Beyond investments in advanced technology, foundries are constantly under pressure to keep up capital expenditures for capacity expansions.
SMIC was founded in 2000, with generous financial backing from the Chinese government. SMIC then pioneered a new business model under which the foundry talks municipalities into building a capital intensive fab while SMIC agrees to manage it.
The model has helped lower SMIC’s capital costs--most of the time but not always. Wuhan Xinxin Semiconductor Manufacturing, now called XMC, was orignially operated by SMIC but owned by a local government, in this case, Wuhan.
Now that the Wuhan foundry is called XMC, the new management team at XMC earlier this week declared that the Wuhan-based fab is “an independent foundry startup--not SMIC’s sister company.” The fab’s ownership is still in the hands of the city of Wuhan. SMIC never bought it back, and it’s now being run by Simon Yang, SMIC’s former COO who resigned the company after Chiu became SMIC’s CEO.
How has SMIC’s Beijing fab been financed?
SMIC, by going to the investment community for its Beijing fab, is raising funds internally. “SMIC needs to execute profitability and regain confidence from investors,” said Chiu.
SMIC's rising revenue by quarter
SMIC is planning to make it a joint-venture fab, “by leveraging investment funds owned by the Beijing municipal government,” according to Chiu.
The investments for SMIC’s Beijing expansion, however, are still under discussion.
Any funding or help from the Chinese central government? “No, so far, we’ve only gotten to the local level,” said Chiu. But Chiu hastened to point out that China has been very friendly, and open to the global semiconductor industry. Companies such as Hynix, Samsung and Intel have been all benefited, building mega-fabs in China, he added.