By Sherry Qin

Semiconductor Manufacturing International Corp. is scheduled to report fourth-quarter results on Tuesday. Here is what you need to know:

NET PROFIT: China's largest contract chip maker is expected to post fourth-quarter net profit of $191.5 million, according to the consensus estimate of 10 analysts polled by FactSet. That would be a 9.6% increase from a year earlier. Analysts previously noted that the fourth quarter is traditionally a low season and expect the foundry sector to continue to recover in 2025.

REVENUE: Quarterly revenue is estimated at $2.19 billion, up 30% from a year ago, according to FactSet. That would be in line with SMIC's guidance of up to 2% sequential growth from $2.17 billion in the third quarter. SMIC's fourth-quarter gross margin likely came in at 19.3%, which would be within its guided range of 18%-20%.

The company's Hong Kong-listed shares surged 52.5% in the final quarter of 2024 amid China's artificial-intelligence development and chip-localization efforts. Analysts see SMIC as a top beneficiary as the U.S. tightens chip restrictions and Chinese AI chip players continue to catch up with the technology. The Chinese government's consumption subsidies for home appliances, which don't use cutting-edge chips, also bode well for SMIC's business.

WHAT TO WATCH:

--The computing hardware supply chain, including chip companies, stands to benefit as Chinese technology giants and startups race to make AI models cheaper, faster and more specialized. As China's only foundry capable of producing sub-14 nanometer advanced chips, SMIC is positioned to meet rising demand for domestically designed AI graphics processing units and accelerators, DBS said in a note. Investors will look for the management's update on its chip-production capability.

--SMIC's gross margin could be under pressure in the near term due to low yields in developing advanced chips, constrained by the limitations of deep ultraviolet lithography machines, DBS said in a note. However, China's foundry sector could witness an industry-wide revaluation in the long term, fueled by capital inflows into the country's emerging advanced AI chip supply chain, it said.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

February 10, 2025 01:48 ET (06:48 GMT)

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