A signal from Semiconductor Manufacturing International Corp. (SMIC) at the top of the company’s headquarters in Shanghai, China, on Saturday, December 19, 2020. SMIC is one of the most important chip manufacturers in China.
Qilai Shen | Bloomberg | Getty Images
In December, Washington put SMIC on a black list called the List of Entities, which restricts American companies from exporting technology to it. The move was seen as a blow to SMIC’s ability to achieve the most advanced chip-making technology. The Chinese company is already far behind its rivals TSMC and Samsung.
The new plant in Shenzhen will help SMIC increase production of so-called 28-nanometer or larger chips. These chips are very old technologies. TSMC and Samsung are making 5-nanometer semiconductors, the most modern chips used in smartphones.
But a recent scarcity of semiconductors around the world has left some sectors, such as the automotive, in need of chips. But these industries don’t necessarily need the latest chip technology. An analyst previously told CNBC that SMIC could meet part of that demand with its older chip technology.
SMIC said that the money from the Shenzhen government will allow it to “expand its scale of production, advance its nanotechnology service and thus obtain a greater return”.
SMIC will have a 55% stake in the Shenzhen subsidiary, while the government’s investment arm will have a position of no more than 23%. The rest of the capital will come from third party investors.