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China’s top chipmaker reports Q2 plunge in profits

China's leading chipmaker SMIC has been hit hard by US sanctions
China's leading chipmaker SMIC has been hit hard by US sanctions - Copyright AFP Hector RETAMAL
China's leading chipmaker SMIC has been hit hard by US sanctions - Copyright AFP Hector RETAMAL

Leading Chinese chipmaker SMIC announced Thursday a sharp year-on-year drop in profits during the second quarter, as a domestic price war and technological rivalry between Beijing and Washington show no signs of abating.

The United States has in recent years taken steps to cut off Chinese firms from accessing its technology and has tightened restrictions on semiconductor exports to the world’s second-largest economy.

Semiconductor Manufacturing International Corporation (SMIC), which is listed in Hong Kong and its home city Shanghai, has been a primary target of these measures.

Beijing, which has sought to boost the country’s ability to mass-produce advanced chips on its own, maintains that the US measures are aimed at preserving its own supremacy in the vital sector.

SMIC said Thursday in a statement to the Hong Kong Stock Exchange that its second-quarter profit attributable to owners stood at $164.6 million, dropping 59.1 percent compared to the same period in 2023.

Revenue surged to $1.90 billion, up 21.8 percent year-on-year and improving from the $1.75 billion recorded in the first quarter.

The firm said it expected revenue growth to continue in the third quarter, increasing by 13 to 15 percent from the second quarter.

Computer chips undergird vast sections of the modern economy and are increasingly key for national security, found in everything from televisions and cars to weapons and satellites.

With escalating geopolitical tensions between China and the United States over thorny issues including Taiwan and the South China Sea, the two countries have been racing to gain an upper hand in the strategic field.

China lacks the capabilities needed to produce large quantities of the smallest and most advanced chips, making it dependent on foreign suppliers.

Despite making significant progress as Beijing pours tens of billions of dollars into the sector, the technical performance of China’s top firms still lags that of TSMC, the Taiwanese juggernaut responsible for over half of global chip production.

Experts say that SMIC has managed to produce a highly advanced seven-nanometre chip, which would represent a major milestone for the Chinese semiconductor industry.

SMIC has not confirmed the claims.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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