The company’s customers have been shovelling in orders early, fearing more fallout from the US-China tech spat. Management admitted in February that orders originally meant for 2025 were being dragged forward. Meanwhile, China’s subsidies for consumer electronics have sparked a chip inventory binge as firms try to grab more market share before the tide turns.
That $188 million profit figure might look good but still fell short of the $226 million analysts expected. Revenue rose 28 per cent to $2.25 billion, also below the $2.36 billion forecast and SMIC’s own guidance.
It helped that the same quarter last year was a car crash: just $72 million in profit as the company choked on post-COVID inventory and splurged on capital spending.
Gross margin got a healthy bump to 22.5 per cent from a grim 13.7 per cent a year earlier. But the real action is in the political trench warfare. SMIC has become Beijing’s poster child in the campaign to ditch foreign chips, focusing on mature tech that still powers a heap of consumer gear.
US sanctions have kept it from getting its hands on extreme ultraviolet lithography tools needed for top-tier chipmaking. Still, since 2021, the company has been pumping out 7-nanometre chips which were buried in Huawei’s new phones, much to Washington’s horror.
Production has been revving up as the tech decoupling accelerates. Last month, China slapped retaliatory tariffs on US goods, and its chip industry association quietly tightened origin labelling rules. That may give SMIC and its mates an easier ride, especially on home turf and in mature chip tech where the US grip is looser.
Investors are clearly buying into the narrative. SMIC’s Hong Kong shares have leapt 42 per cent this year, trouncing the Hang Seng Index’s 14 per cent gain.
The sugar rush might not last. SMIC expects second-quarter revenue to drop by up to six per cent and margin to shrink to around 18 to 20 per cent. Management said it would keep its eyes on the “core business and near-term deliverables,” which sounds like code for bracing for turbulence.
They warned that stuffing the channel now might mean a painful hangover later, and price pressure from rivals could further squeeze the bottom line.
