(Yicai) Feb. 7 -- Shares in Semiconductor Manufacturing International Corp and Hua Hong Semiconductor tanked today after the two major Chinese chip foundries disclosed an underwhelming performance in the fourth quarter last year, dragged down by tepid sales and fierce rivalry.

SMIC's share price [SHA: 688981] plunged 4.6 percent to end the day at CNY42.90 (USD6) in Shanghai, while its Hong Kong-listed shares [HKG: 0981] finished down 8 percent at HKD14.12 (USD1.81).

Hua Hong's share price [SHA: 688347] plummeted 11.1 percent to CNY29.48 (USD4.12) in Shanghai, and its Hong Kong-traded stock [HKG: 1347] sank 11.5 percent to HKD13.86.

SMIC's net profit plunged 58 percent in the three months ended Dec. 31 from the year before to CNY1.1 billion (USD154.7 million), while revenue climbed 3.4 percent to CNY12.2 billion (USD1.7 billion), the Shanghai-based firm reported yesterday. Over the whole year, net profit plummeted 60 percent from 2022 to CNY4.8 billion and revenue tumbled 8.6 percent to CNY45.3 billion.

Hua Hong fared even worse. Its fourth-quarter net profit shrank 80 percent year on year to USD35.4 million, while revenue slumped 28 percent to USD455.4 million, according to its latest earnings report also released yesterday.

The semiconductor sector hit rock bottom last year due to weak global demand, high industrial inventories and intense rivalry, SMIC said. This resulted in fewer sales, changes in the product line-up and a sliding capacity utilization ratio, all of which led to less profit, it added.

2023 was a challenging year for the global semiconductor industry with sluggish sales, said Tang Junjun, president and executive director at Hua Hong. But there are signs of an uptick in the market as destocking continues and a new generation of communication and internet of things technologies are rapidly developed, he added.

In the first quarter, sales will probably grow a maximum of 2 percent from the previous quarter, SMIC said in its performance forecast. And the firm’s gross margin may shrink from 16.4 percent to between 9 percent and 11 percent over the period.

Sales will likely amount to between USD450 million and USD500 million in the three months ending March 31, with a gross margin of between 3 percent and 6 percent, Hua Hong said. The gross margin was 4 percent last quarter, a dive of 34.2 percentage points from a year earlier.

Editors: Dou Shicong, Kim Taylor