China’s largest chipmaker SMIC is now the No. 3 foundry in the world, Counterpoint says

China’s largest chipmaker SMIC is now the world’s third-largest foundry in terms of revenue in the first quarter, according to Counterpoint Research.

State-backed SMIC, or Semiconductor Manufacturing International Co., held a market share of 6% in the first quarter— up from 5% last year, the report showed. It overtook GlobalFoundries and Taiwan’s United Microelectronics Corporation.

This places SMIC behind only Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung Foundry which held 62% and 13% of market share in the first quarter respectively.

“SMIC’s quarterly results surpassed market expectations, and the company secured the No. 3 position in foundry revenue market share in Q1 2024 for the first time, as demand recovery begins in China, including CIS, PMIC, IoT, and DDIC applications,” showed the Counterpoint Research report published Wednesday.

Chips made by SMIC are found in automobiles, smartphones, computers, IoT technologies and more.

SMIC reported first-quarter revenue was $1.75 billion, up 19.7% from a year earlier, as customers stocked up on chips. More than 80% of its revenue in the quarter were derived from customers in China, the firm said in its earnings report.

In the second quarter, the Chinese firm expects revenue to increase by 5% to 7% from the first quarter on strong demand.

China consumes nearly 50% of the world’s semiconductors as it is the biggest assembly market for consumer devices, according to data from tech consultancy Omdia.

SMIC is seen as critical to Beijing’s hopes of reducing dependence on foreign technology in its domestic semiconductor industry as the U.S. continues to curb China’s tech power. To boost domestic manufacturing, Beijing has pumped billions of yuan in subsidies into its chip firms.

SMIC has been the target of U.S. sanctions since 2020 where American businesses will be required to apply for a license before they can sell to SMIC, restricting its ability to acquire certain U.S. technology.

It has also been unable to obtain the extreme ultraviolet lithography machines — which only Dutch firm ASML is capable of making. Without EUV machines, SMIC cannot produce high-tech semiconductors on a large scale at lower costs.

In a blow to U.S. sanctions, a breakdown of Chinese tech giant Huawei’s Mate 60 Pro smartphone launched last year revealed that it runs on a 7-nanometer chip made by SMIC. The smartphone also appears to support 5G connectivity despite U.S. attempts to cut Huawei from key technologies including 5G chips.

However, SMIC still lags behind TSMC and Samsung Electronics, analysts said.

TSMC and Samsung started mass producing 7-nanometer chips in 2018 and currently produces 3-nanometer chips — the smaller the nanometer size, the more advanced and efficient the chip.