TAIPEI -- China's top contract chipmaker, Semiconductor Manufacturing International Corp., said on Friday that strong domestic demand is helping it deliver robust earnings despite a U.S. crackdown that has restricted the company's access to American technologies since last year.
However, SMIC also acknowledged that Washington's trade restrictions have impacted its development of more advanced chips.
SMIC's revenue for the April-June period grew more than 43% on the year to $1.34 billion, while net profit surged nearly 400% to $687.8 million.
On Friday, the chipmaker revised up its full-year revenue growth forecast to 30% as it continues to work with suppliers to alleviate the impact of U.S. export restrictions. SMIC previously predicted growth "exceeding mid-to-high single-digits." It also raised its full-year gross margin forecast to around 30%, the highest level in years.
The results come as major economies, from China to the U.S. to the EU, race to build up their domestic chipmaking capacity for national security reasons and to secure supplies amid an ongoing semiconductor supply crunch.
"The landscape of the ICT industry has also shifted. ... The demand for domestic, indigenous manufacturing has increased substantially," SMIC co-CEO Zhao Haijun said on Friday.
Zhao cited strong demand from makers of consumer electronics and electric vehicles across a range of products, including power management chips, driver integrated circuits and image sensors.
He added that the company should be able to increase production capacity at its Beijing, Tianjin and Shenzhen chip facilities next quarter or early next year as equipment gradually arrives in China, indicating the company has been able to at least partially overcome the U.S. crackdown. Shipments of equipment containing more than 25% American technology are subject to U.S. licensing requirements, which has held up some deliveries.
"It seems that we can achieve our previous announcement of capital spending [of $4.3 billion] for the year," he said.
However, Zhao confirmed that the U.S. blacklisting has hindered the company's development of more advanced technologies. "Due to the impact of the macro environment, the speed of capacity expansion is constrained, and economies of scale have not yet been achieved for the advanced technology," he said.
The delivery of equipment from the U.S. for so-called 14-nanometer and 28-nanometer processing technologies has been postponed, Zhao said, adding that SMIC is communicating with the U.S. government, suppliers and clients to solve the problem. "We are also verifying alternative sources of equipment as part of the solution."
SMIC has also benefited from a surge in prices for chipmaking services as the global electronics and auto industries battle an unprecedented shortage of semiconductors. SMIC is a key production partner for many Chinese chip developers, including Gigadevice, Goodix, Omnivision and Galaxycore as well as U.S. chip developer Qualcomm.
"SMIC has been working in a difficult situation since we were added to the Entity List last year," Zhao and co-CEO Liang Mong-song said in a joint statement, referring to Washington's trade restrictions on the company. "We are still subject to impacts brought by the Entity List and we still see a lot of uncertainties."
SMIC's revenue from its home market, including Hong Kong, accounted for nearly 63% of its total during the June quarter, SMIC's stock filing showed. The figure was 55.6% in the January-March period. North America-based clients contributed around 23% of SMIC's total revenue, second only to China.
Last September, SMIC was added to the U.S. Commerce Department's Entity List, which bans the unlicensed exports of American technologies to the company without Washington's approval. This was a major setback for SMIC and China's tech ambitions, as the world's leading chip production tools are controlled by a handful of U.S. companies.
As a smaller rival to Taiwan Semiconductor Manufacturing Co. and Samsung Electronics, SMIC is China's most promising contract chipmaker and thus shoulders Beijing's hopes for the country to build a self-reliant and controllable chip industry.
However, its technology is still several generations behind those of its Taiwanese and South Korean rivals.