Chipmaker SMIC Gets Mainland China Stamp With New CEO

(Beijing) — SMIC, China’s largest contract microchip maker, named a new CEO to replace its outgoing chief of six years, completing a transformation from its Taiwan roots to a mainland Chinese company as Beijing tries to create a global powerhouse in the sector.

Semiconductor Manufacturing International Corp. (SMIC) said Zhao Haijun, a graduate of China’s prestigious Tsinghua University and seven-year veteran at the company, will take over as CEO on May 10, according to an announcement issued the same day. He will replace Chiu Tzu-Yin, who was named CEO in 2011 and will serve as an independent director going forward.

Zhao’s background includes undergraduate and doctoral studies at Tsinghua, China’s leading sciences university; a Master of Business Administration from the University of Chicago; and 25 years in the semiconductor industry. His mainland background contrasts with SMIC’s previous chief executives, who have come from Taiwan, home to one of the world’s most advanced semiconductor industries.

By comparison, SMIC’s major stakeholders are all mainland Chinese, who set up the company with hopes of creating a global giant capable of competing with Taiwan giants TSMC and UMC. But the company failed to gain traction in the competitive global sector, and is still a fraction the size of its Taiwan counterparts.

Despite being the world’s largest consumer of such high-tech microchips that power products as diverse as smartphones and microwave ovens, China must still import the majority of such chips. In a recent drive to boost the sector, it has made billions of dollars available to local companies to buy technology and build local manufacturing facilities, including the acquisitive Tsinghua Unigroup, based in Tsinghua University.

Zhao’s installation at the head of Shanghai-based SMIC represents the completion of a long-running process that has seen the company become run by mainland Chinese, said Sheng Linghai, a semiconductor analyst at Gartner.

“This hints that a Beijing team has got the leadership,” said Sheng. “It will be more aggressive and follow orders from the government with less consideration of business profitability.”

Sheng added that following the leadership change, SMIC could diversify beyond its current contract manufacturing model, which entails making chips for other companies based on their designs, into a hybrid of such outsourcing business and its own original product designs.

SMIC shares were down 2.8% late in the trading day in Hong Kong. After languishing for years, the stock doubled in value in the second half of last year on hopes for its revival with Beijing’s new support for the sector. The shares have given back some of the gains since then, but are still nearly 50% ahead of their year-ago levels.

Contact reporter Yang Ge (geyang@caixin.com)