SMIC warned of a crisis in the overproduction of chips using old technological processes

Even SMIC’s 44% reduction in capital expenditures in the third quarter hinted that the company was not seeking to increase production capacity at the same rate. The head of the company, Zhao Haijun, emphasized that the overproduction crisis will become more pronounced next year, and already the level of utilization of the SMIC conveyor is far from optimal.

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«In the industry, the level of production capacity utilization now fluctuates around 70%, which is noticeably lower than the optimal 85% and indicates a significant excess of production capacity. This situation is unlikely to improve significantly, and may even worsen,” explained the head of China’s largest contract chip manufacturer.

The growth of SMIC’s own revenue by 34% to $2.17 billion in the third quarter, according to the head of the company, was largely due to the desire of clients to localize the production of components in China, even if we were talking about foreign customers. Already, Chinese chip suppliers have taken a significant share of the local market, and it is unlikely that the localization factor will continue to seriously influence the situation in 2025, according to SMIC management.

In the near future, the company will be very careful about expanding production capacity. New projects are not announced or even discussed within the company, as its head explained.