Semiconductor Manufacturing International Corp (SMIC) has denied a media report in Taiwan that Infineon Technologies could stop outsourcing to the mainland contract chipmaker, saying relations with the German firm were intact. According to the report, Infineon is considering suspending orders due to problems relating to the production of 0.11 micron memory chips. 'We are working closely with Infineon and getting very good early wafer yields on the 0.11 micron process,' an SMIC spokeswoman said yesterday. 'We do not see any sign that our relations with Infineon will change in the near future.' Recent developments at Infineon have led to concerns that SMIC could lose the chipmaker as a key client. In March, Infineon chief executive Ulrich Schumacher suddenly resigned. Mr Schumacher favoured an 'asset light' strategy that relied on contract chipmakers, such as SMIC, rather than costly internal capacity. On April 23, Infineon announced a US$1 billion plan to expand into 12-inch wafer production at its facilities in Richmond, Virginia. Three days later, SMIC chief executive Richard Chang sought to allay investor concerns, saying: 'The day when Dr Schumacher left Infineon, the people immediately called us about this and they told us that nothing is going to change ... their plan is still ongoing.' However, analysts are unconvinced. 'There are signs [Infineon is] having some changes internally which could hurt SMIC,' one said. Deutsche Bank analyst Johnny Chen also questioned the relationship between SMIC and Infineon. '[Infineon's expansion plan] has raised the industry's suspicion that Infineon may walk away from the asset-light strategy that Schumacher had advocated and pursued,' Mr Chen wrote in a recent report. Any loss would be a setback for SMIC's 12-inch wafer expansion in Beijing. SMIC plans to begin production at the plant in the fourth quarter of this year, and Infineon is expected to be a large customer. 'In a worst-case scenario, SMIC may have to scale back 12-inch fab expansion or find other marquee customers to fill the fabs,' Mr Chen said. However, he noted that Infineon would need time to acquire 12-inch wafer tools, which are difficult to supply as global chipmakers aggressively expand their production. It would be 12 to 15 months or more before Infineon could increase 12-inch production in Virginia, affecting SMIC in the second half of next year at the earliest. Another sign of change at Infineon was reported last month in the Financial Times, which said it planned to sell or spin off its memory business. Such a move could also affect Taiwan's Winbond Electronics Corp, which also makes memory chips for Infineon, and Nanya Technology, which has a production venture with the German firm. Yesterday, an Infineon spokesman said: 'We believe our present structure is the appropriate one. We are ... committed to the memory business and regard this as one of Infineon's core businesses.'