As the tariff conflict between the United States and China has eased, China's largest foundry (semiconductor contract manufacturing) corporations SMIC and Huahong Semiconductor are expected to accelerate their efforts to target the U.S. market. The two corporations are reported to plan to increase market share through massive facility investments and a low-cost sales offensive.
According to the quarterly reports from SMIC and Huahong Semiconductor on the 14th, SMIC's share of U.S. market sales in the first quarter of this year was 12.6%, while Huahong Semiconductor's share of the North American market sales was 10.4%. The United States is the region with the highest sales share for SMIC and Huahong Semiconductor after China. Both corporations supply semiconductors used in IT, home appliances, and defense industries through legacy processes.
Despite achieving an increase in performance in the first quarter of this year due to the surge in foundry demand, SMIC and Huahong Semiconductor expressed concerns about demand contraction due to the effects of tariffs starting in the second quarter. Zhao Haijun, CEO of SMIC, said, "We are closely monitoring how tariffs will affect demand," adding that "the demand forecast for the second half is uncertain." Huahong Semiconductor also expected its gross profit for the second quarter to decline compared to the first quarter. SMIC and Huahong Semiconductor's revenues in the first quarter were $2.2472 billion (approximately 3.1932 trillion won) and $540.9 million (approximately 768.6 billion won), respectively, marking increases of 28.4% and 17.6% compared to the same period last year.
As trade tensions between the United States and China ease, it seems that both corporations will gain momentum in their market strategies. The U.S. and China decided to reduce reciprocal tariffs by 115 percentage points during trade negotiations held in Geneva, Switzerland. The tariff imposed by the U.S. on Chinese goods will drop from 145% to 30%. China's retaliatory tariff on U.S. products, which had been set at 125%, is reduced to 10%. This is the first time that the U.S. and China, which have been engaged in a tariff war since the start of the Trump administration, have discussed tariff issues and reached a conclusion.
An industry insider said, "In addition to the tariff conflict, we need to assess the current situation of U.S. semiconductor export regulations, but the mature processes that SMIC and Huahong Semiconductor focus on are relatively free from control effects," adding that "Chinese foundry corporations will focus their efforts on semiconductors for IT devices sold in the U.S. market, leveraging relatively low process expenses."
SMIC plans to implement major equipment investments this year. SMIC announced that it plans to spend $7.32 billion (approximately 9.8 trillion won) this year, expecting revenue to increase in the global market, including the U.S. Hu Baipeng, CEO of Huahong Semiconductor, remarked, "The entire semiconductor industry is facing uncertainty, but we maintained optimal operating rates in the first quarter," and added, "We will expand the 12-inch production line and continue with facility investments to respond to the market."
According to the Semiconductor Industry Association (SIA), the ratio of facility investment to cumulative sales for Chinese foundry corporations reached about 112%, which is four times the global average of 33%. Last year, the equipment investment of China's largest foundry corporation, SMIC, amounted to $7.33 billion (approximately 10.5 trillion won), representing 93% of its sales.