Chinese chipmakers hit record revenue in 2025, capping a five-year domestic buildout driven by Beijing’s push to reduce dependence on imported wafer fabrication equipment, even as pricing pressure begins eroding the profits behind those headline numbers.
Key Takeaways
- Chinese chipmaking equipment firms Naura, AMEC, ACM Research, and Piotech each reported record 2025 revenues.
- Pricing competition among Chinese vendors is now cutting into profit margins despite revenue growth.
- U.S. direct shipments to China fell 34%, but Chinese fabs imported record volumes of American tools via Singapore and Malaysia.
- SMIC’s 2025 revenue reached $9.3 billion, up 16% year-over-year, with projections exceeding $11 billion in 2026.
- Applied Materials, Lam Research, and KLA combined for roughly $19 billion in China revenue in fiscal 2025.
Record Revenue Masks Deteriorating Margins for Chinese Chipmakers
Chinese chipmakers achieved record revenues in 2025, but the victory comes with a caveat: profit margins are shrinking. Naura, AMEC, ACM Research, and Piotech each posted their strongest annual results, driven by Beijing’s multi-year effort to build domestic chip manufacturing capacity and reduce reliance on foreign equipment suppliers. The growth reflects genuine demand from Chinese fabs ramping production in memory, logic, and specialty chips.
Yet beneath the revenue milestone lies a troubling trend. Pricing pressure among Chinese vendors is now beginning to bite into their profit margins, according to analysts cited in industry reports. As more domestic competitors enter the market, they are undercutting each other on price to win orders, a race-to-the-bottom dynamic that squeezes profitability even as sales volumes climb. This is the paradox of China’s chipmaking push: success in volume does not guarantee success in returns.
U.S. Export Curbs Drive Indirect Imports and Domestic Substitution
Direct U.S. shipments of chipmaking equipment to China fell 34%, a stark drop reflecting Washington’s export restrictions on advanced semiconductor technology. Yet the headline number obscures a more complex reality: Chinese fabs imported record volumes of American-branded tools in 2025, routing them indirectly through Singapore and Malaysia to bypass restrictions. Applied Materials, Lam Research, and KLA booked a combined $19 billion in China revenue across fiscal 2025, with each company’s China share exceeding 30% of total revenue—figures that understate actual U.S. vendor exposure due to these indirect channels.
The export restrictions, meant to slow China’s chip advancement, have instead created perverse incentives. U.S. export restrictions on China’s tech sector have added, as one analyst put it, rocket fuel to chip demand. Beijing’s response has been twofold: accelerate purchases of American tools through third-party routes before restrictions tighten further, and invest heavily in domestic alternatives. Chinese chipmakers are caught between these pressures, buying whatever they can from abroad while simultaneously backing homegrown equipment makers to reduce future dependency.
Domestic Chipmakers Post Strong Growth but Face Long Road to Parity
China’s largest chipmakers are posting impressive growth numbers. SMIC, the country’s leading foundry, reported 2025 revenue of $9.3 billion, up 16% year-over-year, with analyst projections expecting revenues to exceed $11 billion in 2026. ChangXin Memory Technologies (CXMT), a major memory chip producer, posted roughly $8 billion in revenue or ¥55 billion in 2025, a stunning 130% increase year-over-year. Even smaller players like Hua Hong are maintaining solid near-term sales momentum.
Yet growth rates mask a critical gap: China still lags global leaders in advanced chip manufacturing. The country’s fabs excel at mature-node production—older process technologies used in automotive, industrial, and consumer applications—but struggle to match the latest capabilities of TSMC, Samsung, and Intel. This leaves China vulnerable to overcapacity in mature nodes, where pricing pressure is already fierce. Moore Threads, a Chinese GPU designer aiming to rival Nvidia, projects 2025 revenue growth of 231-247%, but these are still early-stage competitors playing in segments where Western firms dominate.
Global Suppliers Still Dominant Despite Chinese Competition
American and European equipment makers remain the backbone of global chip manufacturing. ASML, the Dutch lithography giant, saw its China revenue share slip to 29.1% in 2025 from 36% in 2024, a decline reflecting both export restrictions and rising Chinese alternatives. Yet ASML, Applied Materials, Lam Research, and KLA are still capturing enormous value from Chinese fabs desperate to upgrade their toolsets before restrictions tighten further.
China’s cumulative imports from Japan between 2020 and 2025 exceeded $42 billion, while imports from the Netherlands totaled roughly $35 billion. These figures underscore a hard truth: despite five years of domestic investment and record revenues for Chinese equipment makers, the country remains structurally dependent on foreign suppliers for the most advanced tools. Chinese vendors are filling gaps in mature-node equipment and providing cost-competitive alternatives, but they cannot yet replace the technological depth of established global players.
What Happens When Record Revenue Meets Margin Pressure?
The 2025 results reveal a market in transition. Chinese chipmakers are succeeding in volume and revenue, driven by domestic demand, AI server buildouts, and memory shortages that Beijing’s restrictions have exacerbated. But profitability is a different story. As more Chinese equipment makers chase the same customers, price competition intensifies, eroding the margins that should accompany record sales.
This dynamic will likely persist through 2026. Chinese fabs will continue importing American and European tools through indirect channels, sustaining demand for global suppliers. Simultaneously, Beijing will push domestic alternatives harder, creating a dual-track supply chain where Chinese vendors handle volume and commodity products while foreign suppliers retain high-margin, advanced segments. The winners will be those who can compete on price without sacrificing quality—a balance that many Chinese vendors have not yet mastered.
Will Chinese chipmakers catch up to global leaders?
Chinese chipmakers are closing gaps in mature-node production and gaining share in memory and logic, but they lag significantly in advanced process technology. SMIC, CXMT, and others are strong in cost-competitive segments, but TSMC, Samsung, and Intel still dominate the latest nodes where the highest margins and fastest innovation occur.
Why are U.S. shipments to China falling if Chinese fabs need equipment?
Direct shipments fell 34% due to export restrictions, but Chinese fabs are importing record volumes through Singapore and Malaysia to circumvent those curbs. The headline decline masks continued strong demand routed indirectly, keeping American vendors like Applied Materials and Lam Research profitable in the China market.
Is pricing pressure squeezing all Chinese chip vendors equally?
Pricing pressure is hitting Chinese equipment makers hardest, as they compete with each other on cost to win orders from domestic fabs. Global suppliers like ASML and Applied Materials have more pricing power due to technological differentiation and limited competition in advanced segments.
Chinese chipmakers’ record 2025 revenues are real, but they tell only half the story. Margin compression is the cost of rapid expansion in a market where domestic competition is fierce and global suppliers still hold the technological high ground. Beijing’s push for chip self-reliance is succeeding in volume, but profitability remains elusive—a reminder that not all growth is created equal.
This article was written with AI assistance and editorially reviewed.
Source: Tom's Hardware
