China's largest semiconductor manufacturer, the Semiconductor Manufacturing International Corporation (SMIC), plans to invest $7 billion through capital expenditure this year, shared its management during the firm's earnings call for its fiscal first quarter earlier today. The firm explained that it would refrain from profit distribution for 2024 as it is investing the money into future growth. SMIC's capital expenditure dipped significantly in the first quarter to $1.4 billion for a 57% annual drop over the year-ago quarter's $2.2 billion. SMIC's financial head shared the details during the fall, as he outlined that the firm will maintain its 2024 spending levels this year.
SMIC Plans To Maintain 2024 Capital Spending In 2025, Cites Tariff Uncertainty Behind Cloudy Outlook
SMIC spent $7.3 billion in capital expenditures in 2024, a slight drop from the $7.4 billion the firm had spent in 2023. The firm has had to increase its capital spending as it faces more demand from domestic Chinese firms and is tasked with developing the latest chip manufacturing technologies due to US sanctions on TSMC that prevent the Taiwanese firm from selling chips to China's Huawei. SMIC's capital expenidutre was $6.3 billion in 2022 and grew by $1.1 billion in the next year.
During the firm's first-quarter earnings call, SMIC's head of finance, Wu Jungfeng, commented on the firm's capacity expansion and construction. He outlined that the firm was "currently in an important period of capacity construction rollout and continuously increasing market share." These activities, along with research and development, "require continuous capital expenditure," explained the SMIC executive.
Wu added that his firm's capital expenditures in 2025 will stay flat at 2024 levels. "In 2025, the company's capital expenditure is expected to be roughly flat to that of previous year," he said. According to him, the higher expenditures mean that the firm "still needs to prioritize allocating funds to its core business including capacity expansion and R&D activities," which forces SMIC to not distribute profits among investors.
SMIC's co-CEO Zhao Haiijun commented on the tariff-related uncertainties that his firm is facing. Zhao shared that SMIC has seen orders from automotive and other customers grow, which indicates that the sluggish economic environment in China is picking up. However, he added that the "market is experiencing anxiety brought by tariff policy changes and others."
The increased uncertainty has also made it difficult for his firm to predict a clear future for the second half of 2025. Consumer electronics firm Apple saw its shares fall after its latest earnings call saw management remain quiet about the longer-term impact that it faces from supply chain relocation and tariffs.
SMIC took a similar tone. Whether the tariff policy will [inaudible], whether market stimulus and the rush stocking will overdraw the future demand, whether the demand for commodity products will decline due to the pricing increase brought by the new tariffs, all these deserve to be closely paid attention to," said Zhao.
He added that "the firm's pricing increase brought by the new tariffs, all these deserve to be closely paid attention to. Our visibility on second half is not clear. Especially from the latter half of third quarter to end of this year." Zhao also outlined that his "company believes that the second half of the year presents both opportunities and challenges." The SMIC executive noted that the "problems encountered by the company are also issues that everyone has to face."
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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