SMIC: Chaos at the top of China’s largest chipmaker

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Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip maker, said on Wednesday it was trying to confirm the Chinese state media reports that co-CEO Liang Mong Song had resigned, apparently in protest at the appointment of Chiang Shang-Yi, the former co-COO of Taiwanese chipmaker TSMC, to the board.

SMIC did not say what media reports it was referring to, but in a statement to the Shanghai Stock Exchange said it was aware of Liang’s “willingness to step down under certain conditions.”

“The company is currently actively verifying Dr. Liang’s true intention to step down with him, and any further announcements on the above matters will be made in due course,” the company added in its statement.

The turmoil in leadership comes at a difficult time for SMIC. It faces mounting US threats to its business as it tries to play a vital role in China mission to become much more self-sufficient in semiconductors to strengthen its future engineering ambitions.

Chinese media – including Economic Information Daily and Beijing News – published a letter of resignation from Liang warning that US pressure seriously threatened advanced technology development at SMIC, and said he was concerned about the board’s nomination.

“I think today’s staffing proposal will inevitably affect the company’s outlook,” he wrote. “I was very surprised and amazed at the decision, because I knew nothing about it beforehand. I have a deep feeling that I am no longer respected and trusted.”

CNN Business was unable to verify the authenticity of the letter. Analysts at Bernstein wrote in a research note on Wednesday that Liang had previously abstained for Chiang’s appointment.

“As SMIC’s recent technological advancements were directly attributable to Liang, we believe his departure will provoke a negative reaction from the market,” the analysts said. They added that Liang has “personally led SMIC’s technology development” and that the company could face a setback in its “future technological advancements” if his departure is confirmed.

SMIC’s shares shrank after the news. The shares shifted nearly 5% in Hong Kong and 5.5% in Shanghai.

SMIC has recently entered the US government’s reticle as tensions between Washington and Beijing escalate and potentially threaten the company’s efforts to build advanced chip technology.

Much of China’s chipset offering comes from foreign companies, which power everything from Chinese smartphones and computers to telecommunication equipment. Last year, the country imported $ 306 billion worth of chips, or 15% of the value of the country’s total imports, according to government statistics.

Beijing has committed to improving its chip-making technology. SMIC, whose main shareholders are state-owned companies, said earlier this year it wants to invest in technology and catch up with its global competitors.

SMIC lags behind market leaders for three to five years Intel (INTC), Samsung and TSMC (TSM) and analysts say it has a long way to go to be a global competitor. Washington pressure threatens to make that goal even more difficult.

Earlier this month, the U.S. Department of Defense added SMIC to a list of companies the agency claims are owned or controlled by the Chinese military, a decision that means SMIC is subject to restrictions such as the inability to secure U.S. investment. accept.

SMIC has previously said its listing would have “no major impact” on its operations, and has also said it has no relationship with the Chinese military.

But any level of US control is concerning. For example, Chinese technology company Huawei has been slapped with a number of sanctions that have effectively paralyzed its global operations.

Unlike Huawei, SMIC has not been added to a trading division list that would essentially cut it off from US supplies and technologies. But the company has warned investors that potential US export restrictions are a concern.

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