SMIC's Q4 revenue increased by 30.9% year-on-year, reaching a record high, while net profit decreased by 13.5% year-on-year. Capital expenditure is expected to be balanced in 2025 | Financial Report Insights
SMIC's annual revenue continued to grow, but net profit fell by 23.3% year-on-year, with the core issue being increased volume but decreased prices. Wafer sales reached a record high, increasing by 36.7% year-on-year to 8,021 thousand pieces, with a capacity utilization rate of 85.6%. The average selling price of wafers was 6,639 yuan, a year-on-year decrease of 4.7%
Against the backdrop of the overall semiconductor industry still in the recovery phase, SMIC has demonstrated robust resilience, achieving double-digit revenue growth for the fourth time and setting a record high for annual wafer sales. However, due to increasingly fierce industry competition, SMIC's profitability has faced challenges, with significant year-on-year declines in net profit for both the fourth quarter and the entire year.
On Thursday, the 27th, SMIC announced its 2024 performance report, with the key points as follows:
Revenue Performance: Fourth-quarter revenue was RMB 15.917 billion, a quarter-on-quarter increase of 2%, setting a record high for a single quarter, with annual main business revenue reaching RMB 57.108 billion, a year-on-year increase of 28.1%.
Profitability: Fourth-quarter net profit attributable to shareholders was RMB 999 million, a year-on-year decrease of 13.5%, with a gross margin of 18.6%, showing a decline compared to the previous year. Annual net profit was RMB 3.699 billion, a year-on-year decrease of 23.3%, mainly affected by declines in investment income and financial income.
Core Business: Wafer sales volume reached a new high, increasing by 36.7% year-on-year to 8,021 thousand pieces, with a capacity utilization rate of 85.6%. The average selling price of wafers was RMB 6,639, a year-on-year decrease of 4.7%.
R&D Investment: Annual R&D expenses were USD 765 million, accounting for 9.5% of revenue, with R&D personnel accounting for 12.1%.
Capital Expenditure: Cash paid for the purchase of fixed assets, intangible assets, and other long-term assets for the year was RMB 54.559 billion, an increase of 1.3% compared to the same period last year.
Cash Reserves: Cash and cash equivalents at the end of the year reached USD 6.36 billion, ensuring future capital expenditure needs.
2025 Guidance: Sales revenue growth is expected to exceed the average of comparable peers, with capital expenditure remaining flat compared to the previous year.
Shareholder Returns: The company plans not to distribute profits.
The Game of Volume Increase and Price Decrease
SMIC's annual revenue continues to grow, but net profit has decreased by 23.3% year-on-year, with the core contradiction being the increase in volume and decrease in price.
The 36.7% growth in wafer sales volume in 2024 drove revenue, but the average selling price decreased by 4.7%, reflecting the dilution of prices due to the release of mid-to-low-end capacity. Demand for consumer electronics (accounting for 37.8%) and smartphones (27.8%) has rebounded, but the proportion of high-priced products such as high-voltage drivers and RF is insufficient.
Specifically, the demand for lower-priced consumer electronics chips has increased, while the shipment volume of higher-priced advanced process chips has relatively declined. However, whether this is a structural adjustment or simply a market fluctuation still requires continuous observation.
In addition, last year's depreciation and amortization expenses were RMB 23.156 billion (year-on-year +22.8%), and the fixed costs of new production lines during the ramp-up phase will take time to dilute.
Operating Cash Flow Maintains Expansion, Capital Expenditure Expected to Remain Flat
Fourth-quarter operating cash flow was RMB 10.394 billion, a quarter-on-quarter increase of 15.3%, but annual capital expenditure was RMB 54.559 billion. The company expects the 2025 capital expenditure guidance to "remain flat compared to the previous year," but with an EBITDA margin of 54.6% (year-on-year -5.5 percentage points), it is necessary to be cautious about the risk of rising leverage as to whether free cash flow can support both expansion and R&D SMIC stated in its financial report that the company will continue to seize the growing demand for local manufacturing by quickly identifying incremental categories of customer market share, actively responding to changes in customer demand, timely adjusting its product mix, and focusing on technological innovation and process optimization. For 2025, the company expects its sales revenue growth to exceed the average of comparable peers and will continue to maintain its investment in R&D and capacity expansion. This reflects SMIC's confidence in the long-term growth of the industry and also demonstrates its clear strategic layout.
In addition, the company continues to invest in R&D, with R&D expenditure accounting for 9.4% of operating revenue. Although this represents a decline compared to last year, it still maintains a high level