SMIC Downplays Tariff Impact Amid Q2 Earnings Drop

Semiconductor Manufacturing International Company (SMIC) reported a 19.5% YoY decline in Q2 profit, attributing it to the COVID-19 pandemic and US-China trade tensions. Despite the drop, SMIC's co-CEO downplayed the impact of tariffs on operations, stating that the company had not experienced a "hard landing."

Semiconductor Manufacturing International Corporation (SMIC), China's largest contract chipmaker, reported a 19.5% year-over-year (YoY) decline in Q2 profit, attributing the drop to the COVID-19 pandemic and US-China trade tensions. Despite the financial setback, SMIC's co-CEO, Zhao Haijun, downplayed the impact of tariffs on the company's operations, stating that SMIC had not experienced a "hard landing" [1].

Zhao noted that while the company had initially feared a "hard landing" due to U.S. tariff policies, strong domestic demand has kept production capacity tight until October. He explained that customers have either stocked up inventory or found alternative suppliers, minimizing the impact of the tariffs [1].

SMIC's second-quarter revenue rose by 16.2% on the year to $2.2 billion, but its profit attributable to owners declined by 19.5% to $132.5 million, missing analysts' estimates of $183.35 million. The company shipped 2.4 million eight-inch equivalent wafers in the second quarter, up 4.3% from the previous quarter [1].

Zhao also highlighted the growing market share of domestic chipmakers, attributing the trend to the increasing demand for Chinese-made chips. He mentioned that some power semiconductor companies now order approximately 20,000 8-inch wafers per month from SMIC, significantly higher than the 2,000 they had ordered two years prior [2].

Despite the challenges posed by tariffs and trade tensions, SMIC's shares were down more than 5% on Friday, reflecting market concerns about the company's financial performance. However, Zhao remained optimistic about the company's prospects, stating that it expects third-quarter revenue to increase by 5% to 7% from the second quarter [1].

References:
[1] https://srnnews.com/chinas-smic-says-trump-tariffs-did-not-cause-expected-hard-landing/
[2] https://stocktwits.com/news-articles/markets/equity/watch-out-nvidia-and-amd-top-chinese-foundry-says-local-chipmakers-tech-now-on-par-with-foreign-rivals/chrnTzPRdEb