The headquarters of Semiconductor Manufacturing International Corp. in Shanghai.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
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Semiconductor Manufacturing International Corp. will build a $ 2.35 billion factory with financing from the Shenzhen government, the first major project to emerge from China’s master plan to match the U.S. and become more self-sufficient as the global chip supply dwindles.
SMIC warned on Thursday that the scarcity could worsen this year and next and hurt Chinese companies if the country does not increase domestic capacity now. The company has agreed to a joint venture with the southern municipality, in which it will develop and operate a chip factory that can produce silicon of 28 nanometers or more, it said on a stock exchange archiving. The partners intend to attract third-party investment, start production in 2022 and eventually produce 40,000 12-inch wafers per month. Its shares rose up to 3% in Hong Kong.
China wants to build a circle of technology giants that can stand side by side with Intel Corp. and Taiwan Semiconductor Manufacturing Co. Although the specifications for this venture will not appear for months, Premier Li Keqiang pledged to increase spending and conduct cutting-edge chip research in the country’s last five-year goals, establishing a technological plan plan to compete for global influence with the US
“The lack of chip-making capacity is very real and the situation could deteriorate in 2021 and 2022 if Chinese companies do not accelerate expansion,” said SMIC senior vice president Zhang Xin at the SEMICON China conference in Shanghai.
Beijing is moving quickly to cut the West’s dependence on crucial components like chips, an issue that has become more urgent after a global crisis the scarcity of semiconductors worsened during the pandemic. Washington has also blacklisted major Chinese technology companies, including SMIC, cutting it off from American technology while seriously damaging your ability to acquire the chip-making equipment you need. It is not yet clear whether the Biden administration can allow American companies to resume sales to SMIC on a large scale, or to ease pressure from allies in Europe and elsewhere to isolate the Chinese company.
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Links with the government can be essential to achieve the country’s ambitions. Chinese chip makers intend to move beyond the more mature 28 nm nodes – now used in auto manufacturing industries to TVs – but they need billions of dollars and years of trial and error to enter more sophisticated semiconductors for devices like smartphones.
Many of China’s hopes are to advance in emerging fields such as AI and third generation chips: made mainly of materials like silicon carbide and gallium nitride, they can operate at high frequency and in high power and temperature environments, with ample 5G applications, military-grade radar and electric vehicles.
On Thursday, a top employee in the semiconductor industry asked domestic chip giants to merge with their peers, creating national champions with the resources to compete globally. In addition to SMIC, other prominent chip makers in China include state-owned memory giant Tsinghua Group, which is spending billions to expand capacity, and players like Huawei Technologies Co. HiSilicon division and AI specialist Cambricon Technologies Corp.
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“More industry integration is needed to improve our resistance risk. Mergers and acquisitions should be encouraged, ”said Ye Tianchun, deputy director of the China Semiconductor Industry Association, at the conference.
The SMIC project in Shenzhen would mark one of the few factories in the country focused on wafers larger than 12 inches instead of 8 inches, which saves costs because more chips can be spliced, but are much more difficult to manufacture. SMIC already operates factories or factories in four cities, including Beijing and Shanghai. It will own 55% of the proposed new plant, with a government entity owning until a 23% stake.
“Silicon wafer is a key raw material in semiconductor manufacturing, but it is also one of the areas in China’s semiconductor supply chain that has the lowest level of local production, especially 12-inch silicon wafers,” Li Wei, executive vice president of The National Silicon Industry Group, a state-backed wafer maker, said at the conference on Wednesday.
– With the help of Debby Wu and Yuan Gao
(Updates with comments from SMIC executives in the second paragraph)