SMIC cuts capex and R&D

China’s leading foundry, SMIC, has been cutting capex and R&D despite soaring imports of chip manufacturing equipment into China.

SMIC cut its H1 capex from $12 billion in H1 2023 to $8 billion in H1 2024 despite China spending $25 billion on semiconductor manufacturing equipment this year which is more than Korea, Taiwan and the US combined.

SMIC’s H1 spending on buildings and facilities is down from $1.07 billion to $363 million and spending on machinery and equipment is down from $11 billion to $7.4 billion.

The company’s R&D spend is also down – at 10.1% of revenues in H1 compared to 11.4% of revenues in H1 2023.

While it is understandable that SMIC has cut back because of the lack of availability of leading edge equipment from its politically restricted Western suppliers, the surge in China’s equipment buying is attributed to about ten smaller foundries in China all gearing up to make legacy chips.

According to SEMI, China is expected to spend $50 billion on back end and front end facilities this year.