SMIC sees flat Q1 revenue as low-end orders fall

China’s SMIC expects flat revenue in Q1 due to declining low-end orders, offsetting growth in AI chip demand, according to the company.

In 2025, SMIC reported a 16.2% rise in revenue to US$9.3 billion and a 39% rise in net profit to US$685.1 million.

SMIC’s co-CEO Zhao Haijun cited weaker orders from smartphone and lower-end product makers, amid strong AI chip demand, as a reason for the flat revenue outlook.

Industry leaders are expanding capacity to meet AI-related chip needs.

🔗 Source: South China Morning Post

🧠 Food for thought

Implications, context, and why it matters.

SMIC’s AI chip growth is constrained by a technology gap

SMIC is getting heavy orders for AI chips, yet its manufacturing ability trails industry leaders because U.S. and allied export controls limit access to advanced production tools 1.
Those limits keep the company at the 7-nanometer process node (a measure of how small chip features are, and typically a proxy for performance and efficiency), leaving a wide gap between leading U.S. AI chips and Huawei’s best offerings, which are estimated to be roughly five times less powerful 1.
Forecasts put that shortfall on track to widen to seventeen times by 2027 1.
Production at 5 nanometers using less-advanced equipment would likely raise costs and reduce yields (the share of usable chips produced from a wafer), which would curb competitiveness in high-performance AI 2.

SMIC’s expansion plan ties to China’s localization push, while profits face pressure

SMIC plans to invest more than $7 billion to expand, despite pressure on profitability, per Nikkei 3.
The outlay supports China’s localization push to build a more self-reliant domestic supply chain for essential chips, with SMIC pointing to automakers as a demand driver 3.
CSIS (the Center for Strategic and International Studies, a Washington-based policy research organization) says heavy, ongoing state support could let Chinese manufacturers compete more aggressively than U.S. firms that must generate profits on a quarterly basis 2.
That setup may split the global market, with SMIC serving China’s domestic needs for mature-node chips used in cars, appliances, and many industrial systems, while remaining unable to challenge leaders at the cutting edge of AI chips 1.