A Semiconductor Manufacturing International Corp. (SMIC) on top of the company’s headquarters in Shanghai, China, on Saturday, December 19, 2020. SMIC is one of China’s leading chip manufacturers.
Qilai Shen | Bloomberg | Getty images
In December, Washington blacklisted SMIC called the Entity List, which prohibits US companies from exporting technology to it. The move was seen as a blow to SMIC’s ability to catch up with the most advanced chip-making technology. The Chinese company is already far behind its rivals TSMC and Samsung.
The new factory in Shenzhen will help SMIC ramp up the production of so-called 28 nanometers and more chips. Such chips are a fairly old technology. TSMC and Samsung produce 5 nanometer semiconductors, the most advanced chips used in smartphones.
However, due to a recent global shortage of semiconductors, some industries, such as automobiles, are in need of chips. But such industries don’t necessarily need the latest chip technology. An analyst previously told CNBC that SMIC could meet some of this demand with its older chip technology.
SMIC said the money from the Shenzhen government will enable it to “expand its production scale, improve its nanotechnology service and achieve higher returns”.
SMIC will take a 55% stake in the Shenzhen subsidiary, while the government investment arm will have no more than 23%. The remaining capital comes from outside investors.