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Investment bank Morgan Stanley has slashed expected Chinese AIGPU revenues by half due to yield problems at the country's biggest chip manufacturer, the Semiconductor Manufacturing International Corporation (SMIC). SMIC is China's leading domestic chip manufacturer, but US sanctions have curtailed the firm's ability to manufacture leading-edge chips with the latest lithography equipment. As a result, it has to contend with low yields, and according to Morgan Stanley, SMIC will be able to manufacture 18,000 AI chip wafers per month at best by 2027.
China's SMIC Expected To Have A Paltry 30% AI GPU Chip Yields By 2025 End, Says Report
According to a snippet of a Morgan Stanley report shared by a social media user, SMIC's GPU yields by year-end are expected to sit at 30%. Yields, in semiconductor fabrication, refer to the number of usable chips per wafer. The higher the yields, the lower a firm's costs are, as it can earn more revenue per wafer without having to absorb the higher costs associated with the failed chips.
The report shows that the Chinese chip manufacturer is expected to produce 7,000 wafers per month this year. These wafers, which primarily cover Huawei's Ascend AI chips, will focus on the Ascend 910B this year and switch to the 910C in 2026.
Huawei's Ascend 910C is composed of two 910B dies, and Morgan Stanley's data shows that one 12-inch SMIC wafer can accommodate either 78 910B dies or 39 910C dies.
Multiple reports have suggested that SMIC continues to be limited to producing 7-nanometer chips. These limitations stem from the fact that the firm is unable to access the latest EUV chip manufacturing tools from ASML. EUV lithography enables printing tinier circuits on silicon wafers compared to traditional DUV lithography.
To compensate for the lack of newer machines, the Chinese firm has had to resort to patterning. Patterning, in chip fabrication, refers to dividing a mask into portions to print the circuits piece by piece. While 7-nanometer chips can theoretically be produced with DUV chip machines, EUV machines reduce the number of steps and improve the costs and yields.
The Morgan Stanley report suggests that a single 910B chip is expected to cost Huawei RMB50,000 this year, while the 910C is expected to cost RMB110,000. The higher costs for the latter appear to reflect chip packaging as well, along with the price of two 910B dies.
Using these prices and output volumes, the bank estimates that in 2025, 2026 and 2027, SMIC can earn RMB58.5 million, RMB94 million and RMB136 million. The report also shows that SMIC is suffering from low yields, with a yield rate of 30% for the 910B this year, which is expected to improve to 70% by 2027.
Additional details suggest that the low yields have affected these estimates. Another social media user suggests that Morgan Stanley's previous report had expected SMIC to earn RMB146 million, RMB212 million and RMB286.5 million during 2025, 2025 and 2027.
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