SMIC Faces Tariff Uncertainty, Yet Plans $7 Billion Investment in 2025 for Chip Manufacturing Expansion
China’s leading semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC), is forging ahead with a $7 billion capital expenditure plan for 2025, despite growing global tariff pressures and a dip in Q1 investments. During its latest earnings call, SMIC announced it will refrain from distributing 2024 profits in order to allocate resources toward capacity expansion and R&D, signaling a long-term strategy to bolster its technological independence amid intensifying geopolitical and trade tensions.
Capital Spending Strategy Remains Resilient Despite Short-Term Decline
SMIC’s capital expenditure in Q1 2025 fell sharply to $1.4 billion, marking a 57% drop compared to $2.2 billion in the same quarter last year. Nonetheless, SMIC CFO Wu Jungfeng emphasized that total annual capital spending will remain in line with 2024’s $7.3 billion, which itself was only slightly down from $7.4 billion in 2023. This consistency underlines SMIC’s aggressive push to scale production and meet rising domestic demand, particularly as U.S. sanctions prevent firms like TSMC from supplying chips to Huawei and other Chinese companies.
Wu explained that SMIC is “currently in an important period of capacity construction rollout and continuously increasing market share,” requiring consistent investment to support growth and maintain competitiveness in the global semiconductor race.
“In 2025, the company's capital expenditure is expected to be roughly flat to that of the previous year. We still need to prioritize allocating funds to core business areas, including capacity expansion and R&D activities,” said Wu.
Tariff Turmoil Clouds Second-Half Outlook
While SMIC’s expansion continues, co-CEO Zhao Haiijun acknowledged growing anxieties over global trade policy, especially new and potential tariffs targeting Chinese electronics and semiconductors.
“The market is experiencing anxiety brought by tariff policy changes and others,” Zhao said, highlighting increased difficulty in forecasting demand trends for the latter half of 2025.
He warned that pricing hikes, driven by potential tariffs, may undercut demand for commodity chips and prompt rush orders that distort longer-term market expectations. These uncertainties, Zhao said, “deserve to be closely paid attention to.”
While SMIC has seen growing orders from automotive clients and other sectors, reflecting a rebound in some parts of China’s economy, Zhao remains cautious:
“Our visibility on the second half is not clear, especially from the latter half of [the] third quarter to the end of this year. The second half presents both opportunities and challenges, and the problems encountered by the company are issues everyone in the industry must face.”
SMIC’s Strategic Vision Amid Global Headwinds
SMIC’s commitment to multi-billion-dollar investments, even as global semiconductor demand fluctuates and tariff threats loom, demonstrates its resolve to secure China’s chipmaking independence. These efforts are critical for China as it faces ongoing U.S.-led tech sanctions and seeks to reduce reliance on foreign semiconductor technology.
The firm’s broader expansion strategy also aligns with Beijing’s ambitions under the “Made in China 2025” initiative, with a growing emphasis on technological self-reliance, especially in advanced logic chips, AI accelerators, and automotive electronics.
What do you think about SMIC’s aggressive investments amid trade tensions? Can China’s semiconductor ambitions overcome global hurdles? Share your thoughts below.
