China’s largest chipmaker SMIC is now the No. 3 foundry in the world, Counterpoint says

SMIC, China’s largest chipmaker, is now the world’s third-largest foundry by sales in the first quarter, according to Counterpoint Research.

SMIC, a state-backed company, increased its market share to 6% in the first quarter from 5% the previous year, according to a report. It surpassed GlobalFoundries and Taiwan’s United Microelectronics Corporation.

In the first quarter, SMIC trailed only Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung Foundry, with 62% and 13% market share, respectively.

“SMIC’s quarterly results surpassed market expectations, and the company secured the No. 3 position in foundry revenue market share in Q1 2024 for the first time, as demand recovery begins in China, including CIS, PMIC, IoT, and DDIC applications,” according to a report released by Counterpoint Research on Wednesday.

SMIC chips can be found in cars, cellphones, computers, IoT devices, and more.

SMIC reported first-quarter revenue of $1.75 billion, a 19.7% increase from the previous year, as consumers stocked up on chips. According to the company’s financial report, consumers in China accounted for almost 80% of its sales during the quarter.

The Chinese company anticipates revenue to rise 5% to 7% from the first quarter due to robust demand.

According to research from tech consultancy Omdia, China consumes roughly half of the world’s semiconductors as the largest assembly market for consumer products.

SMIC is viewed as essential to Beijing’s goals of reducing reliance on foreign technology in its domestic semiconductor industry, as the United States continues to limit China’s technological power. To stimulate domestic manufacture, Beijing has injected billions of yuan in subsidies into chip companies.

SMIC has been the focus of US sanctions since 2020, with American enterprises being required to apply for a license before selling to SMIC, limiting its ability to acquire specific US technologies.

It has also been unable to secure the extreme UV lithography machines that only the Dutch firm ASML can produce. Without EUV equipment, SMIC cannot make high-tech semiconductors on a big scale at a reasonable cost.

In a blow to US sanctions, a breakdown of Chinese tech giant Huawei’s Mate 60 Pro smartphone, which was released last year, revealed that it is powered by a 7-nanometer processor manufactured by SMIC. Despite US efforts to ban Huawei from crucial technology such as 5G semiconductors, the smartphone looks to offer 5G connectivity.

Analysts, however, believe SMIC continues to lag behind TSMC and Samsung Electronics.

TSMC and Samsung began mass producing 7-nanoscale circuits in 2018 and now create 3-nanometer chips; the smaller the nanometer size, the more advanced and efficient the device.