Schematic of the chip and the SMIC logo. (Video screenshot)
Some media broke the news on Monday (March 1) that SMIC has obtained supply licenses from some U.S. equipment vendors. A research report published by Morgan Stanley, a financial services firm, also said that U.S. equipment suppliers recently resumed supply of components and field services to SMIC and upgraded SMIC’s rating to Hold. Some commentators have pointed out that if the news is true, it indicates that the Biden administration has secretly taken the first step to compromise with the Chinese Communist Party.
Chinese financial media Interface News reported on Monday that Futu News has learned from the supply chain that SMIC has obtained supply licenses from some U.S. equipment manufacturers, mainly covering semiconductor equipment for mature processes.
As of press Time, SMIC has not yet confirmed whether the above news is true. However, it is noted that Morgan Stanley, a well-known international financial services company, has also pointed out in its recent research report that U.S. equipment suppliers have recently resumed supplying components and on-site services to SMIC. Morgan Stanley also raised its rating on SMIC from Neutral to Hold in this regard, while raising its target price on SMIC’s H-shares by 34% from HK$23.8 to HK$31.8.
This means that SMIC’s mature process business is expected to be licensed for U.S. equipment supply, and SMIC’s operational outlook will further brighten, Morgan Stanley reported. Morgan Stanley therefore expects SMIC’s revenue growth to reach 10%-15% in 2021, and has raised its net earnings per share forecast for SMIC by 14% for 2021, and the related figure for 2022 by 6%.
In December 2020, the U.S. Department of Commerce announced to the public that SMIC was on the “Entity List”. This means that U.S. export suppliers wishing to supply SMIC must apply to the U.S. government in advance for a supply license, which is subject to a 60-day statutory review period. Therefore, it is inferred that if U.S. businessmen apply for supply to SMIC from the end of December last year, they will be informed of the application results in the near future.
As the news broke that SMIC has been granted supply licenses by some U.S. equipment makers, SMIC’s share price rose 4.7% to 57.75 yuan on Monday, while the company’s Hong Kong shares also closed up 6.79% at HK$26.75.
Twitter user “financial truth” (@caijingxiang) posted on Monday about rumors that SMIC had received a supply license from a U.S. supplier. The post said that he had made multiple inquiries but could not find the original source of the rumors.
The post further noted that if the information is true, it suggests that the Biden Administration has already taken the “first step” toward compromising with the Chinese Communist Party in secret.
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