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China's premier contract chip maker, SMIC, raises $2.8bn

by Mark Tyson on 3 June 2020, 15:11

Tags: TSMC, Samsung (005935.KS)

Quick Link: HEXUS.net/qael2f

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China's Semiconductor Manufacturing International Corporation (SMIC) has filed for a Shanghai listing to raise capital so it can invest in its chipmaking capabilities. It is raising the equivalent of US$2.8bn via this route, pretty shortly after a similar exercise in Hong Kong raised US$2.2bn.

The money is needed to expand and improve the corporation's manufacturing, which is essential for a number of reasons; firstly the US administration is blacklisting Chinese tech products and firms that supply associated components to China, secondly SMIC is said to be both much smaller and 'years behind' contract chipmaking rivals such as TSMC and Samsung. One of the world's largest smart device makers, Huawei (previously supplied by TSMC), is going to be in a rather tight spot in the coming months.

For some background to the situation, TechNode has collated some interesting insight into SMIC's current capabilities. It reports that SMIC is generations behind TSMC. Currently the Chinese firm is making 14nm chips with a defect rate of around 70 per cent, with one or two years of refinement needed to become proficient. Apparently, SMIC has already started production of the Kirin 710 chipset at 14nm for Huawei's low-end Honor smartphones but that implies a lot of waste. Another report indicated that SMIC's current max production capacity is 6,000 14-nanometer wafers per month, which definitely won't meet Huawei's demands.

There is another potential roadblock in the way of SMIC being able to satisfy China's / Huawei's demand for processors. SMIC is said to use US hardware in the production of its chips, the US authorities are likely to mark this down as a violation of the new rules if it intends to supply Huawei. Dutch firms like ASML are stuck in the crossfire due to this geo-political situation too. Furthermore, it is likely the chip designers rely on US-made software.

At the time of writing SMIC isn't named on the US's 'restricted entity list', but that could easily change, and must be a worry to anyone involved with the Chinese contract manufacturer.



HEXUS Forums :: 6 Comments

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I am sure China will catch up. Trump may have slowed them down briefly but they will use this as an excuse to do it all in house so to speak. He's pushed them into a corner. This ultimately will cut off even more cash flow out of China as they no longer need to buy external products and won't want to with this risk.
Nothing a little Remember & Duplicate cant fix.
cheesemp
I am sure China will catch up. Trump may have slowed them down briefly but they will use this as an excuse to do it all in house so to speak. He's pushed them into a corner. This ultimately will cut off even more cash flow out of China as they no longer need to buy external products and won't want to with this risk.

I've been saying this for ages. Granted they're putting a lot of pressure on the US, but the way they've handled it has not only forced China to develop everything independently, it's motivated them to do at the expense of the US economy.

In years to come when they are taking huge contracts from the USA, they can thank Trump and his administration for their handing of this farce.

For decades 1st world countries have been outsourcing and selling off to China, happy to live a couple of decades with cheap products and labour. Now they are worried as their short sightedness has given all cards to China.
Yoyoyo69
I've been saying this for ages. Granted they're putting a lot of pressure on the US, but the way they've handled it has not only forced China to develop everything independently, it's motivated them to do at the expense of the US economy.

In years to come when they are taking huge contracts from the USA, they can thank Trump and his administration for their handing of this farce.

For decades 1st world countries have been outsourcing and selling off to China, happy to live a couple of decades with cheap products and labour. Now they are worried as their short sightedness has given all cards to China.

It happened with Japan,South Korea and Taiwan to varying degrees. People have forgotten that Japan and the US had a trade war in the 1980s and 1990s too:
https://paleofuture-gizmodo-com.cdn.ampproject.org/v/s/paleofuture.gizmodo.com/that-time-republicans-smashed-a-boombox-with-sledgehamm-1775418875/amp?usqp=mq331AQFKAGwASA%3D&amp_js_v=0.1#aoh=15895630087031&referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fpaleofuture.gizmodo.com%2Fthat-time-republicans-smashed-a-boombox-with-sledgehamm-1775418875

Japan was accused of stealing US jobs,etc. Both the Republicans and Democrats were smashing Japanese products.
China will not catch up because they have stolen technology from everyone.
There is no incentive for the average chinaman to pour their sweat for a
state that pays them peanuts.