In the first quarter of 2022, SMIC’s R&D investment was 1.051 billion yuan, a year-on-year increase of 3.4%, accounting for 8.9% of total revenue.
SMIC Chairman and Chief Financial Officer Gao Yonggang, Co-CEO Zhao Haijun and other senior executives attended and shared with analysts the situation and views on the impact of the new crown pneumonia epidemic, chip inventory and foundry prices.
Zhao Haijun mentioned that SMIC was affected by the epidemic in Tianjin and Shenzhen in the first quarterHas little effect,Plant production and expansion can be completed as planned. For the Shanghai epidemic in the second quarter, SMIC has adopted measures such as closed-loop production,Able to barely deliver customer orders for the quarter.
For chip inventory,intelligentcell phoneThe proportion of terminal revenue decreased,butMCU, power management, fast charging protocol, Wi-Fiand other types of chips are stillin short supply. In addition, SMIC has not raised the foundry price in an all-round way, but instead focuses on long-term cooperation and negotiates the price amicably with customers.
As of the midday break of the Science and Technology Innovation Board, SMIC reported 42.28 yuan per share, down 2.4%, with a total market value of 334.368 billion yuan.
Net profit soared 175%, R&D investment exceeded 1 billion yuan
In the first quarter of 2022, SMIC’s revenue was 11.854 billion yuan, a year-on-year increase of 62.6%; its net profit was 2.843 billion yuan, a year-on-year increase of 175.5%. In the first quarter of 2022, SMIC’s R&D investment was 1.051 billion yuan, a year-on-year increase of 3.4%, accounting for 8.9% of total revenue.
▲ Changes in SMIC’s revenue and profit from Q1 in 2019 to Q1 in 2022
In the first quarter of 2022, SMIC’s gross profit margin exceeded 40%, and SMIC’s revenue and gross profit margin exceeded expectations. Zhao Haijun said that there are two main reasons. First, due to the new crown pneumonia epidemic, SMIC postponed the original annual maintenance of some factories; second, the impact of the epidemic on Tianjin and Shenzhen factories in the first quarter of 2022 was lower than expected.
During the conference call, the outbreak was the focus of SMIC’s management and analysts.
Zhao Haijun emphasized,Epidemic in the first quarterThe main influence is SMIC’sTianjin factory, the size of the Tianjin factory is not large, and the Tianjin epidemic will end in 9-10 days,Small overall impact on SMIC, and even “influenced by influence”. At the same time, the 8-inch production capacity of the Tianjin plant is being expanded.Its expanded capacity has made up for lost capacity.
Some analysts asked: If the epidemic continues into the third quarter, will it cause some pressure on SMIC?
Zhao Haijun responded that closed-loop production is mainly in Shanghai. At present, the epidemic situation in Shanghai is still ongoing, and SMIC has no way to make a complete and accurate answer. At the same time, the epidemic in Shanghai mainly affected SMICInside the factory and the long supply chain took a toll.
From inside the factory,it has little effect. However, from the perspective of the entire supply chain, the impact on downstream packaging, testing and transportation is not the same.The entire supply chain is greatly affected. How big is the specific impact? SMIC will still have to wait until the second quarter or when the Shanghai epidemic is completely over before giving an exact answer.
He added that the current SMIC orders in April and May are currently delivered a little slower, butDelivery still possible by the end of Juneof. But its further impact may have no way to end in the second quarter between today and the rest of the time.
Cancel revenue division of process nodes
The proportion of smartphones continues to decline
In terms of terminal applications, SMIC accounted for 28.7%, 13.8%, and 23.1% of smartphone, smart home, and consumer electronics applications in the first quarter, respectively. Compared with the previous quarter, the proportion of smartphone application revenue continued to decline by 2.5%, and has fallen by 6.5% compared with the first quarter of 2021.
Compared with the first quarter of last year, the proportion of smart home has not changed much, up only 0.1 percentage points; the proportion of consumer electronics revenue has increased by 2.7 percentage points.
▲Changes and comparisons of SMIC’s terminal application revenue
Regarding the decline in the smartphone terminal business, Zhao Haijun said that due to the factors of the Ukraine war, the impact on the mobile phone brand was great, and the sales in the relevant regions had completely disappeared. From his point of view, global mobile phone sales are at least as high as200 million lessDepartment, andMost affected are Chinese mobile phone brands.
But at the same time, the situation is not the same for chips used in smartphones, such asPower management, MCU, Wi-Fi and other chips are still in short supplysituation, so the situation is not the same.
Since this quarter, SMICThe revenue share of each process node is no longer provided, but provides a percentage of revenue divided by wafer inches.
Zhao Haijun said that SMIC has many characteristic processes, and the 40nm, 28nm and other processes are built later than their peers, and the construction of factories is not based on nodes, but based on processes. In its separate factory, 55nm, 40nm, 28nm, and 22nm are all made. The specific node wafer statistics are difficult and have low practical significance. Today, it puts more emphasis on SMIC’s market share and technical reserves in specific terminal fields.
In the first quarter of this year, SMIC added 28,000 wafers equivalent to 8-inch wafer production capacity. It is expected that by the end of this year, the production capacity increase will exceed last year.
In this quarter, SMIC’s 8-inch wafers accounted for 33.5%, and 12-inch wafers accounted for 66.5%. Compared with the fourth quarter of 2021, the proportion of SMIC’s 12-inch wafers increased by 2 percentage points.
