Bambang Pamungkas
China’s semiconductor industry recorded unprecedented revenues in 2025, a significant milestone driven by an insatiable demand for artificial intelligence (AI) chips, a global scarcity of memory components, and, paradoxically, the escalating export restrictions imposed by the United States. These American policies, initially intended to curb China’s technological advancement, have instead galvanized Beijing’s resolve to bolster its indigenous technology sector on an unparalleled scale. Analysts and industry insiders widely anticipate this revenue surge to persist through 2026, underscoring the remarkable adaptability and strategic positioning of Chinese chip manufacturers in leveraging robust domestic demand from tech giants racing to construct their AI infrastructure.
According to reports by CNBC International and Bloomberg on Sunday, April 5, 2026, Paul Triolo, a partner at Albright Stonebridge Group, articulated that the US export restrictions on China’s technology sector over recent years have acted as "rocket fuel" for chip demand. He emphasized that these restrictions have concurrently amplified growth in other burgeoning sectors, notably electric vehicles (EVs) and AI data centers. "US export restrictions in recent years have added ‘rocket fuel’ to chip demand, reinforcing growth from other areas like electric vehicles and AI data centers," Triolo stated, highlighting the complex interplay of geopolitical strategy and market dynamics.
The Paradox of Sanctions: A Catalyst for Domestic Growth
The narrative of China’s semiconductor boom is inextricably linked to the ongoing technological rivalry with the United States. Beginning in earnest around 2018, the US government, citing national security concerns and a desire to prevent China from leveraging advanced technology for military modernization, initiated a series of stringent export controls. These measures targeted critical components, software, and manufacturing equipment essential for producing cutting-edge semiconductors. Key actions included placing prominent Chinese tech companies, such as Huawei and SMIC, on the Entity List, restricting their access to American technology and supplies. Further escalation saw restrictions on advanced computing chips, including high-performance GPUs, and lithography equipment from key suppliers like ASML Holding NV, a Dutch company whose advanced Extreme Ultraviolet (EUV) machines are indispensable for manufacturing the most sophisticated chips.
Rather than stifling China’s ambitions, these restrictions inadvertently spurred Beijing to accelerate its long-standing "Made in China 2025" initiative, which aims for greater self-sufficiency in core technologies. The government poured massive investments into the domestic semiconductor ecosystem, fostering local research and development, subsidizing manufacturing, and incentivizing domestic procurement. This strategic pivot created a captive market for Chinese chipmakers, compelling domestic tech giants to seek alternatives to previously accessible foreign components, even if these alternatives initially lagged in performance. This forced localization strategy has proven to be a significant driver behind the record revenues observed in 2025.
Surging Demand: AI and EV as Primary Engines
The twin engines of artificial intelligence and electric vehicles have been pivotal in fueling China’s semiconductor growth. The global explosion in generative AI, exemplified by large language models and advanced data analytics, has necessitated an unprecedented build-out of AI infrastructure. This requires vast quantities of specialized chips, particularly Graphics Processing Units (GPUs) and AI accelerators, to handle the intensive computational demands of training and running AI models. Chinese tech companies, competing fiercely in the domestic AI landscape, are investing heavily in data centers and AI supercomputing capabilities, creating a massive internal market for chip suppliers.
Simultaneously, China’s dominance in the global electric vehicle market has created a robust demand for automotive semiconductors. EVs are essentially computers on wheels, requiring a diverse array of chips for power management, infotainment systems, advanced driver-assistance systems (ADAS), and battery management. While many of these automotive chips fall into the category of "mature node" or less advanced technology, the sheer volume of EV production has provided a stable and growing revenue stream for domestic foundries. Paul Triolo further elaborated on this, stating, "The growth of electric vehicles and related infrastructure has provided support for less sophisticated, mature node semiconductors, while demand for more advanced chips has surged dramatically due to AI." This dual demand structure, encompassing both high-volume mature nodes and rapidly expanding advanced AI chips, forms the bedrock of China’s current semiconductor prosperity.
Key Players Report Stellar Performance
Several leading Chinese chip manufacturers have reported exceptional financial results for 2025, underscoring the industry’s robust health.
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Semiconductor Manufacturing International Co. (SMIC): As China’s largest contract chipmaker, SMIC reported a substantial 16% year-over-year revenue increase in 2025, reaching a record US$9.3 billion (approximately IDR 158.1 trillion). Projections from LSEG analysts suggest that SMIC’s revenue could even exceed US$11 billion (IDR 187 trillion) in 2026, signaling continued strong growth. While SMIC has made strides in developing advanced processes, its access to cutting-edge equipment, particularly EUV lithography machines from ASML, remains severely restricted by US export controls, limiting its ability to mass-produce the most advanced chips comparable to industry leaders like TSMC.
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Hua Hong Semiconductor: Another prominent Chinese foundry, Hua Hong, also showcased strong performance, reporting a record US$659.9 million (IDR 11.21 billion) in revenue for the fourth quarter of 2025. The company projects stable future sales targets, expecting to maintain revenues within the range of US$650 million to US$660 million, indicating a consistent demand for its specialty processes and mature node offerings.
