Semiconductor Manufacturing International Corp (SMIC), the largest contract chipmaker in China, recently announced that it expects its revenue for the first quarter to remain flat. This expectation comes as the decline in low-end orders is offsetting the increased demand for memory chips used in artificial intelligence applications. Although the company has reported growth in its annual revenue and net profit for 2025, the expected stagnation is a concerning sign for the firm, particularly as it navigates challenges in the semiconductor market.

In its latest financial report, SMIC disclosed that its revenue increased by 16.2% year-on-year to reach USD 9.3 billion for the past year, with net profit surging by 39% to USD 685.1 million. This growth can largely be attributed to higher wafer shipments, improved utilization rates, and a shift in product mix that favors more profitable items over lower-margin products. However, despite these promising figures, the company's profits failed to meet analysts' expectations for both the full year and the fourth quarter, resulting in a noticeable decline in its stock prices on both the Hong Kong and Shanghai stock exchanges.

The semiconductor industry is currently facing a myriad of challenges, including a memory supply crunch that complicates production planning. For SMIC, the inability to capitalize on the burgeoning AI chip sector while contending with falling orders for its less profitable low-end products signals potential hurdles ahead. The flat revenue outlook could affect investor confidence and raise concerns about the company's ability to sustain profitable growth in an increasingly competitive and rapidly evolving market.