SMIC and Hua Hong send a signal: Full production!
SMIC and Hua Hong reported their second-quarter financial results on August 7, showing that both companies achieved year-on-year growth in sales revenue, with significant improvements in profitability. SMIC's sales revenue was USD 2.209 billion, a year-on-year increase of approximately 16.2%, with a gross margin of 20.4%. Hua Hong's sales revenue was USD 566.1 million, a year-on-year increase of 18.3%, with a gross margin of 10.9%. Notably, both companies saw a substantial increase in capacity utilization, with SMIC nearing full production and Hua Hong's capacity utilization exceeding 100%
On August 7th, the two major wafer foundries in China, SMIC and Hua Hong, simultaneously released their second-quarter performance reports. Both companies achieved double-digit year-on-year growth in sales revenue for the second quarter, significantly improving their profitability.
More noteworthy than the revenue growth is the substantial increase in capacity utilization for both wafer foundries. SMIC is nearing full production, while Hua Hong's capacity utilization exceeds 100%.
Second Quarter Revenue Achieves Year-on-Year Growth
According to the second-quarter financial report released by SMIC on the Hong Kong Stock Exchange, the company's sales revenue for the second quarter of this year was USD 2.209 billion, a decrease of 1.7% compared to the first quarter's revenue of USD 2.247 billion, but an increase of approximately 16.2% compared to the revenue of USD 1.901 billion in the second quarter of 2024.
In terms of gross profit, the company's gross profit for the second quarter was USD 450 million, down 11.1% from USD 506 million in the first quarter, but up 69.7% from USD 265 million in the second quarter of 2024; the gross profit margin for the second quarter was 20.4%, a decrease of 2.1 percentage points from the previous quarter, but an increase of 6.5 percentage points from 13.9% in the second quarter of 2024.
In the management commentary, SMIC disclosed that based on the unaudited financial data for the first and second quarters, the company's sales revenue for the first half of the year was USD 4.46 billion, an increase of 22.0% compared to the same period last year; the gross profit margin was 21.4%, an increase of 7.6 percentage points compared to the same period last year.
On the same day, Hua Hong disclosed that its sales revenue for the second quarter was USD 566.1 million, an increase of 18.3% year-on-year and 4.6% quarter-on-quarter; the gross profit margin was 10.9%, an increase of 0.4 percentage points year-on-year and 1.7 percentage points quarter-on-quarter; the profit attributable to the parent company was USD 8 million, an increase of 19.2% year-on-year and 112.1% quarter-on-quarter.
Hua Hong's President and Executive Director Bai Peng stated that the company's second-quarter revenue met guidance expectations, with a gross profit margin exceeding guidance, and both sales revenue and gross profit margin achieved quarter-on-quarter growth.
Capacity Utilization: Nearing Full Production!
Compared to revenue growth, a more significant highlight for both wafer foundries in the second quarter was the substantial increase in capacity utilization.
In the second quarter, SMIC's capacity utilization significantly improved, nearing full production. According to the disclosure, the company's capacity utilization for the second quarter was 92.5%, an increase of 2.9 percentage points from 89.6% in the first quarter, and an increase of 7.3 percentage points from 85.2% in the second quarter of 2024
Hua Hong disclosed that the company's capacity utilization rate in the second quarter reached 108.3%, an increase from 102.7% in the first quarter of this year and 97.9% in the second quarter of 2024. Bai Peng stated that the capacity utilization rate of Hua Hong reached a new high in recent quarters in the second quarter of this year.
Further analysis of revenue composition shows that both companies have their highlights, revealing market growth points.
SMIC disclosed that the revenue share from industrial and automotive sectors continues to grow. Revenue analysis shows that in the second quarter, the revenue share from industrial and automotive sectors was 10.6%, compared to 9.6% in the first quarter of this year and 8.1% in the second quarter of 2024. Additionally, the revenue share from consumer electronics business is also continuously increasing.
Hua Hong's disclosure indicates that in the second quarter, the market demand for flash products, super junction and MOSFET products, and power management products was strong.
Optimistic Revenue Guidance for the Third Quarter
Looking ahead to the third quarter, SMIC expects a revenue growth of 5% to 7% quarter-on-quarter, with a gross margin between 18% and 20%.
Hua Hong disclosed that the company expects third-quarter sales revenue to be between $620 million and $640 million, with an expected gross margin of about 10% to 12%.
Bai Peng stated that as the new 12-inch production line in Wuxi steadily progresses in capacity ramp-up, the company will achieve a comprehensive upgrade from capacity scale to technological ecosystem.
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