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Moore Threads: A rising star in the domestic GPU market, Moore Threads, which harbors ambitions of challenging Nvidia’s dominance, provided impressive guidance for 2025. The company anticipates revenues between 1.45 billion yuan and 1.52 billion yuan (approximately IDR 3.5 trillion to IDR 3.6 trillion). This forecast represents an astonishing year-over-year increase of 231% to 247%, highlighting the explosive demand for domestic alternatives in the high-performance computing segment, especially in the wake of US restrictions on Nvidia’s most powerful chips to China.
The Memory Chip Gold Rush: A Global Shortage and Local Opportunity
The memory chip sector within China has also experienced a windfall, significantly contributing to the industry’s record revenues. Memory, a crucial component for AI data centers, smartphones, and other consumer electronics, has been subject to a global scarcity. This shortage, coupled with consistently high demand, has driven an unprecedented surge in prices, creating highly favorable market conditions for manufacturers.
- ChangXin Memory Technologies (CXMT): China’s leading memory producer, CXMT, capitalized significantly on these dynamics. Bloomberg reported that CXMT recorded a staggering 130% year-over-year revenue increase, surpassing 55 billion yuan, or approximately US$8 billion (IDR 136 trillion) in 2025. This remarkable growth is particularly noteworthy given the broader geopolitical context.
High-bandwidth memory (HBM), a specialized type of DRAM essential for advanced AI accelerators due to its superior bandwidth and power efficiency, is currently dominated by global giants like Samsung, SK Hynix, and Micron. However, US export restrictions on HBM to China have created a unique opening for domestic players. Phelix Lee, a senior equity analyst at Morningstar, observed this strategic shift. "After HBM was restricted from entering China, CXMT emerged as the only domestic alternative, so even technologically inferior HBM2 or HBM2e products were met with high enthusiasm in the domestic market," Lee explained. This scenario exemplifies how restrictions, while posing immediate challenges, can also accelerate the adoption and development of indigenous solutions, even if they are not yet at the cutting edge.
Paul Triolo further elucidated the broader implications for China’s technological advancement. He suggested that the expertise gained from manufacturing memory chips could translate into progress in other critical chip types, such as GPUs. "All memory fabs in China are now becoming incubators for advanced process technology in ways that were unimaginable before the October 2022 US export controls," Triolo commented. This indicates that the domestic memory industry is not merely filling a market gap but also serving as a crucial training ground and innovation hub for more complex semiconductor processes, laying groundwork for future breakthroughs.
Navigating the Advanced Node Frontier: Challenges Remain
Despite these impressive revenue figures and strategic gains, China’s semiconductor industry continues to face formidable challenges, particularly in the realm of advanced chip manufacturing. SMIC and Hua Hong, while growing, are still unable to mass-produce the world’s most sophisticated chips, those typically below 7 nanometers, on par with industry leader TSMC in Taiwan. This critical limitation stems directly from their inability to access the most advanced lithography tools, predominantly the EUV machines manufactured by ASML from the Netherlands, due to US-led export restrictions.
The ambition to achieve complete self-sufficiency in semiconductors is a monumental undertaking. Paul Triolo underscored the sheer scale of this endeavor. "China is unique in that it is basically trying to recreate most of an entire semiconductor supply chain, and this is certainly quite challenging and will take more time to overcome US controls in key areas," he asserted. Replicating an entire supply chain involves not just manufacturing chips but also developing indigenous capabilities in Electronic Design Automation (EDA) software, advanced materials, critical components for manufacturing equipment, and intellectual property – an ecosystem that has taken decades and billions of dollars to build globally. The timeline for China to achieve true parity in all these segments remains uncertain and lengthy.
Strategic Implications and the Path Forward
The record revenues in China’s semiconductor industry in 2025 represent a complex blend of resilience, strategic adaptation, and geopolitical pressure. While domestic demand and state support have created a thriving internal market, the long-term sustainability and global competitiveness of China’s chip sector hinge on its ability to overcome persistent technological hurdles.
Parv Sharma, a senior analyst at Counterpoint Research, highlighted a significant risk: the potential for overcapacity in less advanced, "mature node" chips. As more domestic fabs come online and focus on these segments, a supply glut could drive down prices and profitability. Sharma warned that "maintaining this growth will depend on whether China can successfully move up the value chain to advanced HBM and next-generation logic nodes." This upward mobility is crucial for long-term growth and global relevance.
The broader implications extend beyond economics. The US-China tech rivalry is fundamentally reshaping global supply chains, driving a partial decoupling that could lead to parallel, distinct technology ecosystems. While this fosters resilience in some respects, it also introduces inefficiencies and potentially slows down global innovation as resources are duplicated. For China, the drive for self-reliance is not just economic but also a matter of national security and technological sovereignty. The success of its domestic chip industry in navigating these challenges will dictate its future trajectory as a global technological power and will continue to exert profound influence on the international semiconductor landscape for years to come.
