China's SMIC has strong quarter but outlook cloudy due to tariffs, production yields
By Che Pan and Brenda Goh
BEIJING: China's top foundry, Semiconductor Manufacturing International Corp (
SMIC
), said first-quarter revenue surged and profit more than doubled, helped in part by rush orders from U.S. customers seeking to beat hikes in tariffs.
But the results fell short of analysts' expectations and SMIC predicted a drop in revenue for the current quarter, saying the company could have lower production yields due to the testing of newly installed equipment. Its Hong Kong-listed shares tumbled 6.8%.
Chinese authorities have been in close communication with the country's chip sector to mitigate the impact of escalating trade tensions between the U.S. and China, including granting tariff exemptions, co-CEO Zhao Haijun told an earnings call.
"The direct impact on China's foundry sector at the moment is minor due to tariff exemptions and a diversified supply chain," he said.
But Zhao added that the second half remained unclear and SMIC was watching to see if customers reduce their purchases due to price increases caused by tariffs, which could result in a "hard landing" for the industry.
SMIC's profit attributable to shareholders jumped 162% to $188 million in the January-March quarter from a year earlier, but fell short of an LSEG consensus estimate of $222.4 million.
Revenue climbed 28%. U.S. clients accounted for 12.6% of its first-quarter revenue, compared with 8.9% in the previous quarter and 14.9% in the same period a year ago
SMIC predicted revenue could decline by as much as 6% in the second quarter from the January-March quarter.
The foundry focuses on chips for consumer electronics and home appliances. Advanced chips such as those found in Huawei's smartphones represent a very small portion of its sales. SMIC has never confirmed that it produces Huawei chips.
U.S. President Donald Trump's administration in April granted exclusions from steep reciprocal tariffs on smartphones, computers and memory chips imported from China. Prior duties on Chinese imports, however, remain in place.
Chinese authorities have also granted exemptions on some products, including semiconductors.
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