Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC) / Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC)

<ul>
<li>Based on the some judgments, SMIC consider it will be relatively flat demand in 2024F.</li>
<li>SMIC took into consideration geopolitical instability and allowed equipment vendors to submit orders in advance. </li>
<li>Currently, only a few manufacturers are stockpiling smartphones in response to this wave. The overall industry remains relatively stable.</li>
</ul>


Based on the some judgments, SMIC consider it will be relatively flat demand in 2024F.
SMIC took into consideration geopolitical instability and allowed equipment vendors to submit orders in advance. 
Currently, only a few manufacturers are stockpiling smartphones in response to this wave. The overall industry remains relatively stable.


SMIC (981.HK): Probably A Double U-Shape Correction for Around 2 Years Until the End of 2024F.

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>9926 HK/1801 HK/ BGNE US/9995 HK: US Biosecure Act extended Chinese CXO collaboration until 2032  (+/+/+/+)</li>
<li>BGNE US :BeiGene’s performance in the first quarter of 2024 exceeded expectations, especially benefiting from overseas BRUKINSA(/)</li>
<li>ZLAB US:Zai Lab's revenue and profit in the first quarter of 2024 exceeded expectations, mainly due to Efgartigimod.(/)</li>
</ul>


9926 HK/1801 HK/ BGNE US/9995 HK: US Biosecure Act extended Chinese CXO collaboration until 2032  (+/+/+/+)
BGNE US :BeiGene’s performance in the first quarter of 2024 exceeded expectations, especially benefiting from overseas BRUKINSA(/)
ZLAB US:Zai Lab's revenue and profit in the first quarter of 2024 exceeded expectations, mainly due to Efgartigimod.(/)


[Blue Lotus Daily]:9926 HK/1801HK/ BGNE/9995HK/ZLAB/NIO/LI/1211HK/BEKE/1810HK/3888HK/981HK/MSFT/INTC

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

<ul>
<li>The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo</li>
<li>SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV</li>
<li>SMIC's accomplishment is not reflected in its share price which lies midways between 52 week highs &amp; lows</li>
</ul>


The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
SMIC's accomplishment is not reflected in its share price which lies midways between 52 week highs &amp; lows


China/Asia TMT

Shawn Yang

<ul>
<li>SMIC reported C2Q23 top-line, EBIT, and non-IFRS net profit in-line, (10%), and (20%) vs. our est., and in-line, (35%), and (8%) vs. cons., respectively.</li>
<li>SMIC guided 3Q revenues up 3-5% QoQ, but gross profit flattish QoQ. This suggests SMIC is shipping 8” wafers with low, or negative profit per wafer.</li>
<li>We maintain BUY on Huawei exposure but cut our TP to HK$ 24 to reflect the low profitability of 8” wafer orders that could persist given weak demand.</li>
</ul>


SMIC reported C2Q23 top-line, EBIT, and non-IFRS net profit in-line, (10%), and (20%) vs. our est., and in-line, (35%), and (8%) vs. cons., respectively.
SMIC guided 3Q revenues up 3-5% QoQ, but gross profit flattish QoQ. This suggests SMIC is shipping 8” wafers with low, or negative profit per wafer.
We maintain BUY on Huawei exposure but cut our TP to HK$ 24 to reflect the low profitability of 8” wafer orders that could persist given weak demand.


[SMIC (981 HK, BUY, TP HK$24) TP Change]: Margins Will Decline on No-Profit 8” Wafers Orders

<ul>
<li>We expect SMIC to report C1Q23 top-line and non-IFRS net income 2% and 16% vs. consensus, respectively.</li>
<li>We suggest SMIC’s ability to supply sanctioned firms with 14/7nm nodes provides it with significant pricing power. We expect the decline in SMIC’s wafer ASP to slow.</li>
<li>We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand. We maintain BUY rating and raise our TP to HK$ 26.</li>
</ul>


We expect SMIC to report C1Q23 top-line and non-IFRS net income 2% and 16% vs. consensus, respectively.
We suggest SMIC’s ability to supply sanctioned firms with 14/7nm nodes provides it with significant pricing power. We expect the decline in SMIC’s wafer ASP to slow.
We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand. We maintain BUY rating and raise our TP to HK$ 26.


[SMIC (0981 HK, BUY, TP HK$26) Target Price Change]: Pricing Power Courtesy of Export Restrictions

China

Semiconductor Manufacturing International Corporation operates a semiconductor foundry. The Company provides integrated circuit foundry and technology services including the testing, development, design, manufacturing, packaging, and sale of integrated circuits. Semiconductor Manufacturing International offers its products and services around the world.

Semiconductor Manufacturing International Corp (SMIC) (981 HK)

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Semiconductor Manufacturing International Corp (SMIC) (981 HK)

SMIC (981.HK): Probably A Double U-Shape Correction for Around 2 Years Until the End of 2024F.

Based on the some judgments, SMIC consider it will be relatively flat demand in 2024F. SMIC took into consideration geopolitical instability and...

Patrick Liao

[Blue Lotus Daily]:9926 HK/1801HK/ BGNE/9995HK/ZLAB/NIO/LI/1211HK/BEKE/1810HK/3888HK/981HK/MSFT/INTC

US Biosecure Act extends Chinese collaboration until 2032, BeiGene and Zai Lab exceed Q1 expectations with BRUKINSA and Efgartigimod.

Blue Lotus Research Institute

SMIC's Semi Shocker

SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV. The implications...

William Keating

[SMIC (981 HK, BUY, TP HK$24) TP Change]: Margins Will Decline on No-Profit 8” Wafers Orders

We maintain BUY on Huawei exposure but cut our TP to HK$ 24 to reflect the low profitability of 8” wafer orders that could persist given weak demand.

Blue Lotus Research Institute

[SMIC (0981 HK, BUY, TP HK$26) Target Price Change]: Pricing Power Courtesy of Export Restrictions

We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand, per peer guidance. We...

Blue Lotus Research Institute

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

SMIC (981.HK): Probably A Double U-Shape Correction for Around 2 Years Until the End of 2024F.

Based on the some judgments, SMIC consider it will be relatively flat demand in 2024F. SMIC took into consideration geopolitical instability and...

Patrick Liao

[Blue Lotus Daily]:9926 HK/1801HK/ BGNE/9995HK/ZLAB/NIO/LI/1211HK/BEKE/1810HK/3888HK/981HK/MSFT/INTC

​US Biosecure Act extends Chinese collaboration until 2032, BeiGene and Zai Lab exceed Q1 expectations with BRUKINSA and Efgartigimod.

Blue Lotus Research Institute

SMIC's Semi Shocker

SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV. The implications...

William Keating

[SMIC (981 HK, BUY, TP HK$24) TP Change]: Margins Will Decline on No-Profit 8” Wafers Orders

We maintain BUY on Huawei exposure but cut our TP to HK$ 24 to reflect the low profitability of 8” wafer orders that could persist given weak demand.

Blue Lotus Research Institute

[SMIC (0981 HK, BUY, TP HK$26) Target Price Change]: Pricing Power Courtesy of Export Restrictions

We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand, per peer guidance. We...

Blue Lotus Research Institute

US Biosecure Act extends Chinese collaboration until 2032, BeiGene and Zai Lab exceed Q1 expectations with BRUKINSA and Efgartigimod.