China’s SMIC ramps up chip production capacity, as it targets strategic new acquisitions

Semiconductor giant sees expansion driving business this year, bolstering the mainland’s ambitious plans for the industry

PUBLISHED : Tuesday, 28 March, 2017, 9:18pm
UPDATED : Wednesday, 29 March, 2017, 12:45pm

Semiconductor Manufacturing International Corp (SMIC), mainland China’s largest contract chip maker, is ratcheting up its domestic production capacity this year to meet rising orders from hi-tech components suppliers to smartphones, cars and so-called Internet of Things devices.

“The 2017 order books are looking very strong,” Gareth Kung, SMIC’s executive vice-president for investment, strategic business development and finance, told the South China Morning Post on Tuesday.

With more than US$2 billion cash on hand, SMIC is also looking at another strategic acquisition to bolster its expansion initiatives, following its takeover of Italian contract chip maker LFoundry last year, Kung said.

Its efforts to further increase manufacturing capacity and boost customer orders would reflect positively on mainland China’s ambitions to create an advanced semiconductor industry.

Shanghai-based SMIC was ranked by research firm Gartner as the world’s fifth-largest semiconductor foundry by revenue in 2015, behind Taiwan Semiconductor Manufacturing Company, Globalfoundries, United Microelectronics Corp and Samsung Foundry, a unit of the South Korean electronics giant.

Chip maker SMIC on target for 20pc growth this year

SMIC, which recently reported record-high revenue of nearly US$3 billion for last year, plans to accelerate its move to 28-nanometre fabrication process for creating integrated circuits on silicon wafers.

Kung said 28nm production will be focused at the company’s fabrication plants, which are called fabs, in Beijing and Shanghai.

The company currently operates four fabs in Shanghai, two in Beijing, and one each in Tianjin and Shenzhen.

“SMIC is ramping up 28-nanometre, primarily focusing on the PolySiON/LP process for [Qualcomm’s] Snapdragon 200 products,” Huatai Research analyst Ken Hui said.

Kung pointed out that chips made at SMIC’s 28nm fabs are used on a broad range of applications, including those used in smartphones, advanced set-top boxes, high-speed Wi-fi devices, as well Internet of Things devices.

Internet of Things is generally described as a vast network of smart, connected devices embedded with electronics and software, which gather and send data remotely over the internet without any human interaction.

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Worldwide spending on Internet of Things is forecast to reach US$1.29 trillion by 2020, led by companies in the manufacturing, transportation and utilities industries, according to technology research firm International Data Corp.

Kung said fingerprint sensors remain a growing market segment for SMIC, with new Chinese suppliers increasing their orders this year. These chips are built on the older 0.18-micron process technology.

“Some of our customers are targeting fingerprint sensors for use in automobiles, door locks and credit cards,” Kung said.

On acquisitions, Kung indicated that SMIC was in discussions with some potential new targets.

The company last year paid 49 million (US$53.2 million) to buy a controlling 70 per cent stake in Italian manufacturer LFoundry.

“We have a number of interesting targets, but the mergers and acquisitions process takes a lot of patience,” Kung said.