China’s Semiconductor Giants, SMIC and Huahong, Announce Key Updates Amid Industry Growth

Two of China's leading semiconductor foundries, Shanghai Huahong Group ("Huahong") and Semiconductor Manufacturing International Corporation ("SMIC"), have made significant updates to their business and financial operations. These developments highlight the companies' commitment to strengthening their market positions in the global semiconductor industry.

Capital Increases and Strategic Growth

Huahong Group recently raised its registered capital from approximately ¥13.27 billion to ¥13.45 billion, while SMIC's registered capital surged dramatically from $2.45 billion to $4.45 billion, an 82% increase. These capital injections aim to bolster the companies' capabilities in semiconductor manufacturing and innovation.

Huahong operates three 8-inch and three 12-inch chip production lines across four key locations in Shanghai and Jiangsu. It divides its business into two segments: Huahong Semiconductor focuses on specialty processes, while Shanghai Huali targets advanced logic process foundry services.

SMIC, China's largest and the world's third-largest foundry, provides 8-inch and 12-inch wafer manufacturing services. With facilities in Shanghai, Beijing, Tianjin, and Shenzhen, SMIC has become a cornerstone of China’s semiconductor supply chain.

Q3 Financial Performance: A Positive Trajectory

Both companies recently released their Q3 2024 financial results, showing strong performance:

• SMIC: Revenue hit $2.17 billion, a 32.5% YoY increase, with a net profit of ¥1.06 billion, up 56.4% YoY. For 2024, SMIC anticipates total revenue of approximately $8 billion with a 17% annual gross margin. The company plans to expand its capacity for power devices to support automotive, industrial, and renewable energy markets.

• Huahong Semiconductor: Q3 revenue reached $526.3 million, a 10% QoQ increase, despite a 7.4% YoY decline. Net profit soared 222.6% YoY to $44.8 million. With new 12-inch production lines at its Wuxi facility expected to begin operations by the end of 2024, Huahong projects increased capacity and revenue in 2025.

Capacity Expansion and Market Demand

Huahong and SMIC are both doubling down on mature process nodes, which continue to dominate semiconductor manufacturing for applications like smartphones, PCs, and IoT devices.

• Huahong: Its Wuxi Fab9 project will focus on automotive-grade chips, with a planned monthly capacity of 83,000 12-inch wafers. The project is expected to add 20,000 wafers per month by the end of 2025.

• SMIC: The company is accelerating production at its new fabs, including SMIC East in Shanghai and SMIC Jingcheng in Beijing, to meet increasing demand for 28nm and above nodes.

Industry Trends: Focus on Mature Nodes

According to TrendForce, mature process nodes (28nm and above) are seeing a moderate recovery in demand. In H2 2024, global foundry utilization rates for these nodes increased by 5%-10%. This trend is driven by the persistent need for mature process ICs in consumer electronics, industrial applications, and automotive technologies.

By 2025, mature node capacity is projected to grow by 6% annually, with Chinese foundries contributing significantly. New projects such as TSMC’s JASM in Japan, SMIC’s SMIC East, and Huahong’s Fab9 and Fab10 are poised to shape the global landscape.

Conclusion

Huahong and SMIC’s latest developments underscore China's growing influence in the semiconductor sector. With increased capital, expanded capacity, and a strategic focus on mature nodes, these companies are well-positioned to capture a larger share of the global market. As new fabs come online, China’s contribution to global mature node capacity is expected to surpass 25% by 2025, further solidifying its role in the semiconductor supply chain.