Over the past year America has attacked its supply chains, cutting it off from essential high-tech tools. SMIC is one of many corporate casualties in the escalating conflict over access to advanced technology that is playing out between America and China. Facebook, Google, Microsoft and Twitter have suspended habitual co-operation with Hong Kong police after the Chinese territory adopted a new security law giving Beijing greater control of the quartet only Microsoft has significant business on the mainland that could be a target of Chinese retaliation.
Not a bit of it. SMIC is teeing up a new listing of shares worth It has set a price for those shares that values the company at times its earnings, a ratio five times greater than that of more advanced competitors like the Taiwan Semiconductor Manufacturing Company. It could be one of the largest listings anywhere in So what is going on?
This is a long-standing strategic objective for the Chinese Communist Party, which is therefore happy to put the might of the Chinese state behind SMIC. Although the company lags behind global competitors at the moment, it is in a strong position to sell chips to the large and growing Chinese electronics market. Many Chinese patriotic day-traders probably belong to that group.
The latest assault came on May 15th, when the Department of Commerce introduced new export-control rules that prevent SMIC from using American chipmaking equipment to produce microprocessors for Huawei, the Chinese telecoms giant at centre-stage in the technological cold war. SMIC and its investors will hope that the firm can ride out these and future bumps to reach the lucrative position as chipmaker-in-chief to the Chinese market.
If it can, SMIC may flourish. If not, Beijing will miss its objective. This article appeared in the Business section of the print edition under the headline "What goes up, and up and up". Reuse this content The Trust Project. More from Business The bottom of the barrel Oil giants want to own only the cheapest, cleanest hydrocarbons. Now a message from our sponsors NBC turns to ads to fund its streaming wars. Off his rocker?
CTS Eventim is plotting a post-pandemic comeback tour. The best of our journalism, hand-picked each day Sign up to our free daily newsletter, The Economist today Sign up now.China's largest contract chip manufacturer is years behind its rivals when it comes to the latest technology, analysts said. That assessment comes as the world's second-largest economy faces a tough task in closing the gap with the U.
The Chinese government has made semiconductors a key pillar of its so-called Made In China plan, an initiative to boost the production of higher value products. On top of that, the U. But as SMIC gears up to release second-quarter results later this week, it's notable that China's biggest contract chipmaker is far behind rivals.
The reason for that view has to do with the type of chip that SMIC is only just beginning to manufacture.
Breakingviews - China's chip giant serves nationalism and reform
That is a so-called 14 nanometer 14nm chip. That designation refers to the size of the chip and it's something both Samsung and TSMC have been making for a number of years.
Both firms are now manufacturing 7nm chips, which are essentially smaller and more powerful. If Chinese foundries are not able to manufacture the latest chip sizes, that means companies like Huawei, which design their own chips, have to go to rivals.
For example, Huawei's "Kirin" series of processors for its smartphones have a 7nm design and are manufactured by TSCM. Semiconductors require a large amount of investment, the right talent and expertise to make. Chinese companies will need to overcome some of those hurdles in order to challenge rivals in other countries.
But some analysts say SMIC can catch up with its competitors thanks to a number of factors. One reason, according to China Renaissance, is that the pace at which chips are shrinking is slowing, which will allow SMIC to narrow the gap. The China-U.
There are signs, however, that the ratio could change. China's semiconductor production capacity is growing at the fastest in the world, according to industry body SEMI. Still, experts have told CNBC that China won't close the gap with other countries for at least a decade. Sign up for free newsletters and get more CNBC delivered to your inbox.
Get this delivered to your inbox, and more info about our products and services. All Rights Reserved. Data also provided by. Skip Navigation. Markets Pre-Markets U. Key Points. Semiconductor Manufacturing International Corporation SMICChina's largest contract chipmaker, is behind rivals when it comes to technology, analysts say.
