China’s top semiconductor manufacturers, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, saw sharp declines in their Hong Kong-listed shares on May 9.

SMIC’s shares dropped by 4.8%, and Hua Hong’s fell by 7.9%, following warnings of challenges in the second half of 2025 amid ongoing US-China tensions.

SMIC projected a 4-6% sequential decline in second-quarter revenue, citing production fluctuations and lower average selling prices.

Hua Hong, while forecasting second-quarter revenue growth between US$550 million and US$570 million, also noted uncertainties in customer demand and supply chain dynamics.

Both companies reported strong first-quarter growth, with SMIC’s revenue up 28.4% year-on-year to US$2.2 billion, and Hua Hong’s rising 17.6% to US$540.9 million.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s semiconductor self-sufficiency strategy shows mixed results amid trade tensions

Despite strong quarterly revenue growth for SMIC (28.4%) and Hua Hong (17.6%), significant stock price drops reveal investor concerns about the sustainability of China’s semiconductor strategy1.

The China Integrated Circuit Industry Investment Fund’s decision to reduce its holdings in both companies, approximately 65.98 million shares in SMIC and 6.33 million shares in Hua Hong, signals a potential strategic adjustment from one of Beijing’s key semiconductor policy vehicles2.

This combination of strong revenue and strategic uncertainty reflects a broader trend that began in 2018-2019, when U.S. export restrictions first pushed China toward developing semiconductor independence—a transition analysts predicted would take 3-5 years to materialize3.

The current market reaction suggests investors remain skeptical about whether Chinese chipmakers can maintain growth trajectories while navigating continued trade barriers, despite seven years of focused national investment in semiconductor self-sufficiency.

2️⃣ Short-term revenue growth masks longer-term structural challenges

The contrast between SMIC’s revenue jump (28.4%) and Hua Hong’s revenue growth (17.6%) against their plunging stock prices reveals that investors are more focused on future risks than current performance1.

Industry analysts have identified specific structural concerns, including potential oversupply as Chinese manufacturers continue expanding production capacity despite U.S. export restrictions. This could create downward pressure on prices and margins4.

This challenge is evident in Hua Hong’s financial results, where revenue grew 17.6% but net income plummeted by 88% to just $3.75 million, suggesting significant pressure on profitability despite top-line growth1.

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