In 2021, the sanctions will cut off SMIC's revenue and profit

In 2021, the sanctions will cut off SMIC's revenue and profit
China's largest contract chipmaker, SMIC, reported fourth-quarter performance in 2020, reported full-year performance, and issued a forecast for 2021. The company did not say anything bad about its work in 2020 — the business was booming, but adding SMIC to the "special" list of the United States a couple of months ago will make 2021 a year of uncertainty for it, both in terms of revenue and profit.

To begin with, SMIC's revenue for the last quarter of 2020 increased by 10.3% year-on-year to 6.671 billion yuan ($1.03 billion). Gross profit decreased by 5.8 % to 18 %. The company's net profit for the reporting quarter increased by 93.5% sequentially (in quarterly comparison) to 1.252 billion yuan ($193.85 million).

The company attributed the significant increase in revenue and profit in the fourth quarter to an increase in average product prices and an increase in revenue from contract orders (an increase in the number of chip plates sold). The company also notes an "increase in funding for government projects" and an unusually high return on investment, as well as the correct disposal of financial assets.

For the full year 2020, SMIC's revenue increased by 25.4 % to 25.250 billion yuan ($3.9 billion), and gross profit increased by 7.1 % to 23.6 %. The company's net profit for 2020 reached 4.627 billion yuan ($716.43 million), or 204.9% more than in 2019.

The inclusion of the company in the US sanctions list, more precisely - in the list of companies for which the Americans and their allies require a special license from regulators in the United States, makes SMIC cautiously predict the likely profit in 2021. So, the company believes that in the first quarter, revenue will grow from 7 % to 9 % in annual terms. In general, for 2021, revenue can grow from 5 % to 9 %. This is much more modest than in 2020, although all analysts consider 2021 to be a favorable year for the semiconductor industry.
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