China is trying to boost its own semiconductor industry as the trade war with the U. Integrated circuits on a circuit board. The semiconductor industry has been in focus during the U. Related Tags. News Tips Got a confidential news tip?Piano chords and lyrics
TSMCthe global leader in advanced chip-making. However, analysts cautioned SMIC still faces many challenges, most notably from uncertainty surrounding U. Chang resigned from the company the same year, a move widely speculated to be part of the resolution deal.
That and subsequent support from state-backed funds have given SMIC resources to plow into development of more advanced manufacturing technologies. Tensions entered a new stage last year after Washington took similar action against Huawei. While all that was happening, SMIC had been eyeing a chance to do a second listing on a mainland bourse. But its chance finally came after regulators in April relaxed the rules for overseas-listed Chinese companies to list on the Nasdaq-style, year-old STAR Market in Shanghai.Landscape TimeLapse #03 Tokyo Hyperlapse 4K
According to the new policy, overseas-listed companies wanting to make a second listing on the mainland needed a market cap of at least 20 billion yuan, down from billion yuan previously. By comparison, SMIC is less than one-tenth the size of its rival. Last year, SMIC reported a profit of 1. The smaller the size, the more computing power can fit into a given space. Media reports last year said the U.
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Get exposure for your startup at RISE Meet 5 of the best startups selected to represent China at the largest technology event in Asia. Caixin App Newsletter. You've accessed an article available only to subscribers. Gallery: Fighting the Flood. All Rights Reserved.It will help the contract chipmaker's investment firepower as it tries to step up competition with rivals including including Taiwan Semiconductor Manufacturing Co.
At the proposed price of SMIC could also increase the number of shares on offer, in which case it would raise It would be the biggest share offering in China since Agricultural Bank of China in The offering comes at a time of increasing tension between China and the U. It would also stimulate interest in STAR, which opened a year ago aspiring to become a "Chinese Nasdaq" as a venue for the domestic tech sector to raise equity.
Zhou Zixue, SMIC's chairman, said in an online investors roadshow on Monday that the listing was a "big milestone" for the company and "the entire Chinese capital market". Zhou said China was now the world's largest semiconductor market and that SMIC needed to leverage more funding sources and increase its production capacity to take advantage of a "precious key opportunity". In its exchange filing SMIC said 29 strategic investors would take part in its offering, including the China Integrated Circuit Industry Investment Fund, nicknamed the "Big Fund"-- the country's most important funding vehicle to seed the chip industry.
SMIC gained regulatory approval for the listing in only 19 days, showing how keen China is to help the company become a national chip champion. The listing is expected to take place this month. The contract chipmaker is a beneficiary of Beijing's desire to reduce reliance on foreign suppliers, sparked by Washington's clampdown on several key Chinese tech companies including Huawei Technologies, ZTE and Hikvision.
Huawei has shifted some mid- to low-end chips to SMIC and asked its other chip suppliers to shift manufacturing to China, sources told the Nikkei Asian Review, helping to boost local chip manufacturers' business. The U. Senate in May passed a bill that could ban many Chinese companies from listing shares on U. TSMC is the No. In its offer prospectus, SMIC has flagged many business risks ranging from tech gaps with market leaders to geopolitical tension and potential problems in obtaining foreign chip-production equipment and materials.
For example, Washington's move to require non-American chip suppliers to apply for licenses if using U. Other Chinese chip-related companies have also recently filed to list on the STAR Market, including Bestechnic, a key Bluetooth chip startup, and Cambricon Technologies, a Beijing-backed artificial intelligence chip developer. Both are key Huawei suppliers. One of China's essential goals in establishing the STAR board last year was to improve access to capital for the country's strategic chipmakers.
Roger Sheng, a Shanghai-based analyst at research company Gartner, told the Nikkei Asian Review that SMIC's case showed the Chinese government's commitment to persuading more domestic tech innovators to stay at home.
Semiconductor Manufacturing International Corporation
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Latest On China tech. China's Luxshare buys iPhone plant to strengthen Apple ties.Chipmaking rival to TSMC aims to beef up investment as trade tensions simmer. When the opening bell rang at a. It is the biggest share offering in mainland China in 10 years. Its shares closed the day at That is more than double the 20 billion yuan the Chinese company first planned to raise, according to its prospectus.
