How to interpret the trend of lack of core? SMIC points out the direction: the structural gap is still strong in these areas.

At SMIC's fourth quarter 2021 results presentation held this morning, SMIC's management focused on issues of market concern such as production capacity, capital expenditure and depreciation.

"under the condition that the overall production capacity is in short supply, demand in some areas has slowed down, and production capacity has gradually shifted from the shortage of the whole line to the stage of structural shortage. How to keep up with the trend of industrial development, dynamically balance stock and incremental demand, and make up for the structural gap in the industrial chain is an important task for the company this year. " Gao Yonggang, acting chairman of SMIC, said bluntly.

It is reported that due to the lack of driving force for the development of the mobile phone and consumer products market, the supply and demand of the stock market has gradually reached a balance. While the Internet of things, electric vehicles, middle and high-end analog IC and other incremental market demand is strong, there is a structural capacity gap.

A reporter from Science and Technology Innovation Board Daily noted that at present, the combined revenue share of mobile phones and consumer electronics is showing a downward trend, while the proportion of revenue from other areas such as new energy vehicles is gradually increasing. Among them, the combined income of Q4 mobile phone and consumer electronics reached 54.9% in 2021, down 0.7% from the previous year and 2% from the same period last year, while revenue from other sectors accounted for 32.4%, up 0.5% and 5.1% respectively from the same period last year.

"We have made a variety of product platforms on each process node, and the production capacity can be switched between different platforms and nodes. We are now focused on the main production capacity to 40nm and 55nm. 40nm is the most out of stock this year, and the market demand for 55nm is very large. " Zhao Haijun, SMIC's co-chief executive officer, said that the type of equipment used in the company's 90nm to 22nm process is basically the same and can be converted to production. In the allocation of production capacity, the company will make a certain flexibility adjustment to the proportion.

By the end of the fourth quarter of 2021, SMIC had a monthly production capacity of 621000 8-inch wafers, an increase of 4.6 per cent month-on-month. At the beginning of 2022, SMIC's Shanghai port project has broken ground, and the two projects in Beijing and Shenzhen are progressing steadily and are expected to be put into production by the end of 2022.

The company will increase its monthly production capacity by 100000 pieces in 2021, equivalent to 8 inches, and plan to increase production capacity in 2022 more than in 2021. It is expected that the average monthly production capacity will be 13 to 150000 pieces in 2022. After the full production of the three new projects, the company's total production capacity will be doubled. " Zhao Haijun said that the current equipment delivery cycle is further lengthened, and there may be a certain delay in the arrival time of the new capacity, but the company will strive to deliver the capacity according to the set target.

A reporter from Science and Technology Innovation Board Daily noted that SMIC's capital expenditure in 2021 totaled about $4.5 billion, while capital expenditure in the fourth quarter was $2.13 billion, accounting for about 47.3% of the year. According to the company, most of the capital expenditure is used for production expansion of mature processes, while a small portion is spent on advanced technologies, civil construction of new joint venture projects and others. Capital expenditure is expected to be $5 billion in 2022, an increase of about 11.15% over the same period last year.

According to reports, the company's capital expenditure is mainly divided into three parts, including the construction of the production base, the settlement of equipment in place and the advance payment of long-term equipment. The delayed delivery of equipment has been taken into account in the 2022 capital expenditure budget. Zhao explained: "the 12-inch new production capacity this year will be more at the nodes where the process is more complex, and the average capital investment per piece is higher than that of last year."

On the issue of depreciation, Gao Yonggang said: "when we do capacity planning and capital expenditure, we will consider the affordability of depreciation to avoid depreciation causing large fluctuations to the company's performance." This year's depreciation should be higher than last year, but the increase is smaller than last year. "