[SINGAPORE] Semiconductor Manufacturing International Corporation (SMIC) plunged on Friday (May 9) after China’s leading chipmaker warned sales could fall as much as 6 per cent this quarter because of production disruptions.
Co-CEO Zhao Haijun said sales would fall between 4 per cent and 6 per cent in the second quarter, versus projections for a sharp rise. The warning came after the company discovered unspecified issues with production lines. The company though is sticking with plans to spend US$7.5 billion this year to boost and upgrade output, in line with previous outlays.
SMIC’s stock plunged 11 per cent on Friday in Hong Kong, the biggest fall in more than a month.
“The incident had affected the process accuracy and yield of our products,” Zhao said. “Certain upgrade efforts during equipment verification had also affected yield.”
Zhao also warned of risks in the consumer market, saying a shipment correction in the smartphone market was likely to happen in July or August due to an overly ambitious target.
SMIC reported US$188 million in net income for the first quarter, missing an average analyst estimate of US$218.1 million, despite posting 28 per cent growth in sales.
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The company’s weak second-quarter sales guidance demonstrates the toll of pricing pressure and softer-than-expected consumer chip demand in China, both aggravated by US tariffs, analysts Charles Shum and Steven Tseng wrote in a note.
“SMIC’s 1Q sales undershot consensus by 4.7 per cent, with an earnings miss of 16 per cent, despite the front-loading of orders prior to US tariffs being implemented,” they said.
Zhao dismissed the potential for damage from US tariffs. “We expect positive results from trade talks. If that happens, we believe the impact to semiconductor contract making business can be absorbed,” he said.
Hua Hong Semiconductor, another major Chinese chipmaker, also said any tariffs would not have a meaningful impact on its business. The impact would be limited because the company mostly sells its products in China, president Peng Bai said in an earnings call on Thursday.
“As long as the tariff situation does not disrupt too much of the market dynamics or the market logic too much, we still expect that 2025 will play out as we originally expected,” he said. Shares of the firm fell as much as 13 per cent after first-quarter net income missed estimates by a wide margin. BLOOMBERG
