China’s SMIC to build a new Shanghai plant

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China’s SMIC (Semiconductor Manufacturing International Corp) will invest $8.87 billion to build a plant in Shanghai. SMIC announced the news on Friday, saying it plans to expand capacity, amid a global shortage as Beijing aims to become independent in the sector.

The expansion by the country’s largest chipmaker comes as the shortage forces automotive factories to shutter and electronics industries to raise prices to reduce demand.

Meanwhile, other chipmakers like TSMC and GlobalFoundries have plans to commit or have committed large sums of money to build plants and expand capacity.

Where the money is coming from

SMIC said it agreed to build a production line to churn out 100,000 12-inch wafers in the Lingang Free Trade Zone (FTZ) in the Pudong district (a well-known business hub). The plan will focus on integrated circuit foundry and technology services on process nodes for 28-nanometers and above.

The project is backed by a joint venture SMIC owns a majority of. The joint venture partner is the Lingang FTZ. The company said it would approach other investors in the firm, which has registered capital somewhere in the region of $5.5 billion.

Other companies with plans in the zone include Tesla and Contemporary Amperex Technology.

The ball and chain that is the Washington blacklist

The company is partly funded by China’s state-affiliated chip fund. In the last ten years, the government has spent billions from the fund to help domestic chip companies compete with global rivals in Korea, Japan, and the United States, though SMIC lags in those markets.

SMIC’s unveiling of the new foundry follows similar expansion plans announced in Shenzhen and Beijing in recent months.

The firm is also on a US government blacklist that prevents Chinese state-affiliated/military-affiliated companies from doing business with US companies or its European allies. Being on the list disrupted SMIC’s plans to move into high-end chip manufacturing.