▲Changes and comparisons of SMIC’s revenue of wafers of different sizes
In terms of regions, SMIC’s most important shipments in this quarter are mainland China and Hong Kong, China, which accounted for 68.4% of total revenue, basically the same as 68.3% in the previous quarter.
“North America” and “Europe and Asia” are SMIC’s second and third largest markets, respectively, with North America accounting for 19% of revenue, and Europe and Asia accounting for 12.6%.
Overall, the proportion of revenue in mainland China and Hong Kong markets is still increasing.
▲Changes and comparisons of SMIC’s revenue in various regions
There is still a gap in wafer capacity
Supply chain delivery delays most impacted
Zhao Haijun said that in general, due to the continuous upgrading of products, the general trend of digital interaction of all things, the large increase in cloud storage volume, the demand for automotive electronics in Shanghai, the rise of green energy and other industries,Demand and increment of terminal silicon content have not been met.
In contrast, the average growth of global integrated circuit wafer manufacturing capacity is still in the single digits, even though wafer factories have accelerated the pace of capacity construction in the past two years,Supply chain tensions still prevent production capacity from being built in place in the short term. At the same time, concerns about the regional division of the supply chain due to industrial transfer have accelerated the demand of end customers for production in various places.There are capacity gaps located everywhere.
In response to the epidemic, SMIC immediately conducted closed-loop management, implemented site division and classification management, and dredged transportation and logistics. It also stabilized the morale of employees, stocked anti-epidemic materials, and did a good job in emergency treatment and prevention, which basically ensured the continuity of production and operations and the delivery of customer orders.
Because the annual repair of some SMIC factories has been postponed to this quarter, and the short-term impact of the Shanghai epidemic on its capacity utilization rate. For the second quarter, SMIC is relatively conservative, expecting sales revenue to increase by 1%-3% month-on-month; gross profit margin is in the range of 37%-39%, slightly lower than the first quarter.
▲SMIC’s financial guidance for the second quarter of 2022
Compared with the impact of the Shanghai epidemic on production, SMIC’s plans to build factories and expand production in Shenzhen are relatively smooth.
Its 8-inch capacity in Shenzhen has been expanding, and the expansion is in line with SMIC’s expectations. The 12-inch factory equipment in Shenzhen has been moved in in December last year and has been in trial production. Mass production can be achieved by the end of this year as planned.
Regarding the specific production capacity impact, Zhao Haijun said that the main impact at present is stillSupplier’s delivery delay, such a delay ismonths. The epidemic has less impact on the production and assembly of the factory, and the reduction of shipping flights has an impact on SMIC’s production capacity supply, and the delay has been included in the production capacity.
Gao Yonggang, SMIC’s chairman and chief financial officer, added that it had taken these factors into account when developing its second-quarter metrics, but not necessarily so comprehensively. current epidemicThe impact on wafer output is expected to be based on 5%, SMIC is working hard to control the impact within this range.
Some analysts mentioned that the prices of upstream raw materials and equipment are rising, and there are rumors of rising prices for wafer foundries. How does SMIC view the future trend?
Zhao Haijun responded that the price of government-managed supplies such as water, electricity, and heat has increased, and some have increased significantly. Raw materials are indeed rising, and some even rise by more than 30%. In addition, employees’ salaries will also rise.
Therefore, SMIC expected at that time,May erode 10% of SMIC’s gross profit margin. In this quarter, many of SMIC’s raw materials were purchased last year. In the second and third quarters, more new raw materials will be used, and the depreciation of equipment will be higher, and the increase in cost will gradually manifest itself. The reason why SMIC expects gross profit margins to decline in the second quarter.
In terms of price increases, SMIC’s principle is to conduct friendly negotiations with customers, and more consideration is long-term strategic cooperation, rather than short-term earning more money. Therefore, SMIC has raised prices for some customers, and some customers did not raise prices so much, and did not announce a comprehensive price increase.
Chip inventory is a topic of concern to the industry. Zhao Haijun mentioned that some products such as power management, mobile phone fast charging, Wi-Fi and other chips are still out of stock. However, the current electronic equipment products are iterating, and the types of chips that are in short supply must be further divided. For example, the demand for old Wi-Fi 4 and Wi-Fi 5 chips in mobile phones may not be so high.
He concluded: For inventory,What everyone can do must be surplus; if you are a leading international customer, it must be good, and the next one must be bad; if you are in the international market, it must be good, but only in the Chinese market, it must be bad.At present, SMIC is still in a situation of short supply, because its production capacity is heavily tilted towards the shortage of power management, MCU, Wi-Fi 6 and other parts.
Conclusion: Low-end chip sales are hurting
The epidemic continues or impacts the supply chain
This quarter, SMIC’s financial report and conference call provided a certain reference for the current chip supply situation and the wafer manufacturing industry under the epidemic.
Overall, the current global wafer manufacturing market is still in a situation of tight production capacity, but it has changed from a comprehensive shortage to a shortage of MCUs, power management chips, and Wi-Fi chips in the sub-sectors. At the same time, due to the iteration of terminal electronic equipment, the shortage of more advanced products has intensified, and the demand for more mature products has decreased.
For downstream chip design companies, companies with unique technologies and the ability to open up the international market will have certain advantages in competition. Sales of its low-end chips will suffer as chip capacity and inventories increase.
Under the impact of the epidemic, SMIC and other wafer manufacturers have been less affected in Q1 and Q2 this year through closed-loop management. However, its downstream packaging, testing, and transportation supply chains have been impacted. If the epidemic continues, the supply capacity may be greatly affected.