SMIC AI Chip Production Hindered by Manufacturing Yield Problems
Production of AI chips at SMIC faces a major setback as Morgan Stanley slashes its projections. Morgan Stanley projected that Chinese AI GPU revenues would be cut by half, owing to persistent manufacturing yield problems at Semiconductor Manufacturing International Corporation (SMIC). SMIC being a major domestic player in China is now being held back by the U.S. sanctions blocking its access to advanced chipmaking equipment.
The Major Concern A 30% AI GPU Chip Yield
SMIC's AI GPU yields, according to the Morgan Stanley report, are expected to be just 30% by the end of 2025. In semiconductor fabrication, yield refers to the percentage of usable functioning chips produced from a single silicon wafer. Low yields can greatly exacerbate the cost of production since the costs related to the failed chips must be absorbed.
Technical Problems and Manufacturing Impediments
SMIC's basic problem is not being able to acquire EUV lithography machines from ASML due to sanctions. While the firm is still able to produce 7-nm chips with the older DUV technology, it is severely hampered because that method requires the more complex and less efficient modern-day process of multi-patterning. What multi-patterning does is increase the number of production steps, all of which negatively impact further costs and yield-rates.
Effects on Huawei's Ascend AI Chips
According to the findings, the production limitations affect Huawei's Ascend AI chips directly. SMIC is projected to be producing 7,000 wafers monthly this year, concentrating on the Ascend 910B chip. Work is due to switch to the more complicated Ascend 910C composed of two 910B dies come 2026.
Low yields would have inflated costs for Huawei:
- A single Ascend 910B chip is estimated to cost RMB 50,000 this year.
- The upcoming Ascend 910C is expected to cost RMB 110,000.
Revised Financial Outlook
The report opines that SMIC's yield rate for the 910B chip will recover from 30% this year to 70% by 2027. However, the ongoing hurdles considerably led Morgan Stanley to recompute its revenue estimates to AI chip production in SMIC.
The fresh revenue projections are:
- 2025: RMB 58.5 million
- 2026: RMB 94 million
- 2027: RMB 136 million
These are drastic downsizing of almost 50% from the previous estimates which had put revenues for those years at RMB 146 million, RMB 212 million, and RMB 286.5 million. This is a testimony to how serious the manufacturing limitations have dealt a blow to the financial side of ambitions for the domestic AI chip in China.
