A Semiconductor Manufacturing International Corp (SMIC) designation on top of the company’s headquarters in Shanghai, China, on December 19, 2020. SMIC is one of China’s leading disk makers.
Qilai Shen | Bloomberg | Getty Images
In December, Washington blacklisted SMIC on the Entity List, which restricts U.S. businesses from exporting technology there. The move is seen as a blow to SMIC’s ability to catch up with the latest chipmaking technology. The Chinese firm is already far behind its competitors TSMC and Samsung.
The new Shenzhen plant will help the SMIC increase the production of so-called chips 28 nanometers and higher. Such chips are quite old technology. TSMC and Samsung manufacture five nanometer semiconductors, the latest chips used in smartphones.
But a recent shortage of semiconductors worldwide has shattered some industries, such as automobiles. But such industries do not necessarily need the latest chip technology. One analyst earlier told CNBC that SMIC could meet some of this demand with its older chip technology.
SMIC said the money from the Shenzhen government would enable it to “expand its production scale, advance its nanotechnology service and thus achieve a higher yield.”
SMIC will take a 55% stake in Shenzhen’s subsidiary, while the government’s investment arm will have no more than 23%. The remaining capital comes from third-party investors.