SMIC joins Shenzhen government in US$2.35 billion chip foundry as China pushes for self-sufficiency in semiconductors

Che Pan
·3-min read

China’s leading chip maker Semiconductor Manufacturing International Corporation (SMIC) said it has entered into an agreement with the Shenzhen government to build a new wafer fabrication plant in the southern tech hub, adding more capacity amid a global chip shortage.

SMIC Shenzhen will focus on mature chipmaking technologies of 28-nanometer and above, with the aim of producing 40,000 12-inch wafers per month, according to a stock filing from SMIC on Wednesday. Production at the new factory is expected to begin in 2022.

SMIC and a Shenzhen government-backed investment fund will invest a total of US$2.35 billion in the facility, with the Shanghai-based foundry taking a 55 per cent stake and the Shenzhen fund holding 23 per cent.

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“By seizing the opportunity in Shenzhen to develop the integrated circuit industry, the project can meet growing market and customer needs, and promote our development,” SMIC said in a statement issued late Wednesday.

In November 2020, the China Semiconductor Industry Association said it expected the country to be self sufficient in 28-nm technology within two years. The 28-nm node is considered the sweet spot between low-to-mid-range chips and the mid-to-high-end, which has now become more difficult for Chinese fabs given US restrictions.

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The 28-nm node, introduced by Taiwan Semiconductor Manufacturing Corp (TSMC) in 2011, moved into volume production for smartphones three years later. In August 2015, SMIC announced it was using 28-nm technology to manufacture Snapdragon 410 processors for US chip giant Qualcomm.

The technology node has since become a workhorse for mature products like smart TVs, according to market research firm Omdia.

The Shenzhen foundry announcement comes almost two weeks after SMIC said in a separate filing that it secured supply of deep ultraviolet (DUV) lithography systems from ASML in The Netherlands, in what analysts interpreted as a sign of relaxed US sanctions after Washington had reportedly pressured the Dutch government to block exports of higher end EUV systems to China.

The US Commerce Department requires SMIC’s US suppliers to apply for a licence to sell equipment and materials to the Chinese wafer fab over national security concerns. SMIC said the restrictions would undermine its efforts to develop chips using advanced nodes below 10-nm.

SMIC is China’s leading foundry and the world’s fifth-largest player in the field, capable of producing chips in volume from the mature 0.35 micrometre node to advanced 14-nm, although customer demand for 14-nm is only a small fraction of its total revenue.

The logo of Semiconductor Manufacturing International Corporation (SMIC) is seen at China International Semiconductor Expo (IC China 2020) in Shanghai, China October 14, 2020. Photo: REUTERS
The logo of Semiconductor Manufacturing International Corporation (SMIC) is seen at China International Semiconductor Expo (IC China 2020) in Shanghai, China October 14, 2020. Photo: REUTERS

Despite the US sanctions, SMIC reported record-high full-year results of US$3.91 billion last year on robust demand for semiconductors in consumer electronics, boosted by demand created by the Covid-19 pandemic.

In reporting its results, SMIC also said it planned to invest US$4.3 billion in capital expenditure this year, with most of the investment supporting the expansion of mature nodes, a move that could help ease the global chip shortage that has spilled over from the car industry to consumer electronics.

SMIC has a total of seven wafer fabs in Shanghai, Beijing, Tianjin and Shenzhen, with four producing chips on 12-inch wafers and three specialising in production of more mature 8-inch wafers.

The Shenzhen government fund, founded in May 2019, has a mandate to invest in the city’s strategic and innovation industries.

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