Asian chipmakers slide tracking 80% profit slump in China’s SMIC

Investing.com-- Major Asian chipmaking stocks sank on Friday, tracking a steep decline in Semiconductor Manufacturing International Corp (HK:0981) after China’s biggest chipmaker logged a 80% slide in its quarterly profit amid worsening demand. 

SMIC’s profit attributable to owners fell to about $94 million in the three months to September 30, tumbling from the $470.8 million seen in the same period last year.

Quarterly revenue only fell 15% to $1.62 billion, while the chipmaker’s gross margin nearly halved to 19.8% from 38.9% last year. 

The firm forecast an even lower gross margin in the fourth quarter, and flagged much higher capital expenditures for 2023, as its capacity utilization dropped amid worsening demand for semiconductors. 

SMIC’s Hong Kong shares fell as much as 4.8%, while those of peer Hua Hong Semiconductor Ltd (HK:1347) plummeted nearly 12%. Outside China, TSMC (NYSE:TSM) (TW:2330)- the world’s largest contract chipmaker- fell 0.4% in Taiwan trade, while South Korea’s Samsung Electronics Co Ltd (KS:005930) sank 1%. 

Japan’s Advantest Corp. (TYO:6857)- which makes chip testing equipment- lost 2%, while SoftBank Group Corp. (TYO:9984)- which is exposed to the chipmaking sector through its Arm (NASDAQ:ARM) unit, slid 7.7%, although a bulk of this loss was driven by the tech conglomerate posting an unexpected loss in the September quarter. 

SMIC’s results come just a few weeks after dismal quarterly showings from TSMC, Samsung and SK Hynix Inc (KS:000660), which pointed to sustained weakness in global chip demand. Major chipmakers have been struggling with weak demand amid a sharp rise in interest rates over the past year, with several major players warning that a boom in artificial intelligence development may still be insufficient in propping up demand. 

Earlier this week, Softbank’s Arm also clocked weak results for the September quarter, and forecast disappointing revenue and profit figures for the December quarter. The firm was expected to be one of the biggest beneficiaries of an AI boom this year, given that its chip designs are used by nearly all major semiconductor makers. 

But sluggish investment in tech, coupled with slowing demand for personal computers and smartphones largely offset any major demand boom from AI, given that consumer electronics still account for the biggest source of chip demand. 

Last week, iPhone maker Apple Inc (NASDAQ:AAPL)- which is also a major buyer for Asian chip firms- clocked a fourth straight quarterly decline in sales.