At the Q4 2024 earnings briefing, SMIC Co-CEO Zhao Haijun expressed his important views on the market outlook for 2025, which attracted widespread attention from the industry. He made it clear that although localized production has brought more market demand, homogeneous competition makes structural excess capacity still face fierce competition even when the market recovers. In the face of such a market environment, SMIC will maintain a consistent pricing strategy, follow the market and not take the initiative to reduce prices, but will also work with strategic customers to face price competition when necessary to maintain the company's market share and competitive advantage in various fields.
Market Status and Challenges
The global semiconductor market has experienced tremendous volatility in recent years. On the one hand, with the rapid development of emerging technologies such as artificial intelligence, big data, and the Internet of Things, the demand for semiconductors continues to grow. On the other hand, various places have increased investment in the semiconductor industry, resulting in rapid expansion of production capacity and increasingly fierce homogenization competition. It is estimated that the global data center capital expenditure is expected to continue to increase significantly in 2025, such as Google's capital expenditure investment in 2025 is expected to be 75 billion US dollars, a year-on-year increase of 43%; Amazon expects $100 billion, a year-on-year increase of 26%, etc. This shows that the market demand for semiconductors is still strong, but at the same time, it also puts forward higher requirements for technological innovation and cost control of enterprises.
In this context, SMIC, as an important chip manufacturing enterprise in Chinese mainland, is facing huge challenges. In 2024, the company achieved operating income of RMB57,795.6 million, an increase of 27.7% year-on-year, but the net profit attributable to shareholders of listed companies decreased by 23.3% year-on-year, mainly due to the decline in capital income. This reflects that the company still has certain pressure on profitability, and needs to further optimize the financial structure and improve the efficiency of capital use.
Figure: SMIC's Zhao Haijun talks about the competitive situation in 2025
Corporate strategy and responses
In the face of fierce market competition, Zhao Haijun said that SMIC will enhance its core competitiveness by building leading technologies, bind customers, and combat price pressure by adding new products. The company maintains a consistent pricing strategy, follows the market, does not take the initiative to reduce prices, but will also face price competition with strategic customers when necessary.
Build leading-edge technology
Technological innovation is the key to enhancing the core competitiveness of semiconductor enterprises. SMIC has been committed to technology R&D and innovation, and continues to introduce new products and technologies. For example, the company has achieved automotive-grade certification mass production and terminal applications in high-voltage, high-current, high-reliability BCD and analog platforms, ultra-low-power logic platforms, high-performance microcontrollers, automotive-grade display driver platforms, and high-reliability memory platforms. These technological breakthroughs not only improve the company's product performance and quality, but also enhance the company's competitiveness in the market.
Bind customers
Customer relationships are the foundation of business development. SMIC focuses on long-term cooperation with customers, and has won their trust and support by providing high-quality products and services. The company accelerates the deployment of customer products and comprehensively covers in-vehicle applications such as entertainment, connectivity, power, control, body and chassis, and aims to achieve revenue growth. This strategy of deep customer binding helps the company stabilize its market share and reduce the risk of being cannibalized by competitors.
Add new products
The ever-changing market demand requires companies to continuously introduce new products to meet the needs of customers. SMIC plans to launch a series of new products in the future to meet changing market needs. For example, the company's revenue in consumer electronics, interconnection and wearables and other fields also accounts for a high proportion, and related fields are expected to benefit from the volume of end-side AI and exceed the original market expectations. The launch of these new products will bring new growth points to the company and enhance the company's market competitiveness.
Pricing strategy
In terms of pricing strategy, SMIC maintains a consistent principle of following the market and does not take the initiative to reduce prices, but will also face price competition with strategic customers when necessary. This strategy not only reflects the company's sound business philosophy, but also demonstrates its flexibility and decisiveness in critical moments. Not taking the initiative to reduce prices can avoid falling into vicious price wars and protect the company's profit margins and brand image; When necessary, we work with strategic customers to deal with price competition in order to maintain cooperative relationships with important customers and ensure a stable market share.
Industry trends and company outlook
With the rapid development of emerging technologies such as artificial intelligence, big data, and the Internet of Things, the demand in the semiconductor market will continue to grow. It is estimated that the global data center capital expenditure is expected to continue to increase significantly in 2025, such as Google's capital expenditure investment in 2025 is expected to be 75 billion US dollars, a year-on-year increase of 43%; Amazon expects $100 billion, a year-on-year increase of 26%, etc. This will bring more market opportunities for semiconductor companies, and SMIC, as one of the few companies in mainland China that can mass-produce advanced processes, is expected to fully benefit from the local AI wave, and its advanced processes are expected to continue to be in short supply.
In addition, since the release of the domestic large model Deepseek-R1, the market feedback has been positive, and the strong capability and low-cost characteristics are expected to accelerate the popularization of domestic AI applications, and AI terminals are expected to be fully expanded. This provides SMIC with broad space and good prospects for its future development.
Summary and outlook
In the current market environment, SMIC has adopted a series of proactive and effective strategies to meet the challenges. By building leading technology, adding new products, and maintaining reasonable pricing strategies, the company has achieved remarkable results in enhancing its core competitiveness, maintaining customer relationships, and maintaining market share. At the same time, with the development of industry trends and the growth of market demand, SMIC is expected to usher in greater development opportunities in the future.
However, companies also need to be alert to potential risks and challenges, such as the difficulty of technological breakthroughs, the intensification of market competition, and the uncertainty of the global economic situation. Only by continuously innovating, optimizing management, and improving operational efficiency can we remain invincible in the fierce market competition and achieve sustainable development.
In short, SMIC, under the leadership of Zhao Haijun and other management, is moving in a more stable and sustainable direction. We look forward to the company continuing to give full play to its own advantages in the future, seize market opportunities, and make greater contributions to the development of China's semiconductor industry."
