Chinese semiconductor companies achieved record revenues last year propelled by AI demand, a shortage in memory chips, and U.S. export limitations that have prompted Beijing to enhance its domestic tech sector.
Analysts and the businesses themselves anticipate additional revenue increases this year, highlighting how Chinese chip makers are benefitting from robust demand from local tech corporations aiming to establish their AI infrastructures.
According to Paul Triolo, a partner at Albright Stonebridge Group, U.S. export limitations on China’s technology sector in recent years have provided “rocket fuel” to chip demand, boosting growth in related fields such as electric vehicles and AI data centers.
Semiconductor Manufacturing International Co. (SMIC), the largest chip producer in China, reported a revenue growth of 16% for 2025 from last year, reaching a record $9.3 billion. Revenue could exceed $11 billion in 2026, as per estimates from LSEG analysts.
Hua Hong, another semiconductor manufacturer from China, indicated that its fourth-quarter revenue hit a record $659.9 million, with sales projected between $650 million and $660 million.
Moore Threads, aiming to compete with Nvidia, indicated that revenue for 2025 would range from 1.45 billion yuan ($209.8 million) to 1.52 billion yuan, representing a year-on-year increase of 231% to 247%.
What is propelling sales records?
Multiple factors contribute to this. The expansion of electric vehicles and associated infrastructures has bolstered less complex or “mature node” semiconductors, while the demand for more sophisticated chips is “sky-high due to AI,” stated Triolo to CNBC.
U.S. restrictions implemented in recent years, which denied China access to essential technologies, have hastened a self-sufficiency initiative from Beijing to lessen its reliance on American technology.
Recently, U.S. export restrictions on Nvidia’s chips to China have prompted Beijing to promote local businesses to opt for domestic alternatives, with firms like Huawei stepping in to bridge the gap, despite the performance of their semiconductors lagging behind those from the U.S.
“Although China does not currently hold the lead in peak GPU performance, these indigenous solutions are filling the domestic ‘compute gap’ and propelling record revenues,” Parv Sharma, senior analyst at Counterpoint Research, conveyed to CNBC.
Chinese memory chip manufacturers have also benefitted. Memory, a crucial component for AI data centers and consumer electronics, is currently in short supply globally while demand remains elevated. This has triggered an unprecedented surge in memory chip prices.
ChangXin Memory Technologies (CXMT), one of China’s premier memory manufacturers, experienced a 130% increase in revenue year-on-year, surpassing 55 billion yuan ($8 billion), Bloomberg reported last week, citing sources familiar with the situation.
High-bandwidth memory (HBM) is a type of advanced memory essential for AI. The market is dominated by the three leading players globally who produce this type of memory — Samsung, SK Hynix and Micron. Export limitations on HBM to China have created an opportunity for CXMT, even as its technology significantly trails the leading companies, Phelix Lee, senior equity analyst at Morningstar, told CNBC.
“Once HBM is restricted from entering China, CXMT stands out as the only domestic option, leading to even the technologically inferior HBM2 or HBM2e being welcomed with enthusiasm,” Lee remarked.
HBM2 and HBM2e are technologies that Samsung and SK Hynix initiated production on around 2016. CXMT is anticipated to begin HBM3 production this year.
The knowledge acquired from producing memory chips could lead to improvements in other chips, such as GPUs, according to Albright Stonebridge Group’s Triolo.
“All memory fabrication plants in China are now becoming incubators for advanced process technologies in ways unimaginable before the October 2022 U.S. export restrictions,” Triolo remarked to CNBC.
China’s ongoing challenges
Despite Chinese semiconductor companies achieving record revenues, they still fall short compared to companies in the U.S., South Korea, Europe, and Taiwan in terms of technological capabilities.
SMIC and Hua Hong remain unable to produce the most advanced chips globally at scale like industry frontrunner Taiwan Semiconductor Manufacturing Co (TSMC). This is primarily due to their inability to access the most advanced tools made by ASML in the Netherlands due to export restrictions.
While there are initiatives underway to develop domestic alternatives, the intricate nature of the technology poses significant challenges.
“As demand stays robust, Chinese semiconductor firms face immense pressures due to U.S. export restrictions, and domestic options have become increasingly available in many sectors, but not universally,” Triolo commented.
“China’s goal of essentially recreating vast segments of the entire semiconductor supply chain is inherently challenging and will take time to navigate U.S. controls in crucial areas.”
Moreover, while the current growth stems from “import dependence replacement,” there exists a danger of overcapacity for less advanced chips, observed Counterpoint’s Sharma.
“Sustaining this growth will hinge on China’s success in advancing into higher-value areas such as advanced HBM and next-generation logic nodes,” Sharma concluded.
