Full Breakdown
SMIC Faces Flat Revenue Amid AI Chip Demand Surge
2/11/2026, 4:16:15 PM
Overview of SMIC's Financial Performance
Semiconductor Manufacturing International Corp (SMIC), China's largest contract chipmaker, has reported a mixed financial outlook for the first quarter of 2026. The company anticipates that its revenue will remain flat, primarily due to a decline in low-end orders, despite a significant increase in demand for chips used in artificial intelligence (AI) applications. In 2025, SMIC's revenue rose by 16.2% year-on-year to reach $9.3 billion, while net profit surged by 39% to $685.1 million. This growth was attributed to increased wafer shipments and a higher capacity utilization rate, which rose to 93.5%, up 8 percentage points from the previous year.
Challenges in the Market
Zhao Haijun, co-CEO of SMIC, indicated that the company has experienced a "squeeze" in orders from smartphone vendors and manufacturers of lower-end products due to the overwhelming demand for AI chips. This shift in demand dynamics has led to the company's cautious revenue expectations. The semiconductor industry is currently facing a significant supply crunch for memory chips, driven by a rapid increase in production for advanced chips necessary for AI data centers. This surge in demand has strained global wafer capacity and escalated costs throughout the supply chain, prompting some companies, particularly in the smartphone sector, to scale back their production plans.
Strategic Positioning and Future Outlook
Despite the challenges, Zhao expressed confidence in SMIC's positioning within the current industry development cycle. He emphasized that the company is prepared to address urgent market demands to foster revenue growth in 2026. SMIC's commitment to supporting China's semiconductor self-reliance is underscored by its substantial increase in wafer shipments, which totaled 9.7 million in 2025, up from 8 million the previous year.
Market Reactions and Stock Performance
Following the earnings report, SMIC's shares experienced a decline, with Hong Kong-listed shares dropping by 3% to HK$69.40 and Shanghai-listed stock falling by 1.3% to 114.70 yuan. Analysts noted that while the company's revenue growth was robust, its profit figures for both the full year and the fourth quarter did not meet market expectations, contributing to the negative market response.
Criticism & Opposition
Some analysts have raised concerns regarding SMIC's reliance on the volatile AI chip market, suggesting that the company's flat revenue outlook may indicate potential vulnerabilities in its business model. Critics argue that the focus on AI chips could detract from the company's ability to maintain a balanced product portfolio, particularly in the face of declining demand for lower-end products.
Verbatim Quotes
- “still well positioned in the current industry development cycle” — Zhao Haijun, Co-CEO of SMIC
In summary, while SMIC has demonstrated significant growth in revenue and profit, the company's flat revenue expectations for the upcoming quarter highlight the complexities of navigating a rapidly evolving semiconductor market, particularly in the context of AI demand and shifting consumer preferences.
