The leading Chinese chip manufacturer makes strides with state support and capacity expansion, but faces structural and geopolitical challenges that keep it far from global leadership.
In the geopolitical chessboard of technology, where semiconductors are the modern equivalent of 20th-century steel and oil, China is heavily investing in Semiconductor Manufacturing International Corporation (SMIC) as a pillar of its technological independence. Founded in 2000 and headquartered in Shanghai, this company has become the cornerstone of Beijing’s semiconductor self-sufficiency strategy, amid rising tensions with the United States.
SMIC is not only the largest integrated circuit producer in China but also a significant player in the global market. By the end of 2024, according to Counterpoint Research, it had reached third place in the global foundry market, with a 5% market share, competing with UMC and GlobalFoundries. Among its clients are heavyweights like Huawei and Alibaba, and its portfolio includes technological processes ranging from 0.35 microns to 14 nanometers.
Internal Expansion Amid International Restrictions
In recent years, the company has managed to expand its production capacity, focusing primarily on 28nm nodes, a technology considered mature but still essential in sectors such as automotive, IoT, and industrial devices. This approach has been, in part, a forced response to the restrictions imposed by the United States, which since 2020 has regarded SMIC as connected to the Chinese military apparatus, severely limiting its access to advanced lithography technology.
Especially critical is the block on EUV machinery sales by ASML, necessary for manufacturing chips of 7nm or smaller. Without this key tool, SMIC is forced to optimize older processes, making it difficult to compete with giants like TSMC (Taiwan) or Samsung (South Korea), which already dominate production at 5nm and below.
Between State Subsidies and Structural Dependency
SMIC doesn’t walk alone. It is one of the main recipients of China’s multibillion-dollar investment plans in the semiconductor industry, which include the National Integrated Circuit Investment Fund (with over $190 billion committed since 2014), as well as local and tax incentives.
The company has channeled part of these resources into research and development (R&D). In its 2024 report, SMIC registered 14,058 granted patents and over 20,000 pending, with a 9.1% increase in R&D spending in the past year. Despite these efforts, the company itself acknowledges it maintains a “large technological gap compared to industry leaders.”
One of the factors limiting its progress is its high dependence on the domestic market, which accounts for over 80% of its customer base. At the same time, its penetration in Europe and other Asian markets has diminished, according to a recent report from the French Institute of International Relations (IFRI).
Trade Uncertainty and Scaling Obstacles
SMIC manufactures chips for smartphones, connected devices, PCs, vehicles, and industrial electronics. But its challenge goes beyond its portfolio: it aims to become a real alternative in the global advanced chip market, currently dominated by established players with decades of technological advantage and installed infrastructure.
In its latest financial report, SMIC anticipates a 4 to 6% drop in revenue in the second half of 2025, due to volatility in demand and the international landscape. While the company attributes this decline to general sector factors, its exposure to the U.S. technological blockade, combined with the slow progress in developing domestic lithography, creates a more adverse environment than that faced by its competitors.
Can SMIC Lead the Global Industry?
SMIC’s trajectory is that of a resilient company. It has withstood sanctions, scaled production without access to the newest tools, and solidified a key role in the Chinese supply chain. But it is still far from leading the global semiconductor industry, where what matters is not just scale but the level of technological sophistication.
Experts agree: China can continue to invest, but the long cycles of R&D in chip foundries, the need for disruptive innovations, and geopolitical barriers compel it to seek new solutions. SMIC’s transition from “strategic manufacturer” to “global technological leader” depends not only on public funding or installed capacity, but also on its ability to close the gap in talent, intellectual property, and access to key tools.
For now, SMIC represents more a national stronghold than an immediate global threat, although in the context of an open tech war, its evolution will be closely monitored by governments, competitors, and analysts. In the race for chips, China already has its champion. It remains to be seen if the playing field will truly allow it to compete.