The semiconductor industry is currently experiencing a significant transformation driven by the surge of AI technologiesWhile global giants bask in the opportunities presented by artificial intelligence models, China's three leading wafer foundries are navigating a distinct landscape defined by their recent financial performancesIn recent announcements, Semiconductor Manufacturing International Corporation (SMIC), Huahong Semiconductor, and Legend Silicon have laid out their financial expectations and forecasts for the year 2024, showcasing contrasting trajectories within the industry.

SMIC, one of the most prominent players in the wafer foundry sector, reported a projected revenue of $8.03 billion for 2024, affirming its position as the second-largest pure-play foundry worldwideThis accomplishment solidifies SMIC's status, amidst an overall climate of fluctuating market conditions influenced by technological advancements in AIAt the same time, Huahong Semiconductor, which specializes in niche processes, anticipates a revenue of around $2 billion for the same period, reflecting a 12% year-on-year decline primarily attributed to falling average selling pricesLegend Silicon, focusing on display driver ICs (DDIC), projected an impressive increase in revenue, with forecasts suggesting a rise of 24.52% to 30.74%, positioning it for a potentially lucrative year ahead.

This narrative unfolds in a context where the domestic AI landscape is not only on the rise but also becoming more competitiveThe homegrown AI model DeepSeek garnered attention during the recent Chinese New Year, heralding a new phase of cost-effective AI model trainingThis development presents a viable entry point for non-top-tier computing institutions to engage with the core AI industry, thereby fuelling speculation within semiconductor stock performancesFollowing this upbeat sentiment, SMIC's stock surged to an all-time high of 51 Hong Kong dollars per share, while Huahong's shares rose over 15%, hitting record levels.

CEO Zhang Guobin of Electronic Innovation Network expressed optimism regarding SMIC's achievements, emphasizing the company's revenue milestone. "The $8 billion revenue mark is a noteworthy highlight for SMIC in 2024," he remarked

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He elaborated on SMIC's performance, noting a steady revenue increase, diversification in its foundry services, and strategic investments to enhance production capacity—elements he views as contributors to sustained growth in the competitive semiconductor market.

According to TrendForce, a respected market research firm, SMIC, Huahong, and Legend Silicon ranked third, sixth, and tenth in the global foundry market by the third quarter of 2024. This underscores the dynamic shifts characterizing the semiconductor landscape, as players adapt to the rigorous demands of clients and the rapid pace of technological evolution.

A deeper dive into SMIC's financial highlights reveals a promising trajectoryFor the fourth quarter of 2024, the company recorded a revenue of approximately 15.917 billion yuan, surpassing last year's figures by 31%. Despite this success, net profits attributable to shareholders saw a dip of 13.5%, arriving at 999.2 million yuan—a decline largely tied to decreased investment earningsOverall, SMIC's annual revenue rose by 27.7% compared to the previous year, showcasing its ability to amass revenue but simultaneously revealing a "growing revenue without growing profit" situation.

Zhang emphasized that SMIC’s position as the leading domestic foundry and its revenue growth in 2024 affirm its market dominance, marking a significant achievement for the Chinese semiconductor sector. "The increased overall revenue in the fourth quarter indicates SMIC's capability to shoulder responsibilities as a core contributor to China's semiconductor sector, with major contributions emerging from the smartphone and consumer electronics segments," he added.

A segmentation of SMIC's revenue illustrates its diverse application areas: smartphones (28%), computers and tablets (16%), consumer electronics (38%), internet and wearables (10%), as well as industrial and automotive applications (8%). The significant growth in revenue from consumer electronics and smartphones has been amplified by various factors and government policies aimed at stimulating consumer spending

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Furthermore, income from 12-inch and 8-inch wafers saw notable increases, with the former experiencing a 35% year-on-year growth due to expanded production capacity and rapidly validated new capacities coming online.

