China’s biggest chipmaker reels as US sanctions have a tight grip on it by the throat

China has many companies that are dedicated expressly to the semiconductor industry . Hua Hong Semiconductor, Honghu Suzhou Semiconductor Technology, Naura Technology Group or Advanced Micro-Fabrication Equipment are some of them, but one shines with its own light above the rest: SMIC ( Semiconductor Manufacturing International Corp ).

Its global market share is currently hovering around 5% , which is far from the 17% held by Intel and Samsung, and much further from the 54% held by Taiwanese giant TSMC. Even so, it is hot on the heels of the US GlobalFoundries, which has an approximate share of 7%. These figures clearly reflect its relevance in the integrated circuit market.

Despite everything, it has a formidable rival against it: the United States. The country led by Joe Biden placed the entire Chinese semiconductor industry in its sights on October 7, 2022 , and it did so with one purpose: to prevent this Asian country from being able to develop highly integrated chips similar to those currently produced by TSMC, Samsung or Intel. SMIC is its spearhead, which has placed this company at the forefront of the United States’ black list.

SMIC’s revenues have fallen by 18% during the second quarter of 2023

The financial report published by SMIC last week clearly reflects that this company’s revenues have fallen by 18% during the second quarter of this year when compared to what it obtained during the same period of 2022. However, it also reveals that the The second quarter has been a little better than the first of 2023 because its revenues have increased by 6.7%.

These results are caused by a drop in demand in the field of consumer electronics

Those responsible for this company anticipate that their income will increase between 3 and 5% during the third quarter of this year compared to the same period in 2022. In any case, what is really interesting is that they defend that these results are caused by a situation global market in which there is a drop in demand in the field of consumer electronics.

Zhao Haijun, co-general director of SMIC, justifies his company’s economic performance in this way: “Although the demand for personal computers, industrial components, automotive chips and some other sectors has stabilized and the industry recession has touched Bottom line, our business still has many challenges ahead, geopolitical uncertainty and lack of demand growth are some of them.”

To some extent Haijun’s remarks are meant to emphasize the global decline in demand for electronic devices, but it seems reasonable to assume that both SMIC and other Chinese semiconductor makers are suffering from the sanctions imposed by the US and its allies . These bans prevent Chinese companies from having access to the most advanced lithography equipment , such as ASML’s UVE and UVP machines .

It is not entirely clear to what extent SMIC’s economic performance is being affected by the sanctions, but it is clear that its inability to access cutting-edge equipment limits its competitiveness against some of its rivals, such as TSMC, Samsung, UMC or Global Foundries. The Chinese market is huge, and we can be sure that it plays a key role in SMIC’s accounts, but it is unlikely that a company of its size can maintain its health by feeding only from its own domestic market.