SMIC Raises Annual Capex Forecast to $7.5 bn Amid Earnings Pressure

In a financial update on Thursday, Semiconductor Manufacturing International Corp (SMIC) announced an upward revision in its annual capital expenditure forecast, now projected at approximately $7.5 billion. The company cited ongoing challenges in the semiconductor industry, leading to a lower profit in the third quarter and expectations of reduced gross margins in the fourth quarter.
SMIC at a trade eventSMIC reported a significant over 80 percent decline in its third-quarter profit, with earnings attributable to $470.8 million. This trend aligns with the struggles faced by other industry players like Taiwan’s TSMC and Germany’s Siltronic, all grappling with the repercussions of a semiconductor industry slowdown.

The semiconductor sector has been further impacted by global economic conditions, with businesses tightening their technology budgets in response to high-interest rates and persistent inflation. Additionally, U.S. restrictions on Chinese chip companies are contributing to the challenges faced by the industry.

For the fourth quarter, SMIC anticipates a gross margin ranging between 16 percent and 18 percent, down from 19.8 percent in the third quarter. The company’s revenue for Q3 dropped to $1.62 billion from $1.91 billion in the previous year. However, SMIC expects a sequential increase of 1 percent to 3 percent in revenue for the fourth quarter.

Despite the current challenges, SMIC had earlier projected its capital expenditure for 2023 to remain relatively flat compared to 2022, which stood at about $6.35 billion. The semiconductor manufacturer remains vigilant in navigating the evolving market conditions and global economic challenges impacting the industry.

Investors and industry analysts are closely monitoring these developments as the semiconductor market continues to face headwinds, affecting companies’ financial performances and capital investment strategies.