China focuses on large-scale language models in the field of artificial intelligence.
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Chinese semiconductor companies reported record profits last year, driven by demand for AI, a memory chip shortage and U.S. export restrictions that forced Beijing to beef up its own high-tech industry.
Analysts and the companies themselves are predicting further revenue surges this year, highlighting how Chinese chip makers are capitalizing on strong demand from domestic tech giants looking to build out AI infrastructure.
Paul Triolo, a partner at Albright Stonebridge Group, said U.S. export restrictions on China’s high-tech sector over the past few years have added “rocket fuel” to demand for chips, amplifying growth in other sectors such as electric vehicles and AI data centers.
Semiconductor Manufacturing International, Inc. China’s largest semiconductor manufacturer (SMIC) announced that its sales in 2025 reached a record high of $9.3 billion, an increase of 16% from the previous year. LSEG analysts estimate that sales could exceed $11 billion in 2026.
Huahong, another Chinese semiconductor maker, said its fourth-quarter sales hit a record high of $659.9 million, and that it expects sales to be between $650 million and $660 million.
Moore thread targeting rivals Nvidiaforecast that its 2025 revenue will range from 1.45 billion yuan ($209.8 million) to 1.52 billion yuan, an increase of 231% to 247% from the previous year.
What drives sales records?
Multiple factors are involved. Toriolo told CNBC that the growth in electric vehicles and related infrastructure is supporting less advanced semiconductors, or “mature node” semiconductors, while demand for more advanced chips is “going through the roof because of AI.”
U.S. regulations over the past few years have cut China off from key technologies, accelerating Beijing’s push for self-sufficiency to wean itself from U.S. technology.
More recently, in response to U.S. restrictions on exports of Nvidia chips to China, the Chinese government has encouraged local companies to buy domestic alternatives, and companies like Huawei have stepped in to fill the gap, even as semiconductor performance lags behind the U.S..
“While China does not yet lead in peak GPU performance, these homegrown solutions are filling the country’s ‘computing gap’ and driving record revenues,” Parv Sharma, senior analyst at Counterpoint Research, told CNBC.
Chinese memory chip makers are also gaining momentum. Memory, a key component in AI data centers and consumer electronics, is in short supply globally, although demand remains high. This has led to an unprecedented rise in the price of memory chips.
Sales at Changxin Memory Technology (CXMT), one of China’s major memory companies, rose 130% from a year earlier to more than 55 billion yuan ($8 billion), Bloomberg reported last week, citing people familiar with the matter.
High-bandwidth memory (HBM) is a type of high-end memory required for AI. This market is dominated by the world’s three largest companies in this sector that manufacture this type of memory: Samsung, SK Hynix, and micron. Morningstar senior equity analyst Felix Li told CNBC that HBM’s export restrictions to China have given CXMT a path forward, even though its technology lags behind major players in some ways.
“After HBM was restricted to China, CXMT has emerged as the only domestic alternative, and even the technologically inferior HBM2 and HBM2e are greeted with enthusiasm,” Li said.
HBM2 and HBM2e are technologies that Samsung and SK Hynix started producing around 2016. CXMT plans to produce HBM3 this year.
Triolo, of Albright Stonebridge Group, said the expertise gained from making memory chips could lead to advances in other chips, such as GPUs.
“Every memory factory in China is now an incubator for advanced process technologies in a way that was unthinkable before the U.S. export restrictions in October 2022,” Triolo told CNBC.
China’s continuing challenges
Despite posting record profits, Chinese semiconductor companies continued to lag behind companies in the United States, South Korea, Europe and Taiwan in terms of technological capabilities.
SMIC and Huahong still cannot produce the world’s most advanced chips at the scale of market leaders. Taiwan Semiconductor Manufacturing Co., Ltd.. (TSMC). That’s because they don’t have access to the cutting-edge tools they’ve created. ASML Due to export regulations in the Netherlands.
Efforts are underway to develop domestic alternatives, but it is a major challenge due to the complexity of the technology.
“While demand remains high, Chinese semiconductor companies remain under significant pressure from U.S. export restrictions, and domestic substitutes are becoming increasingly available in many subsectors, but not across the board,” Triolo said.
“China is unique in that it is essentially trying to restructure vast swathes of the entire semiconductor supply chain, which will of course be very difficult and will take much longer to overcome U.S. regulations in key areas.”
And while current growth is being driven by “import substitution,” there is a risk of overcapacity for less advanced chips, Counterpoint’s Sharma said.
“Sustaining this growth will depend on China’s ability to successfully transition its value chain to advanced HBM and next-generation logic nodes,” Sharma added.
