Equities

China’s SMIC Becomes World’s No. 3 Foundry with 6% Market Share, Says Counterpoint

SMIC becomes the world's third-largest foundry with 6% market share, reporting $1.75 billion in Q1 2024 revenue.

By Bill Bullington

5/23, 04:58 EDT
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Key Takeaway

  • SMIC has become the world's third-largest foundry by revenue in Q1 2024, holding a 6% market share.
  • The company reported a 19.7% YoY revenue increase to $1.75 billion, driven by strong demand in China.
  • Despite U.S. sanctions and lack of EUV lithography machines, SMIC produced a 7-nanometer chip for Huawei's Mate 60 Pro smartphone.

SMIC's Market Position

China’s largest chipmaker, Semiconductor Manufacturing International Co. (SMIC), has ascended to become the world’s third-largest foundry by revenue in the first quarter of 2024, according to Counterpoint Research. SMIC now holds a 6% market share, up from 5% last year, surpassing GlobalFoundries and Taiwan’s United Microelectronics Corporation. This places SMIC behind only Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung Foundry, which hold 62% and 13% of the market share, respectively.

"SMIC’s quarterly results surpassed market expectations, and the company secured the No. 3 position in foundry revenue market share in Q1 2024 for the first time, as demand recovery begins in China, including CIS, PMIC, IoT, and DDIC applications," stated the Counterpoint Research report published Wednesday. SMIC's chips are utilized in a variety of applications, including automobiles, smartphones, computers, and IoT technologies.

Financial Performance

SMIC reported first-quarter revenue of $1.75 billion, marking a 19.7% increase from the previous year, driven by customers stocking up on chips. More than 80% of its revenue in the quarter came from customers in China, according to the company’s earnings report. For the second quarter, SMIC anticipates a revenue increase of 5% to 7% from the first quarter, fueled by strong demand.

China consumes nearly 50% of the world’s semiconductors, being the largest assembly market for consumer devices, as per data from tech consultancy Omdia. This significant consumption underscores the importance of SMIC in Beijing’s strategy to reduce dependence on foreign technology in its domestic semiconductor industry. To support this goal, Beijing has invested billions of yuan in subsidies for its chip firms.

Challenges and Sanctions

SMIC has been under U.S. sanctions since 2020, requiring American businesses to apply for a license before selling to SMIC, thereby restricting its access to certain U.S. technologies. Additionally, SMIC has been unable to obtain extreme ultraviolet (EUV) lithography machines, which are essential for producing high-tech semiconductors on a large scale at lower costs. These machines are exclusively made by Dutch firm ASML.

Despite these challenges, SMIC has made notable advancements. A breakdown of Huawei’s Mate 60 Pro smartphone, launched last year, revealed that it runs on a 7-nanometer chip made by SMIC. The smartphone also supports 5G connectivity, despite U.S. efforts to cut Huawei off from key technologies, including 5G chips. However, SMIC still lags behind TSMC and Samsung, which began mass-producing 7-nanometer chips in 2018 and currently produce 3-nanometer chips.

Street Views

  • Counterpoint Research (Bullish on SMIC):

    "SMIC’s quarterly results surpassed market expectations, and the company secured the No. 3 position in foundry revenue market share in Q1 2024 for the first time, as demand recovery begins in China, including CIS, PMIC, IoT, and DDIC applications."