Notably, SMIC's annual shipment volume exceeded 8 million wafers, with an average utilization rate of 85.6%. This utilization rate underscores the efficient operational capabilities of the company, with revenue from its smartphone chip segment alone witnessing a surge exceeding 4 billion yuan, reflecting a 37% increaseThe solid performance in tablet and automotive markets signals a maturing and stabilizing foundry business.

Among the various revelations, the report highlighted that Chinese market revenues constituted a staggering 89.1% of total revenue, indicating SMIC’s pivotal role as a backbone for domestic integrated circuit companiesZhang noted that with the continuous development of China's strong Fabless companies, the future appears bright, as steady growth is expected to yield new revenue highsIn a call to investors, Co-CEO Zhao Haijun acknowledged the swift transition of downstream industries towards domestic supply chains, reinforcing preparedness to meet market demands.

Contrasted with SMIC's trajectory, Huahong Semiconductor, while also engaged in a variety of sectors, leans more towards mature processes within its specialized operationsThe company ranked sixth in the global wafer foundry market and second in mainland ChinaHowever, a mixed bag of quarterly results revealed that Huahong's revenue in Q4 2024 stood at around $500 million—a year-on-year increase of 18%, though it faced a notable net loss of $25.2 millionThe loss was elucidated as stemming from foreign currency exchange losses that contrasted with gains recorded in the previous periods.

Insights into Huahong’s quarterly performance indicate a shift in revenue dynamics, with quarterly revenue from 12-inch wafers overtaking that from 8-inch for the first time

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Consumer electronic products dominate Huahong's end market, covering 64% of revenue, while industrial and automotive income suffered a year-on-year decline of 11%, reflecting common industry challengesOver the full year, Huahong anticipated a revenue drop of 12% overall to $2 billion, primarily due to reduced average selling pricesThis decline led to a net loss of $140 million, marking the first annual loss in over a decade for the company.

In recent months, Huahong underwent a significant change in leadershipThe former chairman, Zhang Suxin, stepped down, making way for Qinjian, chairman of Shanghai Lianhe InvestmentAdditionally, the former president, Tang Junjun, transitioned to a board chairman role, while Bai Peng, a former Intel executive, took over as president, indicating Huahong's strategic intent to adapt to changing market demands.

Bai highlighted during the financial reports that Huahong would expand from 55nm and 65nm process nodes towards smaller process nodes. "While Huahong Semiconductor is firmly anchored in mature node specialty processes, the definition of what constitutes a 'mature node' is evolvingJust a few years back, the line was drawn at 40nm; I anticipate that in the coming years, it will border on 28nm, potentially even reaching 22nm." Such prospective changes in Huahong’s operational strategy reflect the increasing market demand for advanced technology.

As we examine Legend Silicon, which originated in May 2015 and focuses on display driver ICs, a distribution of its projected revenue reveals optimismThe company anticipated annual revenue ranging between 9.02 billion and 9.47 billion yuan in 2024, marking a substantial growth trajectoryIts leadership expressed confidence in maintaining high capacity utilization rates, thanks to a gradual uptick in market health.

In terms of leadership updates, Legend’s GM Cai Huijia announced his resignation on February 13, leading to concerns about continuity in oversight for major projects; however, the company held that the transition would not impede research and development timelines.

Reflecting on the disparate fortunes of SMIC with a net profit drop of 45.4%, Huahong with a challenging fiscal year resulting in a revenue fall of 12%, and Legend emerging with a staggering net profit growth of up to 178.8%, we glean a multifaceted picture of China’s semiconductor landscape in 2024. The upcoming quarter for 2025 beckons a mix of potential, as SMIC forecasts a 6% to 8% sequential revenue growth with margins hovering between 19% and 21%. Zhao pointed out an increase in urgent orders due to uncertain international policies and proactive inventory strategies fueled by new government incentive programs.

Conversely, Huahong projects first-quarter revenue between $530 million and $550 million with margins between 9% to 11%. With the launch of a new 12-inch production line set to commence operations at the end of 2024, the anticipated depreciation may strain profits

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