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China’s SMIC Reports Strong Q1 Profit Surge but Warns of Cloudy Outlook Amid Tariffs and Yield Risks

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Semiconductor Manufacturing International Corp (SMIC) posted a strong financial performance in the first quarter, with profit surging 162% to $188 million and revenue rising 28% year-over-year, driven partly by rush orders from U.S. clients seeking to preempt newly imposed tariffs. However, despite the gains, the results missed analyst expectations, and SMIC’s Hong Kong-listed shares dropped 6.8% following a cautious Q2 forecast.

SMIC, China’s largest chip foundry, said it expects revenue in the second quarter to decline by as much as 6%, citing potential challenges from lower production yields as the company integrates new manufacturing equipment.

Key Financials (Q1 2025):

  • Profit attributable to shareholders: $188 million (vs. $222.4M LSEG estimate)

  • Year-over-year profit growth: +162%

  • Revenue growth: +28%

  • U.S. customer contribution: 12.6% of revenue (up from 8.9% in Q4 2024)

Tariff Impact and Industry Risks:
Co-CEO Zhao Haijun acknowledged the escalating U.S.-China trade tensions, noting that although the current impact is limited—thanks to tariff exemptions and a diversified supply chain—uncertainty looms for the second half of the year.

“If customers cut back purchases due to price increases, the sector could face a hard landing,” Zhao warned.

The company remains largely focused on legacy chips for consumer electronics and home appliances, while advanced chips, such as those powering Huawei smartphones, make up a very small portion of its business. SMIC has not confirmed any production ties to Huawei.

Broader Policy Context:

  • The Trump administration in April approved tariff exclusions on selected Chinese electronics including smartphones, computers, and memory chips, partially easing import pressures for U.S. firms.

  • Meanwhile, Chinese authorities have granted exemptions on some semiconductor imports and are in active talks with the domestic chip sector to mitigate the trade war’s impact.

Despite its strong Q1, SMIC’s outlook reflects the fragility of the global semiconductor supply chain in a climate of geopolitical tension, policy shifts, and technological transition—especially as it scales new equipment and process nodes.

GlobalFoundries Forecasts Stronger Q2 Amid Stable Demand and Tariff Tailwinds

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GlobalFoundries (GFS.O) on Tuesday projected second-quarter revenue and profit slightly above Wall Street expectations, indicating stable demand despite industry-wide pressures from tariffs, smartphone weakness, and policy uncertainty.

The U.S.-based contract chipmaker expects Q2 revenue of $1.68 billion (±$25 million) and adjusted earnings of 36 cents per share (±5 cents). Analysts polled by LSEG had anticipated $1.67 billion in revenue and 35 cents per share in profit. The positive forecast comes after the company posted Q1 revenue of $1.59 billion, slightly ahead of estimates, and adjusted earnings of 34 cents, beating forecasts of 28 cents.

While smartphone demand, its largest revenue stream, remains under pressure, GlobalFoundries said its automotive chip segment showed year-over-year growth in Q1. This resilience comes amid U.S. President Donald Trump’s global tariff strategy, which has already imposed levies on foreign-made autos – the company’s third-largest market.

Interestingly, CEO Thomas Caulfield noted that U.S. tariffs on foreign-made chips could benefit domestic manufacturers like GlobalFoundries by prompting customers to shift production to U.S.-based fabs. However, broader uncertainty around the CHIPS Act, which includes $52.7 billion in U.S. subsidies for domestic chip production, continues to cloud the industry’s long-term outlook.

Meanwhile, speculation of a potential merger with Taiwanese United Microelectronics Corp (UMC) resurfaced in March, although UMC denied any ongoing talks in April.

Despite the policy fog and shaky smartphone sector, GlobalFoundries appears cautiously optimistic heading into Q2 – signaling potential resilience among U.S.-based chipmakers navigating a turbulent geopolitical landscape.