SMIC Nears 5nm Breakthrough Amid High Costs

China's top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), is reportedly on track to finalize its 5nm process by 2025, according to Wccftech. However, the company faces significant cost and yield challenges. SMIC's 5nm wafers could be up to 50% more expensive than those from Taiwan Semiconductor Manufacturing Company (TSMC), as it relies on older deep ultraviolet (DUV) lithography instead of cutting-edge extreme ultraviolet (EUV) tools. Additionally, yield rates are reported to be only one-third of TSMC's for the same process.

Huawei plans to adopt SMIC's 5nm technology for its Ascend 910C AI chip, a move aimed at reducing China's dependence on NVIDIA. To improve competitiveness, SMIC may need domestically developed EUV machines, with trial production rumored to begin in Q3 2025. Chinese equipment maker SiCarrier, reportedly linked to Huawei, is working on alternatives to ASML's EUV tools. SiCarrier's CTO also sits on SMIC's board, and the company previously made headlines for a 5nm DUV-based patent associated with Huawei's Mate 60 Pro.

Strong Performance Amid Geopolitical Tensions

Despite technical challenges, SMIC ranked as the world's third-largest foundry in Q4 2024, according to TrendForce, with quarterly revenue rising 1.7% to $2.2 billion. The company posted a record annual revenue of $8.03 billion in 2024, up 27% year-over-year, with an 85.6% capacity utilization rate. SMIC expects 2025 revenue growth to outpace the industry average.

Taiwan Investigates SMIC's Alleged Talent Poaching

Amid its technological push, SMIC is under scrutiny in Taiwan for allegedly poaching semiconductor talent. Taiwanese authorities recently raided 34 locations across six cities as part of a broader crackdown on unauthorized recruitment by Chinese firms. Investigators examined operations linked to 11 Chinese companies, including SMIC, which reportedly used a shell company registered in Samoa to discreetly hire Taiwanese engineers.

The probe revealed that other Chinese firms had also set up unauthorized offices in Taiwan to recruit specialists in key fields like silicon photonics, an essential technology for AI and next-generation computing. While SMIC has previously faced allegations of misappropriating TSMC's manufacturing technologies, it now focuses on hiring experienced engineers to accelerate its chip development.

The Bottom Line

SMIC's race toward 5nm underscores China's broader semiconductor ambitions, but the company faces formidable obstacles, including cost inefficiencies, technical limitations, and geopolitical tensions. Its success may hinge on China's ability to develop competitive EUV technology while navigating growing scrutiny over its recruitment practices.