Chinese chip maker SMIC boosts expansion with US$7.5 billion investment in new Tianjin plant amid concerns of US sanctions

SMIC’s new fab in Tianjin will have a production capacity of 100,000 12-inch wafers a month, covering 28-nanometre and older chip process nodes
Products made by this new manufacturing line will be for telecommunications, cars, consumer electronics and other applications

Semiconductors

Iris Dengin Shenzhen

Published: 2:22pm, 27 Aug, 2022

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Semiconductor Manufacturing International Corp (SMIC), the largest and most advanced chip foundry operator in mainland China, is investing US$7.5 billion to develop a new 12-inch wafer production line in the northern city of Tianjin, part of its capacity expansion programme that has gained urgency amid concerns of fresh US trade sanctions.

The new plant will be built inside the XEDA Sci-Tech Park, located south of downtown Tianjin in the Xiqing Development Area, and have a production capacity of 100,000 12-inch wafers a month, covering 28-nanometre and more mature semiconductor manufacturing process nodes, according to SMIC’s announcement in Hong Kong and Shanghai on Friday. It did not provide a timeline for this project.

Products made by this new manufacturing line will be for telecommunications, cars, consumer electronics and other applications, the company said.

The announcement was made after SMIC entered into a cooperation framework agreement with the state-owned Tianjin Xiqing Economic Development Group, which is responsible for planning and construction inside the Xiqing Development Area, and the Tianjin Xiqing Economic and Technology Development Area Management Committee. The two local government authorities committed to provide support in terms of land use, talent, infrastructure and other requirements.

A view of the XEDA Sci-Tech Park, located south of downtown Tianjin, in the northern city’s Xiqing Development Area. Photo: Weibo

SMIC’s new Tianjin project comes months after the contract chip maker earmarked a record US$5 billion for capital expenditure this year, up from US$4.5 billion in 2021, with the goal of boosting its monthly production capacity by 130,000 to 150,000 8-inch equivalent wafers.

The company currently has three 12-inch fabrication facilities under construction in Shanghai, Beijing and Shenzhen. It already operates three 8-inch fabs and three 12-inch fabs in Shanghai, Beijing, Tianjin and Shenzhen.

Development of its new US$7.6 billion Beijing fab, known as SMIC Jingcheng, started in early 2021. It will have a production capacity of 100,000 wafers per month when its first phase becomes operational in 2024. The new Shenzhen fab is expected to be completed by the end of this year.

The urgency of SMIC’s production capacity expansion has come into focus because of rising geopolitical tensions between Beijing and Washington.

China’s top chip maker reshuffles board amid threat of more US sanctions

The Bureau of Industry and Security, an agency under the US Department of Commerce, on August 15 started to enforce new export controls covering technologies for the production of advanced chips on grounds of national security. While China is not singled out in the latest US export controls, analysts have said the restrictions clearly target the world’s second-largest economy.

That marked an escalation of Washington’s efforts to boost America’s hi-tech advantage over China, after US President Joe Biden signed into law the Chips and Science Act that earmarks nearly US$53 billion in semiconductor manufacturing incentives.

The US government has also been lobbying the Netherlands to ban ASML Holding from selling to China mainstream technology used in making a large chunk of the world’s semiconductors. That restriction would expand an existing moratorium on the sale of the most advanced chip-making systems to China.

Shanghai-based SMIC, which was added to the US trade blacklist in December 2020, was singled out in March by US Commerce Secretary Gina Raimondo, who warned that Washington could “essentially shut” the company down by denying it access to American tools and software if it sold semiconductors to Russia. SMIC later said that it has never had any customers in Russia, assuaging investor concerns that the firm could be punished by Washington over potential violations of US economic sanctions on the country for invading Ukraine.