SMIC Sees Sales Surge but Faces Profit Decline Due to High-Cost Huawei Chips

SMIC has released its 2024 financial report, highlighting Huawei’s significant impact on its performance. Despite achieving strong revenue growth, the high production costs of Huawei’s chips have negatively affected profits.

The semiconductor firm reported Q4 2024 revenue of $2.207 billion, marking a new sales milestone despite ongoing U.S. chip restrictions. Year-over-year, SMIC’s revenue grew by 31.5%, while its annual sales surged by 27% to $8.03 billion—crossing the $8 billion mark for the first time.

However, net profit took a hit, dropping 45.4% year-over-year. SMIC recorded a net profit of just $493 million in 2024, primarily due to increased manufacturing expenses and limited financial support. A major contributor to this decline appears to be Huawei.

According to reports, SMIC has been struggling with the high costs of producing 7nm Kirin chips for Huawei at scale, significantly impacting its profit margins.

Previously, it was speculated that SMIC might face further financial strain while producing the refined Kirin 9020 chipset for the upcoming Huawei Mate 70 series, requiring substantial investment in development and manufacturing.

As the US continues to tighten chip controls on China, SMIC now appears to be the only option in the country. The superior Huawei Kirin chips also brought the Chinese chipmaker into the limelight and gave it immense support.

Thus, Huawei chips are seemingly the reason behind the SMIC sales rise and low net profit in 2024. Inputs further reveal that China contributed 89.1% of SMIC’s total revenue while the US owns 8.9% and Europe/Asia owns 2%.

SMIC is now expecting a notable growth of 6 to 8% in the first quarter of this year, with a gross margin of 19-21%