Strong Demand and Full Orders, SMIC Raises Prices
The United States’ export control on SMIC has made the already tight global foundry capacity “worse”. The company also confirmed for the first time that it will “raise average wafer prices” due to strong customer demand and strong orders.
On November 25, an investor asked SMIC on the “SSE e-Interaction” platform: It is reported that the demand for 8-inch wafer foundry capacity is strong, and many foundries will adjust the increase in the fourth quarter and the first quarter of next year. price, does your company have this plan?
Today (November 26), SMIC said in response to the question: existing customer orders will be carried out according to the signed contract, and new customers and new projects will be negotiated by both parties to determine the price, and the company will also optimize product mix. Raise the average wafer price.
The screenshot of “SSE e-Interaction” is the same as below
Half a month ago (November 11), SMIC’s third quarterly report showed that its revenue exceeded US$1 billion for the first time, setting a new high for three consecutive quarters. The demand for mature application platforms was strong, and the capacity utilization rate was close to full load. Revenues related to chips such as management have grown significantly.
At that time, some brokerages speculated that the increase in SMIC’s revenue may be related to the increase in the price of 8-inch wafers.
Since entering the second half of the year, the global 8-inch foundry capacity has continued to be in short supply. On the one hand, due to the fact that 8-inch fabs have had little new investment for many years, the total production capacity has stagnated; on the other hand, home office and online education have increased the demand for smart terminals, putting pressure on chip production capacity.
In September, the U.S. government further tightened export controls on SMIC, which had a certain impact on the expansion of its 8-inch/12-inch mature technology and advanced technology, and further put pressure on the already tight global foundry capacity.
After it was confirmed that the export control was strengthened by the United States, SMIC’s share price was halved, and investors kept asking the company’s communication progress with the U.S. Department of Commerce on “SSE e-Interaction”, including whether it could continue to purchase and SMIC’s follow-up. Negotiation plans, etc.
SMIC said in its reply today that the company has always adhered to compliant operations and abides by the relevant laws and regulations of the place where it operates. At present, the company is operating normally and has actively communicated and communicated with relevant U.S. government departments, but the specific details are not convenient to disclose.
Looking forward to the full year of 2020, SMIC revised its revenue target upward to an annual growth rate of 24% to 26%, and its gross profit margin target was higher than last year.
“At present, there is no obvious phenomenon of customer transfer orders. The company maintains a partner model of active communication and close cooperation with customers, and tries its best to meet customer needs.” SMIC also indirectly responded “Qualcomm transferred orders to TSMC.” ‘ rumors.
Taiwan media previously reported that Qualcomm had planned to transfer the power management chips of 5G mobile phones to other manufacturers, but due to the tight global production capacity, the company also failed to find “alternative production capacity” from SMIC after increasing the price.
“When will the procurement of equipment required for the new 28nm factory in Beijing be implemented?” Another investor asked.
SMIC revealed that the Beijing new plant project is still in the preparatory stage, and will be announced in time if there is any substantial progress.
On July 31 this year, SMIC signed the “Cooperation Framework Agreement” with the Beijing Development Zone Management Committee. The two parties will establish a joint venture to engage in development and operation focusing on the production of 28nm and above integrated circuit projects. The first phase plans to reach a monthly agreement. 100,000 12-inch wafer capacity.
It is worth mentioning that in the context of SMIC’s limited expansion, Taiwanese media recently released news that TSMC, Samsung and UMC are simultaneously targeting the huge domestic demand market in mainland China and are preparing to expand 28nm production in the mainland to increase their share.
The brokerage research report believes that with the continuous advancement of 5G, the demand for advanced process chips in the electronics industry has surged. With the advantages of huge market demand, rich demographic dividends, stable economic growth and favorable policy environment, China’s integrated circuit industry will achieve rapid development.
“At present, there is still a mismatch between supply and demand in the integrated circuit market in mainland China, which provides a broad market prospect for wafer foundries such as SMIC.” said the report.