Potential Risks Are Not Likely To Impede SMIC's Expansion

In the current era, national development is indispensable to the fast-growing technology sector. In the high-tech domain, intelligent chips facilitate the most critical technologies applied in all walks of life.

● SMIC's operating income followed an upward trend in the first half of 2020. While most of its revenue is from high-nanometer nodes, the foundry kept expanding its capex at sub-14 nm.

● Various catalysts, including the government subsidies, resolved internal conflicts and the growing consumption market in China, will exert a positive effect on SMIC's future performance. 

● The US sanctions will further suppress SMIC's development, widening the gap between the mainland foundry and TSMC and impeding its cooperation with other suppliers. 

● Once SMIC solves its supply problems, it will be back on track in its quest to catch up with other top players in the area for the next five years.

As the US Ministry of National Defense announced on December 3, 2020, Shanghai-based semiconductor manufacturer SMIC (HKSE:SMIC) has become the country's second gargantuan high-tech firm to suffer US trade restrictions. Those prevent  SMIC from making products by using American components. Moreover, there was an  internal conflict that happened right after the restrictions were launched. SMIC's CEO, Mengsong Liang, was rumored to be set to unexpectedly resign from the company. Will SMIC successfully handle this situation as it faces major hurdles in both internal and external environments?  

After over 20 years of development, SMIC has become a tier-one foundry in China, distinguished by its large industrial size and advanced technology. Moreover, in 2018, it was ranked in the top four contract semiconductor manufacturers globally, occupying up to 6% of the market. It was ranked in the top five by operating income in the global foundry market by the end of 3Q 2020. 

Financial performance and business outlook

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