Investor enthusiasm for the listing -- the STAR market's biggest so far -- comes as Beijing aims to cut China's reliance on foreign chipmakers and support the country's domestic semiconductor industry, which is viewed as critical to national security, amid ongoing tensions with Washington. The listing comes just days ahead of the Shanghai tech board's first anniversary. SMIC's offering underscores how keen China's top policy makers are to convince domestic tech titans to list locally.
The move is also the latest indication of a decoupling from the U. Sina, the Nasdaq-listed Chinese company behind the Twitter-like service Weibo, has received a proposal from an entity led by Chairman and CEO Charles Chao to take the business private after 20 years on the U.
More than Chinese companies are listed in the U. The Chinese company is still listed in Hong Kong. Chen added that in the near term there will be waves of tech and chip companies listing on the STAR board, as top policy makers are currently endorsing the market.
SMIC flagged various business risks ahead of its share offering in Shanghai, including geopolitical tensions and its technological gap with market leaders. The Chinese company also faces problems in obtaining advanced chip-production equipment from ASML, Europe's largest chipmaking equipment supplier, due to U. The equipment is crucial for SMIC's tech capability to leap ahead in the next few years.
Further U. Taiwan Semiconductor Manufacturing Co.
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Offer ends July 31st. Your trial period has expired You need a subscription toLike its larger rival, SMIC is a contract chipmaker for customers including Qualcomm and Huawei, the handset and telecoms equipment maker blacklisted by the United States on national security concerns.
Semiconductor Manufacturing International Corporation
Yet SMIC is still years behind rivals technologically. The company only just started manufacturing its most advanced generation of 14 nanometer chips last year, more than four years after TSMC, Intel and Samsung Electronics debuted their own respective versions.
The urgency to narrow this gap has intensified as U. Just days ago, the U. Commerce Department said foreign companies using American chip-making equipment will need a license before supplying Huawei. By giving the board an anchor tenant, it will validate the liberalisation package built into the initiative. SMIC will also likely be the first foreign-domiciled company to list on primary mainland exchanges.
This will serve that goal too. Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time. All opinions expressed are those of the authors.
Discover Thomson Reuters. Directory of sites. United States. Robyn Mak. A researcher plants a semiconductor on an interface board during a research work to design and develop a semiconductor product at Tsinghua Unigroup research centre in Beijing, China, February 29, Breakingviews Reuters Breakingviews is the world's leading source of agenda-setting financial insight.Notable customers include Qualcomm  Broadcom and Texas Instruments.
It was founded on April 3, and is headquartered in Shanghai. The acquisition was completed as of July 29, SMIC holds NSI will develop analog and specialty semiconductor process technology platforms in the areas of high-voltage analog, radio frequency, and optoelectronics. These developments will support customers in IC design and product development for applications in smart home, industrial, and automotive electronics, new generations of radio communications, augmented reality, virtual realitymixed reality, and other specialty systems.
SMIC was building a plant that would be the first in China to use nanometer production technology. Current [ when? Zixue Zhou serves as chairman of the board. SMIC launched mass production of 28 nm at year-end SMIC says 28nm to 45nm technology will be adopted by its second-phase expansion wafer fab in Beijing, which is slated for operation in September with a monthly capacity of 35, wafers. A second round was opened in The liability phase of the lawsuit began on September 9, in Oakland, California,  and the jury found SMIC liable on 61 out of 65 claims.Water flow sensor circuit
SMIC has customer service and marketing offices in the U. From Wikipedia, the free encyclopedia. Chinese semiconductor foundry. Operating income. Net income. Financial Times. Tech Or It Does. Which Is It? Connecticut Post. SMIC website. Archived from the original on 4 January Retrieved 6 January Nikkei Asian Review. SMIC press release. Archived from the original on 9 February Archived from the original on 29 October Harvard Business School.
The New York Times. Archived from the original PDF on
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