SMIC Acquisition of Beijing Unit Signals Major Consolidation in China’s Chip Sector

China’s top chipmaker, SMIC, is moving to acquire full control of a key subsidiary. The deal involves Semiconductor Manufacturing North China (SMNC) in Beijing. This strategic consolidation aims to strengthen China’s domestic semiconductor supply chain.

The move comes as SMIC navigates significant financial pressure from U.S. tariffs. The company remains committed to its massive spending plans despite a sharp drop in profitability.

Financial Headwinds Challenge China’s Chip Champion

SMIC’s latest financial results reveal the impact of ongoing trade tensions. According to their Q2 2025 earnings report, revenue saw a modest increase to $2.2 billion. However, net profit plummeted by 19.5% compared to the same period last year.

This profit drop highlights the severe pressure from U.S. export controls and tariffs. Management had previously warned these factors would create headwinds. They confirmed a capital expenditure plan of $7 billion for the year despite the uncertainty.

Equity-Based Deal Boosts Market Confidence

To fund the SMNC acquisition, SMIC will issue new shares instead of using cash. This strategy preserves capital for its expansive manufacturing investments. Surprisingly, investors reacted positively to the news of potential share dilution.

SMIC’s stock price jumped 5% on the Hong Kong Exchange following the announcement. Shares later gained nearly 10% in Shanghai trading. This rally indicates strong market confidence in the long-term strategic value of the consolidation.

The company stated the transaction is still in the planning stages. Final terms are subject to negotiation between the involved parties. The deal aligns with a broader trend of consolidation in China’s semiconductor industry.

This strategic SMIC acquisition underscores China’s determined push for semiconductor self-reliance. The move strengthens its domestic production capabilities against a challenging global trade landscape.

Info at your fingertips

What is SMIC acquiring?

SMIC is moving to acquire the remaining 49% stake in Semiconductor Manufacturing North China (SMNC). This will give it full ownership and control of the Beijing-based manufacturing unit.

How is SMIC paying for this acquisition?

The company plans to fund the deal by issuing new shares. This equity-based approach helps SMIC conserve its cash for other critical capital expenditures.

Why did SMIC’s stock price go up after the news?

Investors viewed the consolidation move as a positive long-term strategy. It strengthens SMIC’s position in the domestic market and aligns with China’s national semiconductor goals.

How have U.S. tariffs affected SMIC?

Tariffs have significantly impacted profitability. SMIC’s Q2 2025 profit fell 19.5% year-over-year, even as revenue grew, due to higher costs and market uncertainty.

Is this deal finalized?

No. SMIC has stated that the acquisition is still in the planning phase. Specific details, including the final share price, are still subject to negotiation.

Trusted Sources: Reuters, Hong Kong Exchange filings, company earnings reports.