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SHANGHAI – Chinese chip maker Semiconductor Manufacturing International (SMIC) on Thursday reported its first quarterly sales decline in three years as the global semiconductor sector struggles to cope with inventory gluts.

Sales for the first quarter were US$1.46 billion (S$1.94 billion), down 20.6% year-on-year, in line with analyst expectations. Net profit fell 48.3% year-on-year to US$231.1 million.

SMIC executives believe the reason for the drop is as follows. weak demand, After years of chip shortages caused customers to build up excess inventories.

At an earnings call, SMIC co-CEO Zhao Jun said the recovery outlook for the second half of the year was still uncertain.

Other semiconductor companies have faced similar challenges in recent months. A chip shortage that began in the second half of 2020 led to a surge in demand from manufacturers such as SMIC, but brands now have excess chip inventories amid sluggish sales of electronics products.

Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) Earnings in the first quarter were reported to be down 5% year-over-year. On the other hand, Samsung Electronics’ chip division reported: A record loss of US$3.4 billion at the same time.

In early October, the U.S. Department of Commerce announced a comprehensive set of export controls aimed at deterring the entry of Chinese semiconductor manufacturers.

Analysts say the restrictions will further hamper SMIC’s ambitions to manufacture advanced chips.

Nonetheless, the company is rapidly expanding capacity across China and has announced plans to build four new chip manufacturing plants from 2020 onwards. One factory in Shenzhen has entered mass production, and the other is scheduled to start mass production later this year.Reuters SMIC’s quarterly sales drop for first time in three years due to oversupply of chips

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