In 2024, China’s top semiconductor player, SMIC, experienced a remarkable surge in revenue, reaching its highest point ever, even though its net profits took a significant hit. This mixed result paints a vivid picture of the shifting dynamics in China’s chip manufacturing sector.
According to SMIC’s annual report filed with the Hong Kong stock exchange, the company saw a substantial 27% boost in its full-year revenues, totaling an impressive US$8 billion. Yet, net profits plummeted by 45.4%, landing at US$493 million. This drop in profitability caused SMIC’s stock to slide 3.4% on Friday morning.
Meanwhile, Hua Hong Semiconductor, China’s second-largest wafer fab, reported a 12.3% drop in its 2024 revenue, amounting to US$2 billion. Its profits fell even more sharply by 79.2% to US$58 million, leading to a 3.3% decline in its share price during the morning trading session in Hong Kong.
This dip in profitability for both SMIC and Hua Hong highlights the intensifying competition within China’s domestic chip market. Additionally, US export restrictions have been a thorn in SMIC’s side, particularly hindering its efforts to advance into more lucrative, cutting-edge node production.
SMIC’s primary customers remain in the consumer electronics sector, which continues to drive its wafer sales. On the other hand, Taiwan’s TSMC, the global leader in semiconductor manufacturing, reported a nearly 40% increase in net profit for 2024, reaching an astonishing US$35 billion. This stark contrast underscores the challenges SMIC faces, even though TSMC’s revenues are only about 12 times larger.
