SMIC Reports Strong Q1 Growth but Warns of Tariff Impact and Production Challenges Ahead

China’s largest semiconductor manufacturer, Semiconductor Manufacturing International Corp (SMIC), reported strong growth in the first quarter of 2025, with revenue increasing by 28% and net profit rising by 162% compared to the previous year. This impressive performance was largely driven by a surge in orders from U.S. clients anticipating new tariff hikes. However, despite the gains, SMIC’s net profit of $188 million fell short of market expectations of $222.4 million, prompting a 6.8% decline in its Hong Kong-listed shares.

Looking ahead, SMIC forecasts a revenue drop of up to 6% for the second quarter of 2025, citing reduced production efficiency as new equipment is integrated into its manufacturing processes. The company is proceeding cautiously amid ongoing U.S.-China trade tensions. Co-CEO Zhao Haijun noted that while current impacts on China’s semiconductor sector are relatively limited—thanks to exemptions and diversified supply chains—the risk of weakened demand remains if tariffs continue to inflate prices for end products.

Although SMIC plays a key role in China’s chip industry, its involvement in manufacturing advanced chips for smartphones, such as those used by Huawei, remains unclear. The company has not publicly confirmed any direct supply to Huawei. Both the U.S. and Chinese governments have offered temporary tariff relief, easing immediate pressure on the tech sector, though the long-term outlook remains uncertain.

Overall, SMIC’s first-quarter results highlight its resilience and growing capacity, but the company remains vigilant amid geopolitical and operational challenges. The cautious tone in its forward-looking statements reflects broader concerns within the global semiconductor industry about supply chain disruptions, international trade policies, and technological restrictions. SMIC is expected to continue monitoring the evolving landscape to adapt its strategies accordingly.