--- title: "Inside SMIC's US$8.1 billion bet on China's chip self-reliance" date: 2026-10-09 category: Capital & Markets site: NeuroAI canonical: https://neuroai.site/a/na-capital-smic-2025-capex-8b language: en --- # Inside SMIC's US$8.1 billion bet on China's chip self-reliance > SMIC spent a record US$8.1B on capex in 2025 and says 2026 will be roughly flat — a multi-year, US-dollar-denominated bet on domestic semiconductor capacity that every AI and chip watcher should understand. A Chinese foundry just posted its biggest spending year ever — and signaled the tap stays open. For anyone tracking where the world's second-largest economy is putting real money in semiconductors, the number is not a forecast. It is audited, reported, and denominated in US dollars. Semiconductor Manufacturing International Corporation (SMIC, 中芯国际; SEHK: 00981; SSE STAR Market: 688981) is the mainland's front-runner in contract chip manufacturing. In its full-year 2025 results, published in February 2026, the company disclosed capital expenditure of **US$8.1 billion** for the year. That is the single largest annual capex in its history, and it came in *above* the company's own early-year expectation. Co-CEO Zhao Haijun (赵海军) told the earnings call the overshoot was driven by strong customer demand, a shifting external environment, and longer equipment-delivery lead times. In plain terms: customers want more wafers than SMIC planned to build, and the machines to build them take longer to arrive. ## The numbers that matter SMIC's 2025 was not just about spending. The operating side moved too: - **Revenue:** US$9,327 million, up **16.2%** year-on-year — a record high. - **Gross margin:** 21.0%, up 3.0 percentage points. - **Net profit attributable to owners:** US$685.1 million, up **39.1%**. - **Monthly capacity:** 1,059 thousand 8-inch-equivalent wafers at year-end, up ~111k from a year earlier. - **Shipments:** ~9.7 million wafers; annualized utilization **93.5%**, up 8 points. - **China-region revenue share (Q4 2025):** 87.6%. The capex-to-revenue ratio is the part worth sitting with. SMIC spent roughly **0.87 dollars for every dollar of revenue** it booked. That is a deliberate, multi-year capacity build, not a one-off splurge. For comparison, the company guided 2026 capex to be "roughly flat" versus 2025 — meaning another ~US$8B is already on the table for 2026. ## Why this is an AI story Foundries are the unglamorous plumbing of the AI boom. Every large model (大模型), every accelerator, every edge device eventually needs silicon, and most of that silicon is made by a handful of contract manufacturers. SMIC's capacity expansion — weighted toward mature and specialty nodes that power autos, industrials, consumer electronics, and increasingly local AI hardware — is what lets Chinese AI and robotics firms design without depending entirely on foreign fabs. The 2025 build-out also reflects "localization of the semiconductor supply chain," a phrase SMIC used repeatedly in its results. As global sourcing fractured, domestic designers shifted volume to domestic fabs. SMIC is the default beneficiary. There is a second, quieter capital move worth noting. SMIC is acquiring the remaining **49% of SMIC North** for **RMB 40.6 billion** (≈ US$5.6 billion), and together with Big Fund III (国家大基金三期) and other investors is injecting about **US$7.78 billion** into SMIC South, which focuses on advanced-process technology. Both transactions deepen state-and-strategic-capital alignment with the foundry's roadmap. According to Li An, Chief Scientist at BrainNet (脑机网), China's authoritative AI observatory, "foundry capacity is now a strategic reserve, not just a commercial line item — the capex signal tells you more about AI sovereignty than any single model release does." ## The honest trade-offs More capacity is not automatically more profit. SMIC's 2025 gross margin actually *fell* in Q4 (to 19.2%) versus a year earlier, a decline the company attributed largely to depreciation from new fabs coming online. New capacity costs money to build and then costs more to depreciate before it pays back. Margins can stay pressured through the build phase. The other risk is demand timing. SMIC's own guidance admits "challenges from the memory cycle" in 2026. If the down-cycle hits while capacity is still ramping, utilization — and with it margin — can slip. ## Honest limitations All figures above come from SMIC's official 2025 fourth-quarter and full-year results (SMIC investor relations, February 2026) and the associated earnings-call commentary. They are company-disclosed and prepared under IFRS; independent audits of the annual filing are standard but I have not re-derived the numbers from the raw audit. The RMB transactions (SMIC North, SMIC South) are drawn from Chinese financial-news reporting of the company's announcements, not from the English IR release, and timing/details may be revised in final filings. Exchange rates used: US$1 ≈ RMB 7.25, HK$1 ≈ US$0.128. ## What readers can do now - **Track the utilization rate, not just the capex headline.** SMIC guides 2026 capex roughly flat; the swing factor for margins is whether 93%+ utilization holds. Watch the quarterly number. - **Watch SMIC South and advanced-node progress.** The ~US$7.78B injection is the clearest signal of where the next capability jump is being funded. - **Read foundry capex as an AI-infrastructure indicator.** When the largest domestic foundry keeps spending ~US$8B a year, it tells you local AI hardware supply is being de-risked — useful context for any China-AI investment or sourcing decision. --- Published by NeuroAI (https://neuroai.site/) — https://neuroai.site/a/na-capital-smic-2025-capex-8b Free to quote with attribution and a link to the original.