In 2023, the inflection point of SMIC is coming

What is the inflection point? Mathematically, a point that changes the upward or downward direction of a curve.
In short, it is an original development trend. After this point, significant changes have taken place, either rapid growth or accelerated decline. This turning point is the turning point.
For the leading chip manufacturers in Chinese Mainland, 2023 may be an inflection point, which will either usher in a big growth or decline from this year.
In 2023, the inflection point of SMIC is coming
Why do you say that? There are four reasons.
First, the demand in the downstream market is sluggish and the utilization of production capacity is rapidly declining. According to the data of SMIC in the fourth quarter of 2022, the capacity utilization rate fell to 79.5%, 12.4 percentage points lower than the previous month and 8.7 percentage points lower than the previous year.
Moreover, the current decline in capacity utilization is also a phenomenon in the whole industry, such as Liandian and Grid Core. As we all know, the capacity utilization rate of many wafer factories has dropped to 70% or even lower. This phenomenon will not change in a short time.
In 2023, the inflection point of SMIC is coming
Second, the price war is coming, and Liandian has already set a price. It said that the price can be reduced by 10-15% for customers who put the film in the second quarter. Samsung also reduced the price of mature wafers by about 10%.
Next, there will be more and more wafers to reduce prices. After all, there is overcapacity and the price reduction is certain. This is the industry rule. However, Liandian, Samsung, and TSMC have large capacity and high gross profit rate. The price reduction is beneficial to themselves, but not to SMIC.
In 2023, the inflection point of SMIC is coming
Third, the problem of equipment depreciation. In recent years, the investment in the intensive construction of new plants in SMIC is very large, so the equipment depreciation is also very large. The production line of the wafer factory is often worth tens of billions of investment. After the initial conversion to fixed assets, it will face huge depreciation and swallow up profits. This is the stage that every new factory will go through.
Compared with other wafer factories, the pressure of this piece of medium core is relatively higher. Especially in recent years, four new bases of medium core have been built, and the next few years will enter the peak period of depreciation.
In 2023, the inflection point of SMIC is coming
Fourth, there are few reasons for the limited advanced technology. So at present, SMIC can only vigorously develop mature technology. For example, the newly built capacity of SMIC is almost 28 nanometers or more, while the threshold of mature technology is relatively low, and everyone has great competition. SMIC will not be so strong in mature technology.
In addition, at present, about 70% of the customers of SMIC are domestic customers, and only about 30% are overseas customers, so the performance of SMIC still depends on how domestic customers choose.
Therefore, 2023 is indeed a turning point. If domestic customers strongly support SMIC, and domestic demand increases sharply, the market recovers rapidly, then it will be an upward trend and rapid development. However, if domestic customers are attracted by low prices and go to Liandian, TSMC, Samsung, etc., then the pressure on the high-speed development of SMIC in recent years will be greater this year, and there is a downward possibility.
In 2023, the inflection point of SMIC is coming
Of course, semiconductors have cycles. From the perspective of historical law, the cycle of semiconductors is generally about three years, so the inflection point is only the inflection point in this cycle. No matter up or down, you need not worry too much or be too happy. The trend of the rise of China’s core is unchanged, which is the fundamental aspect of China’s core.