Technology / Semiconductor / Internet Research

Nicolas Baratte

Equity Bottom-Up

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

Semiconductor Manufacturing International Corp (SMIC)

<ul>
<li>Semiconductors and AI chips have become a geopolitical tool, between the US and China but also between the US and the Rest of the World (Biden’s Jan-25 limitations by country).</li>
<li>This has led to an increase in Chinese R&amp;D in Semiconductors since 2020. In particular 3 areas: AI chips, production equipment, small geometries below 7nm. This article reviews recent announcements.</li>
<li>Rush orders for Nvidia H20 GPU since Jan-25. Loongsoon breakthru AI chip. SMIC starting 5nm production in 2025. SiCarrier announced EUV lithography machine.</li>
</ul>


Semiconductors and AI chips have become a geopolitical tool, between the US and China but also between the US and the Rest of the World (Biden’s Jan-25 limitations by country).
This has led to an increase in Chinese R&amp;D in Semiconductors since 2020. In particular 3 areas: AI chips, production equipment, small geometries below 7nm. This article reviews recent announcements.
Rush orders for Nvidia H20 GPU since Jan-25. Loongsoon breakthru AI chip. SMIC starting 5nm production in 2025. SiCarrier announced EUV lithography machine.


Taiwan Tech Focused Senior Analyst

Patrick Liao

<ul>
<li>There is speculation about Deepseek's wafer manufacturing yield issue at <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a> these days.  </li>
<li>The potential concern serves as a signal for a hot topic within the company, carrying two underlying meanings.</li>
<li>Although <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> is making waves in AI applications, we must not overlook the potential for continued creative developments in the world, such as Deepseek's solution.  </li>
</ul>


There is speculation about Deepseek's wafer manufacturing yield issue at Semiconductor Manufacturing International Corp (SMIC) (981 HK) these days.  
The potential concern serves as a signal for a hot topic within the company, carrying two underlying meanings.
Although NVIDIA Corp (NVDA US) is making waves in AI applications, we must not overlook the potential for continued creative developments in the world, such as Deepseek's solution.  


SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>Media reports of a sharp decline in profit linked to trade tensions are not correct. Gross, operating and total net profit all increased from 1Q to 4Q of 2024.</li>
<li>Management's guidance for 1Q of 2025 has sales growth accelerating to 6% to 8% and the gross margin remaining relatively high at 19% to 21%. This looks reasonable.</li>
<li>But the shares are near their all-time high and too expensive to chase given the potential negative impact of President Trump's trade policy. Take profits.</li>
</ul>


Media reports of a sharp decline in profit linked to trade tensions are not correct. Gross, operating and total net profit all increased from 1Q to 4Q of 2024.
Management's guidance for 1Q of 2025 has sales growth accelerating to 6% to 8% and the gross margin remaining relatively high at 19% to 21%. This looks reasonable.
But the shares are near their all-time high and too expensive to chase given the potential negative impact of President Trump's trade policy. Take profits.


SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

<ul>
<li>SMIC's 1Q25 guidance is for revenue to increase by 6% to 8% QoQ, and the gross margin to range from 19% to 21%.   </li>
<li>Client revenue contribution from China/Europe/US has changed from 80.8%/15.7%/3.5% in 4Q23 to 89.1%/8.9%/2% in 4Q24. These numbers indicate that SMIC is gradually becoming independent from Europe and the US. </li>
<li>SMIC's guidance for the year 2025 is that revenue growth is expected to be higher than the industry average in the same markets.</li>
</ul>


SMIC's 1Q25 guidance is for revenue to increase by 6% to 8% QoQ, and the gross margin to range from 19% to 21%.   
Client revenue contribution from China/Europe/US has changed from 80.8%/15.7%/3.5% in 4Q23 to 89.1%/8.9%/2% in 4Q24. These numbers indicate that SMIC is gradually becoming independent from Europe and the US. 
SMIC's guidance for the year 2025 is that revenue growth is expected to be higher than the industry average in the same markets.


SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

Cross Asset Strategy

<ul>
<li>From the superlative September (US$24.2 bn net buy), onshore investors' net Southbound buying dipped in October (US$11.9 bn) and November (US$15.7 bn). Xiaomi, Alibaba, PopMart and Meituan were bought most.</li>
<li>The most sold stocks during October-November were SMIC, Hua Hong Semi, Innovent Biologics. Enthusiasm for semiconductor and biotech seems to be cooling off, though we believe biotech focus should revive.</li>
<li>Investors' sustained preference is for stocks catering to domestic consumption that are able to adopt AI to improve productivity and expand their cash-generating businesses. Internet platforms fall in this silo.</li>
</ul>


From the superlative September (US$24.2 bn net buy), onshore investors' net Southbound buying dipped in October (US$11.9 bn) and November (US$15.7 bn). Xiaomi, Alibaba, PopMart and Meituan were bought most.
The most sold stocks during October-November were SMIC, Hua Hong Semi, Innovent Biologics. Enthusiasm for semiconductor and biotech seems to be cooling off, though we believe biotech focus should revive.
Investors' sustained preference is for stocks catering to domestic consumption that are able to adopt AI to improve productivity and expand their cash-generating businesses. Internet platforms fall in this silo.


Asian Equities: Southbound Zeal Dips; Some Established Themes Looking Tired, Others Rejuvenated.

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)

Semiconductors and AI Servers in China

Geopolitical tensions drive Chinese R&D in semiconductors, with focus on AI chips and small geometries. Recent announcements include rush orders...

Nicolas Baratte

SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

Patrick Liao

SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

SMIC is doing much better than negative press reports suggest, but the shares are too expensive given the uncertainty posed by Donald Trump's trade...

Scott Foster

SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.

Patrick Liao

Asian Equities: Southbound Zeal Dips; Some Established Themes Looking Tired, Others Rejuvenated.

Southbound buying dipped in October-November. Focus remains on stocks catering to domestic consumption & AI adoption. Semiconductor & biotech zeal...

Manishi Raychaudhuri

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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Semiconductors and AI Servers in China

​Geopolitical tensions drive Chinese R&D in semiconductors, with focus on AI chips and small geometries. Recent announcements include rush orders...

Nicolas Baratte

SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

​Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

Patrick Liao

SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

SMIC is doing much better than negative press reports suggest, but the shares are too expensive given the uncertainty posed by Donald Trump's trade...

Scott Foster

SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

​SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.

Patrick Liao

Asian Equities: Southbound Zeal Dips; Some Established Themes Looking Tired, Others Rejuvenated.

​Southbound buying dipped in October-November. Focus remains on stocks catering to domestic consumption & AI adoption. Semiconductor & biotech zeal...

Manishi Raychaudhuri

Geopolitical tensions drive Chinese R&D in semiconductors, with focus on AI chips and small geometries. Recent announcements include rush orders...

Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.

Southbound buying dipped in October-November. Focus remains on stocks catering to domestic consumption & AI adoption. Semiconductor & biotech zeal...