SMIC (Zhongxin Guoji), China’s largest semiconductor foundry, will build a 12-inch wafer semiconductor plant. After the U.S. sanctions, semiconductor demand in China surged after the first half of last year and this year, which drastically improved the performance of the company.
As reported by the Chinese media on the 5th, SMIC agreed to invest $8.87 billion and establish a joint venture with the Lingang Management Committee of the Shanghai Free Trade Experimental Zone. The joint venture is owned by SMIC to the tune of more than 51%.
This new company plans to manufacture products with a circuit line width of 28 nm (nanometers) or more, with the capacity to supply 100,000 12-inch wafers per month.
Zhou Zi-Xue (65), who has led the company for the past six years, has also resigned for personal reasons, and Gao Yonggang, the current chief financial officer (CFO), will take on the role.
As CFO of SMIC since 2014, Gao Yonggang has focused on the development of a semiconductor blockchain network in response to national strategic needs. According to Chinese media reports, he has attracted investment or participated in more than 100 semiconductor projects.
“SMIC is expanding its factories to meet the needs of foundry customers,” said Gao Yonggang. “China is a large and rich market, and domestic demand is enormous.”
SMIC had 11 factories in China in 2019. There are also four 12-inch wafer factories in Beijing, three 8- and 12-inch wafer factories in Shanghai, Shenzhen and Tianjin in Guangdong, and Ningbo and Shaoxing in Zhejiang. These plants produce at least 35,000 to 180,000 8- and 12-inch wafers per month. The number of factories will increase to 12 when a new factory is built in Lingang, Shanghai.
SMIC has also been blacklisted by the U.S. Department of Defense and Commerce and on the Export Administration Regulation (EAR) list in 2020, as a result of sanctions.
However, the U.S. sanctions have been positive for SMIC. Orders rushed to SMIC after the supply chains of domestic semiconductor demand companies, such as Huawei, were blocked. SMIC’s sales last year were the highest since the company’s founding in 2000. Compared to the same period last year, sales and operating profit increased by 21.8% and 61.9%, respectively.
The main reasons are that the share of the Chinese region increased by 7.3 percentage points to 62.9%, and the price of semiconductors increased.
As the semiconductor shortage accelerates, SMIC has greater potential for growth. To meet the demands in China, it is said that SMIC production capacity must increase by about eight times.