In the 10 days in late August, when Chinese OEM chip manufacturers summarized their second-quarter performance, net profits grew steadily: SMIC grew by 261.7%, reaching US$479.2 million; Huahong grew by 385.9%, reaching US$38.6 million. Chinese customers have to spend more on the services of these companies, not only because of the artificial intelligence boom but also because of import substitution.
Image source: Micron Technology
SMIC, the largest company in China’s chip foundry services market, saw its second-quarter revenue grow 36% to US$3 billion, almost reaching the level expected by analysts (US$2.9 billion). Huahong reported revenue growth of 26.8% to a record US$717.5 million, exceeding consensus market expectations. SMIC management said it expects demand for the company’s services to grow evenly in the second half. The company is ready to respond to the chip shortage by using existing production capacity more efficiently and accelerating commissioning of additional space.
Huahong representatives admitted that the revenue dynamics in the second quarter were not only due to the increase in chip production, but also to the increase in its average sales price. The company plans to increase service prices in the second half of this year. As Huahong’s management predicts, high demand for its services will continue at least until next year.
According to TrendForce data, SMIC became the world’s third largest chip foundry in the first quarter, behind the top two TSMC and Samsung Electronics. Huahong ultimately ranked only sixth in the world rankings, but this is not bad for a Chinese company. SMIC expects revenue for this quarter to be US$3.06 billion to US$3.12 billion, a quarterly increase of 2% to 4%. At the same time, Huahong’s quarterly revenue target is US$770 million to US$780 million. The production lines of both companies will remain at the highest level not only in the coming months but also in the coming years. Analysts at UBS say the boom in artificial intelligence will allow Chinese companies to earn more than $10 billion a year from contract manufacturing of chips in the field.
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