Companies Benefiting from U.S. Sanctions: Is China's SMIC the Winner?

How the U.S.-China Trade War Boosted SMIC’s Growth

As global tensions rise between the U.S. and China, one company appears to be benefiting from the fallout: China's Semiconductor Manufacturing International Corporation (SMIC). With Taiwan’s TSMC, the world’s largest foundry, now cautious about taking orders from Chinese firms due to U.S. sanctions, SMIC has seen a surge in business. The heightened U.S.-China trade conflict, sparked by President Donald Trump’s policies, is pushing China’s semiconductor industry into new avenues, and SMIC is reaping the rewards.

SMIC recently reported a 34% increase in revenue from Chinese clients in the fourth quarter of last year. The company’s co-CEO, Zhao Haijun, revealed that the first two quarters of this year have seen a sharp rise in orders. The growth can be attributed to China's ongoing drive for semiconductor self-sufficiency, a move that has led SMIC to operate at full capacity.

The rise in SMIC's fortunes comes as the U.S. has imposed more stringent measures against China, including a 10% tariff announced by Trump on February 4th. As tensions between the two nations continue to escalate, Chinese companies have rushed to secure supplies before any additional restrictions take effect. SMIC, which primarily caters to the Chinese market, stands to benefit from this increased demand as businesses prepare for future sanctions.

In a move that opened the door for SMIC, TSMC announced last November that it would no longer accept orders for semiconductor production processes below 7 nanometers for Chinese firms. This policy change follows the U.S. Department of Commerce’s decision to enforce stricter regulations. Any semiconductor sales to China involving processes smaller than 7 nanometers now require explicit approval from the U.S. government. With TSMC unable to meet the needs of Chinese clients for advanced semiconductor manufacturing, SMIC has stepped in to fill the void.

As a result of these sanctions, SMIC has gained substantial market share in China. In 2024, 85% of its revenue came from Chinese customers, with the remaining 15% split between the U.S. and Europe. SMIC’s domestic dominance is expected to continue growing as China accelerates its efforts to develop its own semiconductor industry and reduce reliance on foreign suppliers.

For SMIC, the last quarter of 2024 was especially profitable, with quarterly revenue reaching $2.2 billion—an impressive 31.5% year-over-year increase. The company’s total annual revenue for 2024 was $8.03 billion, marking a record 27% increase from the previous year. SMIC anticipates that its revenue will continue to grow at a rate higher than the industry average in China, with an estimated 6-7% increase in 2025.

SMIC’s rise during this tumultuous period highlights the shifting dynamics in global semiconductor production. As the U.S.-China trade war intensifies and Chinese companies continue to pursue technological self-reliance, SMIC is positioning itself as a key player in the global semiconductor market, with significant support from local demand and government initiatives aimed at reducing dependence on foreign technology.

This scenario underscores the broader trend of geopolitical tensions influencing global trade and the semiconductor industry, particularly in terms of technology transfer and manufacturing capabilities. For SMIC, the combination of U.S. sanctions and China’s strategic shift towards self-sufficiency has paved the way for growth, solidifying its place as a key beneficiary in the ongoing trade conflict.