Chipmaker SMIC Inks Deal With Shanghai for $8.8 Billion Factory

What’s new: China’s largest contract chipmaker Semiconductor Manufacturing International Corp. (SMIC) has unveiled plans to spend $8.87 billion on a new factory in Shanghai, the latest move to boost its microchip manufacturing capabilities amid a global shortage.

In a Friday exchange filing, the company, which is listed in Shanghai and Hong Kong, said that it has signed an agreement with the Lin-Gang special area — part of Shanghai’s free trade zone — in which SMIC will establish a joint venture that to build and operate the plant, which has a planned monthly production capacity of 100,000 12-inch wafers.

SMIC will control at least 51% of the joint venture and will be responsible for its operations and manufacturing, while an investment entity designated by the Shanghai government will take a 25% stake. Third-party investors will be sought for the remainder, according to the filing.

The plant will focus on the production of 28-nanometer and above integrated circuits and technical services, the filing said, without specifying when the facility will begin operations. Currently, the most advanced chips are made with 5-nanometer technology.

The background: The deal comes as Beijing pursues self-sufficiency in chip manufacturing against the backdrop of Washington limiting sales of chips made with U.S. technology to some Chinese tech companies.

In March, SMIC announced a similar deal, in which it will work with the Shenzhen government to jointly invest in a $2.35 billion project to produce 28 nanometer and above integrated circuits with the end goal of producing of 40,000 12-inch wafers per month.

In December, the Trump administration put SMIC on a U.S. trade blacklist, alleging that the company was providing technology to China’s military, a claim SMIC has denied.

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Ding Yi (yiding@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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