TAIPEI, Taiwan A consortium of Chinese banks has agreed to loan $600 million to Shanghai-based foundry Semiconductor Manufacturing International Corp. to allow the company to expand its 300-mm wafer operations in Beijing.
The deal comes about three months after the U.S. Export-Import Bank, a U.S. government agency that promotes exports, declined a request from SMIC for a loan guarantee to international banks willing to lend $769 million that would have been used to buy chip-making equipment, mainly from Applied Materials Inc.
Some U.S. semiconductor makers, particularly Micron Technology Inc. (Boise, Idaho), disapproved of the U.S. bank guaranteeing a loan for a foreign competitor, while the U.S.-Taiwan Business Council was supportive of the loan, believing that it promoted the health of the U.S. equipment industry.
Rebuffed, SMIC threatened to buy equipment from non-U.S. suppliers and turned to Chinese banks, which had already provided $285 million in 2004 to support the company's growth plans. In a statement Thursday (May 26), SMIC chief executive Richard Chang said the foundry would pay for future expansion with cash on hand or additional loans.
The loan is important to SMIC's expansion plans, since it represents about 60 percent of its capital budget for this year. At about $1 billion, SMIC's budget is down 46 percent from last year's $1.8 billion, making it the industry's fourteenth largest spender.
The foundry is trying to expand to achieve greater economies of scale and drive down its manufacturing costs. In April, SMIC said its net loss increased to $30.0 million in the first quarter of 2005, compared to a loss of $11.2 million in the fourth quarter of 2004. Its sales were $248.8 million in the first quarter of 2005, down 14.7 percent from $291.8 million in the prior quarter. For the second quarter, SMIC is projected to lose $39.4 million on sales of $232.1 million, according to market watcher Jefferies & Co.
The banks involved in Thursday's deal are China Development Bank, China Construction Bank, Bank of China, Agricultural Bank of China, China Merchants Bank, HuaXia Bank, China MingSheng Bank, Bank of Communications, Bank of Beijing, Industrial and Commercial Bank of China (Asia) and CITIC Ka Wah Bank.