SMIC co-CEO Zhao Haijun said the foundry can still benefit from rising demand for less advanced ‘legacy chips’ required for some AI products
The chief executive of China’s top foundry said on Friday that the company cannot take full advantage of surging demand for artificial intelligence (AI) chips because of US restrictions on advanced-node technologies.
Semiconductor Manufacturing International Corporation (SMIC) co-CEO Zhao Haijun made the comments the day after the chipmaker reported record revenue in the third quarter owing to strong demand for “legacy chips” such as those used in electric vehicles (EVs).
US sanctions have prevented the Shanghai-based foundry from importing advanced tools needed to upgrade its processing and narrow its technological gap with international rivals such as Taiwan Semiconductor Manufacturing Company (TSMC). Yet Zhao suggested SMIC could still be benefiting from the industry-wide AI boom.
“AI is a blessing for semiconductor manufacturing,” Zhao said during an earnings conference call with analysts on Friday. “It can bring us business growth in many years ahead.”
The AI boom over the past couple of years has led to a surge in demand for global foundries, which have rushed to reconfigure their production mix to focus on graphics processing units (GPUs), the chips that power much of the training of AI models. TSMC, the world’s largest contract chipmaker, said in October that it is bullish about its outlook for the next year because of solid AI demand.
With foundry priorities shifting towards GPUs and other specialised AI chips, Zhao said many customers are turning to SMIC to get other services they need.
“We can’t produce competitive products such as GPUs due to caps on manufacturing nodes, but we can produce other AI-related products such as analogue and power-supply chips used for AI products,” he said, adding that this has been a growing business segment for the company.
Zhao predicted the chipmaking industry would grow 10 per cent next year on the back of strong AI demand, but without that demand the rate could be as low as 4 per cent.
SMIC’s quarterly revenue surpassed US$2 billion for the first time in the three months ended September. The company added 21,000 12-inch wafters in new monthly capacity in the past quarter and expanded its client base in China. Zhao said SMIC’s new 12-inch wafer capacity has been in high demand over the last few quarters, allowing it to charge more per unit.
SMIC expects 2024 annual revenue to reach US$8 billion, which would be a 27 per cent increase over last year.
Zhao said the global foundry market has not yet bottomed out from weak European and American auto sectors or China’s weakening solar and battery industries. The sector’s full-year average production utilisation rate will be around 70 per cent this year, according to Zhao, who said this is not likely to improve significantly next year.
The substitution of international chips with domestic ones will continue to progress, according to Zhao, albeit at a slower pace over the next year, as major customers have already swapped out much of their hardware.
“Whether Chinese smartphone makers or EV producers, they have a global vision, hoping to have multiple suppliers,” Zhao said. “When domestic procurement accounts for about one third of their supply chain, the rest will not change too much.”
www.scmp.com
The chief executive of China’s top foundry said on Friday that the company cannot take full advantage of surging demand for artificial intelligence (AI) chips because of US restrictions on advanced-node technologies.
Semiconductor Manufacturing International Corporation (SMIC) co-CEO Zhao Haijun made the comments the day after the chipmaker reported record revenue in the third quarter owing to strong demand for “legacy chips” such as those used in electric vehicles (EVs).
US sanctions have prevented the Shanghai-based foundry from importing advanced tools needed to upgrade its processing and narrow its technological gap with international rivals such as Taiwan Semiconductor Manufacturing Company (TSMC). Yet Zhao suggested SMIC could still be benefiting from the industry-wide AI boom.
“AI is a blessing for semiconductor manufacturing,” Zhao said during an earnings conference call with analysts on Friday. “It can bring us business growth in many years ahead.”
The AI boom over the past couple of years has led to a surge in demand for global foundries, which have rushed to reconfigure their production mix to focus on graphics processing units (GPUs), the chips that power much of the training of AI models. TSMC, the world’s largest contract chipmaker, said in October that it is bullish about its outlook for the next year because of solid AI demand.
With foundry priorities shifting towards GPUs and other specialised AI chips, Zhao said many customers are turning to SMIC to get other services they need.
“We can’t produce competitive products such as GPUs due to caps on manufacturing nodes, but we can produce other AI-related products such as analogue and power-supply chips used for AI products,” he said, adding that this has been a growing business segment for the company.
Zhao predicted the chipmaking industry would grow 10 per cent next year on the back of strong AI demand, but without that demand the rate could be as low as 4 per cent.
SMIC’s quarterly revenue surpassed US$2 billion for the first time in the three months ended September. The company added 21,000 12-inch wafters in new monthly capacity in the past quarter and expanded its client base in China. Zhao said SMIC’s new 12-inch wafer capacity has been in high demand over the last few quarters, allowing it to charge more per unit.
SMIC expects 2024 annual revenue to reach US$8 billion, which would be a 27 per cent increase over last year.
Zhao said the global foundry market has not yet bottomed out from weak European and American auto sectors or China’s weakening solar and battery industries. The sector’s full-year average production utilisation rate will be around 70 per cent this year, according to Zhao, who said this is not likely to improve significantly next year.
The substitution of international chips with domestic ones will continue to progress, according to Zhao, albeit at a slower pace over the next year, as major customers have already swapped out much of their hardware.
“Whether Chinese smartphone makers or EV producers, they have a global vision, hoping to have multiple suppliers,” Zhao said. “When domestic procurement accounts for about one third of their supply chain, the rest will not change too much.”
US chip restrictions are hindering AI ambitions of China’s top chip foundry
SMIC co-CEO Zhao Haijun said the foundry can still benefit from rising demand for less advanced ‘legacy chips’ required for some AI products.
www.scmp.com