However, the company's financial results fell short of analysts' forecasts, and SMIC has projected a potential revenue decline for the current quarter. The company cited anticipated lower production yields due to the ongoing testing of newly installed equipment as a contributing factor to this cautious outlook. Following the earnings announcement, SMIC's shares listed in Hong Kong experienced a sharp downturn of 6.8%.
During an earnings call, co-CEO Zhao Haijun highlighted the proactive measures taken by Chinese authorities to cushion the domestic chip sector from escalating trade tensions with the United States. These efforts include the provision of tariff exemptions.
"The direct impact on China's foundry sector at the moment is minor due to tariff exemptions and a diversified supply chain," Zhao stated.
Despite the positive first-quarter results, Zhao expressed uncertainty regarding the latter half of the year. He indicated that SMIC is closely monitoring whether customers will reduce their order volumes in response to price hikes resulting from tariffs. Such a scenario, he cautioned, could lead to a "hard landing" for the industry.
SMIC's profit attributable to shareholders witnessed a substantial 162% jump to $188 million in the January-March period compared to the same period last year. Nevertheless, this figure was below the LSEG consensus estimate of $222.4 million. Revenue for the quarter climbed by 28%. Notably, U.S. clients accounted for 12.6% of SMIC's first-quarter revenue, showing an increase from 8.9% in the preceding quarter but a decrease from 14.9% in the corresponding period a year ago.
Looking ahead, SMIC anticipates a potential revenue decrease of up to 6% in the second quarter compared to the first three months of the year.
The foundry primarily concentrates on producing chips for consumer electronics and home appliances. Advanced semiconductors, such as those utilized in Huawei's smartphones, constitute a very small portion of its current sales. SMIC has consistently refrained from confirming any involvement in the production of chips for Huawei.
It's worth noting that the administration of the then U.S. President granted exclusions in April from significant reciprocal tariffs on smartphones, computers, and memory chips imported from China. However, previous duties on Chinese imports remain in effect. Simultaneously, Chinese authorities have also implemented exemptions on certain products, including semiconductors.