By Che Pan and Joe Cash
BEIJING (Reuters) -China’s top foundry SMIC said on Friday U.S. tariff policy had not led to a “hard landing” the company had initially feared and strong domestic demand would keep its production capacity tight until October.
Co-CEO Zhao Haijun told a post-earnings call the company was not consulting with customers on U.S. President Donald Trump’s 100% tariff plan for chip imports but expected smaller impact, thanks to contingency plans made after the April tariffs.
“After these past few months, everyone has either stocked up enough inventory for this year and next year, or found other suppliers,” Zhao said, “So I think the impact will become even smaller.”
Previous tariff rounds had led to cost increases of less than 10% for overseas customers, he added.
China raised additional duties on U.S. goods to 125% in April after Trump effectively raised tariffs on Chinese goods to 145%. On Wednesday Trump vowed a tariff of about 100% on imports of semiconductors, but excluded companies manufacturing in the U.S. or which have committed to do so.
SMIC, which does not have manufacturing in the United States, was blacklisted by the U.S. commerce department in 2020.
China is its dominant market, contributing 84% of second- quarter revenue, flat with the first, while the U.S. made up 12.9%, up slightly from 12.6%.
SMIC’s second-quarter revenue rose 16.2% on the year to $2.2 billion. Its profit attributable to owners declined 19.5% to $132.5 million, missing analysts’ estimates of $183.35 million, according to LSEG data.
Semiconductor Manufacturing International Corp (SMIC), as it is formally known, shipped 2.4 million eight-inch equivalent wafers in the second quarter, up 4.3% from the previous quarter.
Zhao said its production capacity remained insufficient and would stay tight until October due to robust demand from domestic substitution for analog chips, WiFi and ethernet chips and controller chips for memory.
SMIC’s monthly production capacity expanded by 18.5% quarter-on-quarter to 991,000 wafers, with utilisation rates rising to 92.5% from 89.6% in the March quarter.
But Zhao said the fourth quarter is usually a slow season for the industry and rush orders and early shipments would slow then.
SMIC expects third-quarter revenue to increase by 5% to 7% from the second.
SMIC’s Hong Kong-traded shares were down more than 5% on Friday.
(Reporting by Pan Che and Joe Cash; Editing by Muralikumar Anantharaman and Clarence Fernandez)
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