Key Takeaways
SMIC has received multiple financial boosts, including a tax break and capital injections, since the U.S. imposed chip supply restrictions to Huawei on May 15. CFRA thinks that SMIC is key to China’s aim for semiconductor self-sufficiency, which requires SMIC to be the leader in terms of chip processing technology.
However, even with significant financial support, the technology gap between SMIC and the global foundry industry leader TSMC is too wide to be closed within the next five years. in CFRA’s view. The chip supply restriction to Huawei also affects SMIC as well as TSMC.
Hence, SMIC is likely to remain behind TSMC in terms of chip processing technology, overall pricing power, and profitability at least in the next five years.
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