One of China’s Biggest Chipmakers Reports Profits Plunge 79%, But That Won’t Stop Expansion

Chinese contract chipmaker Hua Hong Semiconductor remains in the shadow of larger SMIC, but that hasn’t stopped it from investing heavily in expanding its manufacturing capacity. The company’s capital expenditures tripled to $2.7 billion last year, and even as profits and revenues fall, Hua Hong isn’t ready to give up on further expansion.

Image Source: Hua Hong Semiconductor

Last year, the company’s revenue fell by 12% to $2 billion, while net profit fell by 79% to $58 million. According to Hua Hong representatives, such dynamics of financial indicators are due not only to high capital expenditures, but also to low prices for semiconductor products. In addition to expanding production, Hua Hong is ready to spend significant funds on research and development this year. In addition, the Chinese authorities have reduced subsidies directed to the development of the semiconductor sector. The municipality of Shanghai, the company’s native city, remains a major shareholder of the parent holding company Hua Hong Group.

Last year, power electronics and image sensors were in demand. The utilisation rate of Hua Hong’s production lines approached 100%, which allows their efficiency to be compared with the best foreign competitors. In the fourth quarter of last year, Hua Hong separately ended with an 18% increase in revenue to $539 million, but at the same time there were net losses of $25 million. The company’s advanced technologies are 65-nm and 55-nm, the share of which in revenue for the year almost doubled to 24%. Bai Peng, who has experience at Intel related to the production of logic components, has recently become the president of Hua Hong Semiconductor. This appointment allows the Chinese company to look to the near future with confidence.