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**SMIC Struggles To Achieve Profitability But Continues Expenditure As Planned**
In May, SMIC announced it would continue spending $7 billion on capital expenditure this year despite headwinds from tariffs. The firm warned that over-ordering due to tariffs made predicting its cash flow for the second half of 2025 difficult, and pricing increases added another challenge.
**Second-Quarter Earnings Highlights Tariff Impact**
SMIC’s second-quarter earnings revealed the impact of these challenges. Despite modestly growing revenue to $2.2 billion from $1.9 billion in the previous year, profits dropped by 19.5%. The firm earned $146 million in profit, a decline from $172 million in the same quarter last year and a 54.6% drop from the first quarter figures.
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**Expansion Plan Despite Financial Struggles**
Despite these financial challenges, SMIC announced it would acquire a 49% interest in SMNC through issuing new shares to fund the transaction. Although this led to equity dilution, SMIC’s shares gained 5% on trading day of the announcement. The acquisition is still in planning stages and details such as the share price are subject to negotiation.
**Market Reaction**
SMIC’s shares have risen 6.8% since the deal was announced, after initially gaining more before paring back some gains. Immediately following the announcement, SMIC’s stock increased by 10% on the Shanghai exchange as it joined smaller peer Hua Hong Semiconductor in consolidating its market position amidst rising domestic demand for Chinese chips and trade tensions with the US.
