SMIC Heads For March Nasdaq Listing
By Paul Denlinger
Shanghai-based SMIC (Semiconductor Manufacturing International Corp.) is heading for a March listing on Nasdaq. The company hopes to raise US$1 billion in the IPO, which it plans to invest in manufacturing capacity expansion. The underwriters are believed to be Deutsche Bank and CSFB.
SMIC already has won sizable orders from Infineon of Germany for DRAM chips, as well as from Japan, which puts it in a stronger position to compete internationally. Earlier this month, Motorola injected an 8" silicon wafer fab in Tianjin into SMIC, taking a minority position in the new company which is driving China's chip fab growth.
In December, TSMC (Taiwan Semiconductor Manufacturing Corp.), which is the world's largest chip fab, and is based in Hsinchu, Taiwan, sued SMIC in a northern California court for intellectual property violations. This was widely seen as a move to prevent SMIC going public in the US.
SMIC has borrowed US$285 million from China Construction Bank and Industrial and Commercial Bank of China to increase its current 8" silicon wafer capacity. The company, which was founded in 2000, now has three 8" silicon wafer fabs. The company has a close relationship with China's four major banks, and Jiang Mienheng, son of former Chinese president Jiang Zemin, acts in an advisory capacity to the company. Winston Wang, son of Taiwan's plastics magnate Wang Yung-ching and Neil Bush, younger brother of the US president, are also involved with the company. The first loan the company took from the Chinese banks was in the amount of US$480 million in December 2001.
The company is now planning to make three 12" silicon wafer fabs in Beijing. Projections are that SMIC's China operations this year will put it ahead of Singapore's Chartered Semiconductor, making China the world's third largest chip fab maker. Five years ago, China had almost no domestic manufacturing capacity.
The chip industry has rebounded from the latest deflation cycle, and Morris Chang, chairman of TSMC, yesterday revealed that the company planned to invest US$2 billion in capital expenditures during the current cycle. The main question is, where will he invest the money, in China or Taiwan? TSMC has received approval to invest in China, but because of political considerations (the Taiwan government is a shareholder in the company), has held back.
SMIC's aggressive expansion means that the window of opportunity is closing for TSMC in China.
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