarter to USD 416 million in the second quarter, up 115.9 percent sequentially and 329.7 percent year-over-year, supporting a large portion of the quarterly profit. SMIC stated that the change in other income, net, in the second quarter was primarily due to an increase in gains from changes in the value of its securities investments and passive dilution gains from changes in equity in associated companies.

In its earnings report, SMIC noted that capital expenditures in the second quarter of 2023 were USD 1,731.5 million, and total capital expenditures for the first half of the year were nearly USD 3 billion. Meanwhile, research and development expenses increased to USD 177.6 million in the second quarter of 2023 from USD 167.7 million in the first quarter of 2023 due to increased R&D activities.

SMIC management stated that the company's revenue increased 6.7% sequentially to USD 1.56 billion in the second quarter of 2023, and gross margin decreased 0.5 percentage points to 20.3%. 12-inch capacity demand was relatively complete, while 8-inch customer demand was weak, and capacity utilization was lower than 12-inch, but still better than the industry average.

Looking ahead to the third quarter, the company expects revenue to grow 3% to 5% sequentially, with gross margins in the 18% to 20% range. Shipments are expected to continue to increase in the third quarter, while depreciation is expected to continue to grow. The company expects sales in the second half of the year to be better than in the first half.

The company said it will continue to do an excellent job in technology research and development, platform development, the new products from the rapid verification, and the supporting production capacity of the fastest speed arrangement, ready for the next round of the growth cycle.

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