Chinese chipmaker SMIC to invest US$280 million in advanced assembly line with Qualcomm as domestic industry grows

PUBLISHED : Thursday, 17 September, 2015, 6:21pm
UPDATED : Thursday, 17 September, 2015, 6:21pm

Semiconductor Manufacturing International Corp (SMIC), China's biggest contract manufacturer of integrated circuits, is teaming up with Qualcomm to invest US$280 million in the development of an advanced assembly package line for the country's growing chip industry.

Shanghai-based SMIC and a subsidiary of Qualcomm, the world's leading supplier of mobile chips, signed on Wednesday a non-legally binding term sheet to invest in SJ Semiconductor, a specialist in advanced wafer-level packaging and testing based in the eastern coastal province of Jiangsu.

That deal is backed by China Integrated Circuit Industry Investment Fund Company, the national fund established in September last year to support the domestic semiconductor industry's expansion initiatives.

SJ Semiconductor is a joint venture formed in August last year by SMIC and Jiangsu Changjiang Electronics Technology, a semiconductor assembly and testing services provider that is listed in Shanghai.

Chiu Tzu-yin, the chief executive at SMIC, said the investment in SJ Semiconductor will expedite the venture's roll-out of mainland China's first "bumping" production process for 12-inch wafers, putting it on track for mass production at the start of next year.

Bumping is an advanced process that uses "bumps" made of solder, instead of wire bonding technology, on the silicon wafers before these are sliced into individual chips.

These bumps not only form the interconnection between the integrated circuit and the packaging, but also ensure good electrical, mechanical and thermal performance.

Chiu said SJ Semiconductor will form a vital part of the local chip-manufacturing ecosystem, providing a convenient one-stop service to supply high-quality and efficient integrated circuits for domestic and international customers.

"It is important for SMIC to develop China's advanced supply chain," Chiu said.

SMIC is the No 2 supplier for "fabless" chip companies in mainland China, behind the world's largest contract chipmaker Taiwan Semiconductor Manufacturing Corp. Fabless companies design integrated circuits and outsource all the fabrication to chip foundries like SMIC. 

China's State Council introduced in June last year a new government policy to promote the domestic semiconductor industry through the infusion of vast amounts of capital to develop an efficient, advanced local manufacturing supply chain.

The Ministry of Industry and Information Technology said the domestic semiconductor industry was vital to national development and information security. The sector, however, is still too small to meet domestic demand, which is forecast to reach 1.2 trillion yuan (US$188 billion) this year from 916 billion yuan in 2013.

"We expect the government support to accelerate the growth of China's semiconductor industry, and SMIC is a primary beneficiary," Mark Li, a senior analyst at Bernstein Research, said in a report.

Steve Mollenkopf, the chief executive at United States-based Qualcomm, said its intention to invest in SJ Semiconductor was part of the company's "long-term strong support for the continued growth of China's prosperous semiconductor ecosystem".

"Qualcomm has a long history of cooperation with SMIC," Mollenkopf said.

In June, the company joined SMIC, Huawei Technologies and Belgium-based nanoelectronics firm Imec to set up mainland China's most advanced integrated circuit research and development programme, which will initially focus on so-called 14-nanometre complementary metal-oxide semiconductor (CMOS) technology.

CMOS refers to both a particular digital circuitry design used to construct various semiconductors and the family of processes used to deploy that circuitry on chips. 

At present, Qualcomm's Snapdragon 410 processors are being manufactured using SMIC's 28-nanometre process technology, and have been successfully launched in smartphone models from Huawei, Samsung Electronics, ZTE, Lenovo, Coolpad, HTC and Xiaomi.