SMIC Stockpiles Raw Materials Ahead of Possible U.S. Sanctions: Report

SMIC has placed significant orders for raw materials with its Taiwanese partners following shipments of Huawei's HiSilicon Kirin 9000S system-on-chip for the Mate 60 smartphone in violation of U.S. Sanctions, reports money.UDN.com. Industry observers cited by the publication believe that the contract maker of chips anticipates stricter sanctions from the U.S. And is stockpiling the materials it needs. There could be other reasons, too.

The buzz in the industry suggests that SMIC has recently approached its partners in Taiwan, placing substantial orders equivalent to around two years' worth of materials supply. Some believe that this move is to ensure a steady supply for its 7nm chip production, hinting at the company's forward-thinking approach.

The larger question revolves around SMIC's motivations for such significant stockpiling. Some think it could be a proactive measure against potential new restrictions from the U.S. Others feel it could be an effort to raise their inventory, anticipating a surge in client requirements.

Huawei has high hopes for its Mate 60-series smartphones and expects to ship as many as 20 million units this year if supply remains intact. But these smartphones will keep shipping next year, and their sales will only increase. Furthermore, the company will likely introduce other smartphones based on its chips, significantly increasing its requirements for SoCs. As a result, it makes sense for SMIC to increase procurement of raw materials pure enough for its 7nm production.

SMIC and other Chinese chipmakers are not novices when it comes to stockpiling. In anticipation of U.S. Sanctions and restrictions, they have imported virtually all chip-making equipment from Europe, Japan, and the U.S. They could lay their hands on in recent months.