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Morgan Stanley Revises Projections for SMIC’s AI GPU Revenues
Investment bank Morgan Stanley has dramatically reduced its forecasts regarding revenues from Chinese Semiconductor Manufacturing International Corporation (SMIC), cutting expectations by 50%.This significant revision is due to ongoing yield challenges faced by SMIC, China’s premier domestic chip producer. US sanctions have considerably restricted SMIC’s access to cutting-edge lithography equipment, hindering its ability to produce leading-edge chips and resulting in subpar yields.
Forecast for AI GPU Chip Yields
A recent snippet of a Morgan Stanley report, shared widely on social media, indicates that SMIC’s AI GPU chip yields may languish at just 30% by the end of 2025. In semiconductor manufacturing, “yields” represent the number of functional chips produced from each wafer; thus, higher yields lower costs and increase profitability by maximizing output per wafer.
For this year, SMIC is projected to manufacture approximately 7, 000 wafers monthly, primarily for Huawei’s Ascend AI chips, specifically the Ascend 910B this year, with a transition to the 910C expected in 2026. Notably, the Ascend 910C integrates two 910B dies, and the report highlights that each 12-inch wafer produced by SMIC can accommodate either 78 dies of the 910B or 39 dies of the 910C.
Morgan Stanley: This year, SMIC will start at 7, 000 12-inch wafers per month, increasing to 13, 000 next year and 18, 000 in 2027 for AI semiconductors. Morgan Stanley: The wafer yield of the 910B that SMIC is currently producing is around 30%.pic.twitter.com/jUIgrPmsDM
— Jukan (@Jukanlosreve) September 6, 2025
Challenges in Chip Production
Reports indicate that SMIC is still constrained to manufacturing 7-nanometer chips primarily due to its lack of access to advanced Extreme Ultraviolet (EUV) lithography equipment from ASML. EUV technology enables the fabrication of smaller circuits on silicon wafers, enhancing efficiency and yield compared to conventional Deep Ultraviolet (DUV) lithography.
To mitigate these technological gaps, SMIC has reverted to “patterning, ” a method that allows for the segmentation of a mask for sequential circuit printing. While DUV machinery can technically produce 7-nanometer chips, EUV equipment significantly streamlines the process, cutting down on both complexity and costs while boosting yields.
Financial Outlook and Revenue Projections
Morgan Stanley anticipates that the cost for a single 910B chip will be approximately RMB50, 000 this year, rising to RMB110, 000 for the 910C due to additional considerations, including chip packaging and the dual-die structure of the latter. Based on these anticipated prices and production rates, by 2025, 2026, and 2027, SMIC’s revenue forecasts are RMB58.5 million, RMB94 million, and RMB136 million, respectively. Unfortunately, the company’s low yield rates, estimated at just 30% for the 910B in 2025, are expected to improve to 70% by 2027.
There’s a consensus among various analysts highlighting that these yield issues have adversely impacted SMIC’s financial outlook. A social media analyst has pointed out that Morgan Stanley’s earlier report had projected revenue figures of RMB146 million, RMB212 million, and RMB286.5 million for each respective year, marking a stark difference due to the current yield deficiencies.
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