SMIC Joins with Local Government in New Foundry Joint Venture
Semiconductor Manufacturing International Corporation (SMIC), headquartered in Shanghai, China, has announced a new joint venture with the Shaoxing Government and Shengyang Group to create a new foundry to manufacture MEMS and power semiconductor devices. The March 1 announcement of the new company, Semiconductor Manufacturing Electronics (Shaoxing) Corporation, notes that a combined investment of ¥5.88 Billion RMB (approximately $930 M) will be used to establish a wafer and module foundry and sustain R&D research in MEMS, power semiconductor devices and other specialty technologies. The new foundry will be located in Shaoxing, China and is part of a strategic initiative to build an advanced manufacturing industrial cluster in the Yangtze River Delta region.
Dr. Zhou Zixue, Chairman of SMIC, noted that SMIC has been working on specialty technologies such as MEMS and power devices for almost ten years. Indicated in his speech, “SMIC has worked on the specialty technologies of MEMS and power devices for almost ten years. However, the domestic Chinese manufacturing base for these technologies is relatively small. This new facility will establish a strong local supply for supplying these components to local manufacturers.
Local Demand and Competition Drive Strategic SMIC Initiative
In addition to developing a supply for local demand, this latest move by SMIC can also be seen as a competitive response by SMIC. SMIC is the largest foundry supplier headquartered in China but faces ongoing competition from other Chinese foundries - Shanghai Huali Microelectronics Company (SHMC) and Shanghai Huahong Grace Semiconductor Manufacturing Corporation (HHGrace). According to Len Jelinek, Chief Analyst at IHS Markit Technology Group, SMIC’s competitors are applying pressure as they pursue design wins in the local market for advanced logic products for products such as smartphones. SMIC’s move helps it reposition itself in the internal Chinese market to lead in supplying products for the important industrial and automotive segments. This initial investment will allow SMIC to establish a small 6-inch or 8-inch foundry with the opportunity to provide MEMS products for automotive emissions products, engines and hybrid/electric vehicles.
China has previously announced plans for major investments to build significant semiconductor manufacturing capacity within China. This is part of an overall strategy to become the main supplier of semiconductors for electronics products manufactured in China. This has prompted concern about a potential glut of semiconductor capacity that could result in oversupply in the global market which would depress semiconductor prices and harm profitability in the semiconductor industry. However, this investment in new MEMS and power device manufacturing is relatively minor in the context of overall investment in semiconductor manufacturing capability. It is primarily strategic in nature to capitalize on the local demand in the automotive and industrial sectors.
As major foundries have focused on advances in process technologies and capacity to meet the demands of advanced technologies used in high-volume products such as smartphones they have been less aggressive to invest in specialty areas such as MEMS. This latest move by SMIC not only signals its intentions to capitalize on a local opportunity but to also pursue a foundry market opportunity that can benefit from the focused attention of an important foundry supplier like SMIC.