SMIC is “stocking” key production equipment and important replacement parts


SMIC

The current tension between the U.S. and China is causing a lot of chaos in the manufacturing industry. The U.S. has been banning Chinese manufacturers and there is no certainty for any Chinese manufacturer presently. A few weeks ago, there were reports that the U.S. may include SMIC (China’s largest chip foundry) in its entity list. Now, reports out of China claims that SMIC is stocking some relevant replacement parts and equipment.  The report claims that SMIC is doing this in order to reduce the impact of the US tightening of export restrictions.

Huawei to move from TSMC to SMIC

Furthermore, SMIC is cooperating with other Chinese chip manufacturers to establish a shared reserve of such parts. According to the report, there is already a central warehouse for these electronic parts. In addition, an inside source claims that the scale of SMIC’s procurement from upstream suppliers in the United States, Europe, and Japan has exceeded the full-year demand in 2020. The procurement items include etching, lithography, and wafer cleaning.

The company is also procuring other equipment such as testing machines as well as consumables. From what it has currently according to the reports, it can maintain production for over a year. 

Rumors claim that SMIC has been banned by the U.S.

Earlier, there was news that the US Department of Commerce has imposed export restrictions on SMIC. But then SMIC officially denied the news, saying that the company had not received such official news. The company reiterated that SMIC only provides products and services for civilian and commercial end-users. The company has nothing to do with the Chinese military and does not produce chips for any military end-users.

The second-quarter financial report shows that SMIC’s sales in the second quarter of 2020 were $939 million, an increase of 3.7% month-on-month, and 18.7% year-on-year. In the second quarter of 2020, its gross profit was $249 million, an increase of 6.4% month-on-month, and 64.5% year-on-year. The risk mass production of SMIC 14nm chips has already begun. SMIC’s 14/28nm advanced manufacturing processes account for 9.1% of its total production. Currently, one-quarter of SMIC’s customers are in the United States.

Whether the current report is true or not, one thing is certain, Chinese manufacturers are perplexed. They are already planning for a “raining day”. Nobody wants to be taken unawares thus they are quietly making preparations. Chinese companies are working hard to overcome the U.S. grip on core manufacturing technologies. If this happens, we will see a new dimension in the industry.

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