The microstructure and mechanical properties of the stainless steel layer of a composite pipe produced by the centrifugal-SHS process were investigated. The possibility of crack formation is discussed and the methods for increasing ductility and avoiding cracking are given. The influence of solution treatment on the microstructure and mechanical properties are also investigated. It is shown that the stainless steel is mainly composed of austenite phase between which a thin ferrite layer is distributed. The inter-metallic compound AlNi precipitates in the ferrite phase and sigma-phase precipitates at the phase boundaries between the austenite and ferrite. Solution treatment significantly increases the tensile strength and ductility of the stainless steel.