China's top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), has raised its 2023 annual budget to $7.5 billion, an 18 percent jump over 2022, amid United States (US) sanctions.

The increase highlighted the company's commitment to securing its standing in the semiconductor industry amid escalating geopolitical tensions, particularly with the US.

Nikkie Asia reported that the rise in SMIC's capital expenditure budget happened despite posting an 80% decline in net profit for the July to September quarter. The company reported a net profit of $94 million for this year's third quarter, down from $470.8 million a year earlier.

(Photo : PETER PARKS/AFP via Getty Images)
HONG KONG, CHINA: Richard R. Chang, President and CEO of SMIC Semiconductering International Corp. (C) speaks on their debut on the Hong Kong Stock Exchange 18 March 2004. SMIC, China's largest chip maker fell sharply on its first day of trading in Hong Kong after a disappointing debut in New York overnight.

Response of SMIC on US Sanctions

The company's move comes in the wake of tightened US sanctions, further restricting China's access to advanced technological equipment.

According to the South China Morning Post, SMIC's proactive response includes an accelerated pace in hoarding semiconductor tools, positioning itself strategically to navigate the challenges posed by the dynamic geopolitical landscape.

In an earnings conference call on Friday, Zhao Haijun, co-CEO of SMIC, emphasized the "grey rhino" risks posed by geopolitical factors, referring to the often-ignored but obvious dangers. 

"Geopolitical factors have brought about a grey rhino effect to the mid- to long-term development of the industry," Zhao noted.

In navigating these challenges, he added that all participants in the industry are exploring strategies and paths forward.

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SMIC Commitments Amid US Sanctions

Zhao also cited SMIC's commitment to mitigating the impact of geopolitical uncertainties on shipment times. To ensure ramp-up production at plants that have been initiated, SMIC has allowed tool suppliers to make earlier deliveries. 

Zhao noted a substantial increase in equipment expected to be delivered to the fab by the end of the year, surpassing the original forecasts.

Amid challenges and uncertainties, SMIC stands as a resilient player in the semiconductor industry, adapting to the seismic shifts in the global tech terrain. The company expected its revenue to increase from one percent to three percent in the current quarter.

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