Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC) / Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC)

<ul>
<li>There is speculation about Deepseek's wafer manufacturing yield issue at <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a> these days.  </li>
<li>The potential concern serves as a signal for a hot topic within the company, carrying two underlying meanings.</li>
<li>Although <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> is making waves in AI applications, we must not overlook the potential for continued creative developments in the world, such as Deepseek's solution.  </li>
</ul>


There is speculation about Deepseek's wafer manufacturing yield issue at Semiconductor Manufacturing International Corp (SMIC) (981 HK) these days.  
The potential concern serves as a signal for a hot topic within the company, carrying two underlying meanings.
Although NVIDIA Corp (NVDA US) is making waves in AI applications, we must not overlook the potential for continued creative developments in the world, such as Deepseek's solution.  


SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>Media reports of a sharp decline in profit linked to trade tensions are not correct. Gross, operating and total net profit all increased from 1Q to 4Q of 2024.</li>
<li>Management's guidance for 1Q of 2025 has sales growth accelerating to 6% to 8% and the gross margin remaining relatively high at 19% to 21%. This looks reasonable.</li>
<li>But the shares are near their all-time high and too expensive to chase given the potential negative impact of President Trump's trade policy. Take profits.</li>
</ul>


Media reports of a sharp decline in profit linked to trade tensions are not correct. Gross, operating and total net profit all increased from 1Q to 4Q of 2024.
Management's guidance for 1Q of 2025 has sales growth accelerating to 6% to 8% and the gross margin remaining relatively high at 19% to 21%. This looks reasonable.
But the shares are near their all-time high and too expensive to chase given the potential negative impact of President Trump's trade policy. Take profits.


SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

<ul>
<li>SMIC's 1Q25 guidance is for revenue to increase by 6% to 8% QoQ, and the gross margin to range from 19% to 21%.   </li>
<li>Client revenue contribution from China/Europe/US has changed from 80.8%/15.7%/3.5% in 4Q23 to 89.1%/8.9%/2% in 4Q24. These numbers indicate that SMIC is gradually becoming independent from Europe and the US. </li>
<li>SMIC's guidance for the year 2025 is that revenue growth is expected to be higher than the industry average in the same markets.</li>
</ul>


SMIC's 1Q25 guidance is for revenue to increase by 6% to 8% QoQ, and the gross margin to range from 19% to 21%.   
Client revenue contribution from China/Europe/US has changed from 80.8%/15.7%/3.5% in 4Q23 to 89.1%/8.9%/2% in 4Q24. These numbers indicate that SMIC is gradually becoming independent from Europe and the US. 
SMIC's guidance for the year 2025 is that revenue growth is expected to be higher than the industry average in the same markets.


SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<ul>
<li>The HSTECH index is trading higher on higher breadth and momentum in January, up 6% so far.  Analysts project an upside of 23% over 12 months.</li>
<li>China's semiconductor sector is advancing this year from AI enthusiasm and accelerated localization in the chip industry.  <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a> shares have benefited from this trend.</li>
<li>
<a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> benefits from China's announcement that it will subsidize more consumer products, including smartphones and new vehicles.
</li>
</ul>


The HSTECH index is trading higher on higher breadth and momentum in January, up 6% so far.  Analysts project an upside of 23% over 12 months.
China's semiconductor sector is advancing this year from AI enthusiasm and accelerated localization in the chip industry.  Semiconductor Manufacturing International Corp (SMIC) (981 HK) shares have benefited from this trend.

Sunny Optical Technology Group (2382 HK) benefits from China's announcement that it will subsidize more consumer products, including smartphones and new vehicles.



The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (January 25)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Semiconductor Manufacturing International Corp (SMIC) / Event-Driven

<ul>
<li>SOUTHBOUND gross trading activity was again not stronger per day than the previous several weeks, but SB Net Buying was again BIG. Given the change in Tencent, remarkable even.</li>
<li>The story was follow-through, but SMIC and Xiaomi were also big buys. This is shaping up to be a "let's buy what US Persons cannot" moment.</li>
<li>No sectors saw net selling through CCASS data five days to Weds. Top 10 activity was quite concentrated this week. Very few stray names.</li>
</ul>


SOUTHBOUND gross trading activity was again not stronger per day than the previous several weeks, but SB Net Buying was again BIG. Given the change in Tencent, remarkable even.
The story was follow-through, but SMIC and Xiaomi were also big buys. This is shaping up to be a "let's buy what US Persons cannot" moment.
No sectors saw net selling through CCASS data five days to Weds. Top 10 activity was quite concentrated this week. Very few stray names.


HK Connect SOUTHBOUND Flows (To 17 Jan 2025); Again Big Net Buying by SB, Again on Tech

China

Semiconductor Manufacturing International Corporation operates a semiconductor foundry. The Company provides integrated circuit foundry and technology services including the testing, development, design, manufacturing, packaging, and sale of integrated circuits. Semiconductor Manufacturing International offers its products and services around the world.

Semiconductor Manufacturing International Corp (SMIC) (981 HK)

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Semiconductor Manufacturing International Corp (SMIC) (981 HK)

SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

Patrick Liao

SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

SMIC is doing much better than negative press reports suggest, but the shares are too expensive given the uncertainty posed by Donald Trump's trade...

Scott Foster

SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.

Patrick Liao

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (January 25)

HSTECH advances with good market breadth in January. SMIC is benefiting from AI advances as well as the localization trend in semi industry. ...

David Mudd

HK Connect SOUTHBOUND Flows (To 17 Jan 2025); Again Big Net Buying by SB, Again on Tech

SOUTHBOUND continues to buy heavily in tech and finance. Gross flows remain light but net flows are very strong. AH Premia are now the lowest in...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

SMIC (981.HK): Speculation About the Deepseek Rumor Does Imply Continued Creative Works in the World

​Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

Patrick Liao

SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength

SMIC is doing much better than negative press reports suggest, but the shares are too expensive given the uncertainty posed by Donald Trump's trade...

Scott Foster

SMIC (981.HK): Revenue Growth Decelerated in 4Q24, and Growth Momentum to Be Regained in 1Q25.

​SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.

Patrick Liao

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (January 25)

HSTECH advances with good market breadth in January. SMIC is benefiting from AI advances as well as the localization trend in semi industry. ...

David Mudd

HK Connect SOUTHBOUND Flows (To 17 Jan 2025); Again Big Net Buying by SB, Again on Tech

SOUTHBOUND continues to buy heavily in tech and finance. Gross flows remain light but net flows are very strong. AH Premia are now the lowest in...

Travis Lundy

Speculation surrounds Deepseek's wafer yield issue at SMIC, highlighting the importance of ongoing innovation in AI applications like Deepseek's...

SMIC expects revenue growth in 1Q25, shifting focus to China and reducing reliance on Europe and the US, aiming for above-average growth in 2025.