China’s SMIC gets Shenzhen funds for US$2.4bn fab

Taipei Times

March 19, 2021

Semiconductor Manufacturing International Corp (SMIC, 中芯國際) is to build a US$2.35 billion plant with funding from the Shenzhen City Government, the first major project to emerge from China’s master plan to match the US and become more self-reliant amid a global chip shortage.

SMIC yesterday said that shortages could worsen this year and next, harming Chinese businesses if the country does not immediately increase domestic capacity.

In the joint venture with Shenzhen, the company has agreed to develop and operate a manufacturing facility that can produce chips using 28-nanometer technology, it said in a stock exchange filing.

The partners aim to attract third-party investment, begin production by next year and eventually produce 40,000 12-inch wafers per month.

“The shortage in chip manufacturing capacity is very real, and the situation could deteriorate in 2021 and 2022 if Chinese companies don’t speed up expansion,” SMIC senior vice president Zhang Xin (張昕) told the SEMICON China conference in Shanghai.

Beijing is moving swiftly to cut a dependence on the West for crucial components such as chips, an issue that became more urgent after a global shortage of semiconductors worsened during the COVID-19 pandemic.

Washington has also blacklisted major Chinese tech firms, including SMIC, cutting it off from US technology, while severely impairing its ability to procure the equipment it needs to make chips.

It remains unclear whether US President Joe Biden’s administration might allow US firms to resume selling to SMIC on a large scale, or ease up on pressuring allies in Europe and elsewhere to boycott the Chinese company.

Mergers with the government might prove essential to achieving the country’s ambitions. Chinese chipmakers aim to progress past the more mature 28-nanometer nodes — now used in industries from automaking to TVs — but need billions of dollars and years of research to produce more sophisticated semiconductors for gadgets such as smartphones.

Much of China’s hopes rest on making headway in burgeoning fields such as artificial intelligence and third-generation chips: Mainly made of materials such as silicon carbide and gallium nitride, they can operate at high frequency and in higher power and temperature environments, with broad applications in 5G, military-grade radar and electric vehicles.

SMIC’s Shenzhen project would mark one of the few plants in the country focused on larger 12-inch rather than 8-inch wafers, which save on cost because more chips can be sliced from it, but are far more difficult to fabricate.

SMIC operates fabs in four cities, including Beijing and Shanghai. It would own 55 percent of the planned factory, with a government-owned entity owning up to a 23 percent stake.

“Silicon wafer is a fundamental raw material in semiconductor manufacturing, yet 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 (李煒), executive vice president of the National Silicon Industry Group (矽產業集團), a state-backed wafer manufacturer, told the conference on Wednesday.