Semiconductor Manufacturing International Corp. (SMIC), China’s largest chipmaker, has raised concerns about a potential oversupply of mature-node chips in the second half of 2025. The company, which specializes in established chips used in consumer electronics and home appliances, noted that the market could face an imbalance due to weakening demand and increased output.
During the COVID-19 pandemic, SMIC benefited from a surge in demand for its chips as people relied on consumer electronics during stay-at-home orders. However, as people return to offices and replacement demand slows, SMIC has experienced a drop in consumer-driven demand. Advanced chips for Huawei smartphones account for a small portion of SMIC’s revenue, with the company never confirming whether it produces chips for Huawei.
Co-CEO Zhao Haijun warned analysts that two key factors could impact the second half of 2025. First, the company expects a decline in order volume as demand for chips has been pulled forward into the first half of the year. Second, the increase in production capacity across the industry is likely to result in price competition among manufacturers for orders.
SMIC reported a 31.5% year-on-year increase in revenue for the October-December period, reaching $2.2 billion, meeting market expectations. The company expects first-quarter revenue to grow by 6% to 8% compared to the previous quarter. The positive share movement was attributed to broader optimism in Chinese stocks and the development of cost-effective AI models by DeepSeek, which could benefit domestic chipmakers like SMIC.
Despite the challenges, SMIC’s strong first-quarter outlook and steady capital expenditure (CAPEX) plans have bolstered investor confidence. In 2023, SMIC’s capital expenditure surged to $7.3 billion from $4.5 billion in 2021, and the company expects to maintain a similar level in 2024 and 2025.
However, SMIC’s gross profit margin has seen a decline, dropping to 20% in 2023 compared to over 30% in previous years. While profitability improved in the October-December period, Zhao expects continued pressure on profitability in 2025 due to rising depreciation costs from increased capital expenditure. Profit attributable to owners of SMIC was reported at $107.6 million for the period, below analysts’ expectations of $193.45 million.
