SMIC Photo: VCG

 Chinese major chipmaker Semiconductor Manufacturing International Corporation (SMIC) posted a decline in gross profits for the fourth quarter compared with the quarter before as wafer shipments shrank, according to its fiscal disclosure on Thursday, revealing an annual gross margin target to be in the mid-teens this year amidst the fallout of its addition to the US Entity List.

The chipmaker posted $981 million in revenue during the fourth quarter with its gross margin at 18 percent, according to unaudited results filed with the Hong Kong bourse.

Its gross profit was $176.8 million in the fourth quarter, a decline of 32.5 percent from the previous quarter’s $262.0 million, according to the company, which attributed the fall to “the decrease in wafer shipment and product mix change.”

The quarterly margin reading also compared with 24.2 percent in the third quarter. 

SMIC’s shipments of 8-inch equivalent wafers totaled 1,415,788 during the fourth quarter, down 1.7 percent from the prior quarter, although its monthly capacity rose over the past quarter owing to its capacity expansion in the majority-owned Beijing 300mm fab, read its quarterly disclosure.

Its research and development spending also rose to $194.4 million in the fourth quarter from $158.5 million in the third quarter.

Still, SMIC’s multiple full-year financial metrics hit record highs, according to the company, citing its annual revenue, gross profits and profits attributable to the company.

Its shares in the STAR Market in Shanghai finished up 1.39 percent on Thursday, while its shares in the Hong Kong market shed 2.33 percent.

The US Entity List restricts SMIC from buying US related items or technologies. 

Export license application processes must be followed, which take time and will face uncertainty, the filing indicated, citing Gao Yonggang, SMIC’s chief financial officer.

In a sign of the blacklist’s impact, SMIC’s sales revenue from higher-end 14-nm and 28-nm products accounted for only 5 percent of the total for the fourth quarter, down dramatically from 14.6 percent in the third quarter. 

As a consequence, the company sets its annual revenue target at “mid-to-high single digit percentage growth,” while its gross margin target for the whole of 2021 is set in the mid-teens.

With demands for non-FinFET processes remaining strong amid tight foundry industry capacity, SMIC expects its capacity for non-FinFET to continue to be fully loaded and pledges to increase monthly non-FinFET capacity for both 8-inch and 12-inch this year.

“Given the impact of being added to the Entity List, we will consider strengthening the development and deployment of our first and second generation FinFET multi-platforms and expand the reliability and competitiveness of our platforms,” according to an announcement from SMIC.