Semiconductor International Manufacturing Corporation (SMIC) recently revealed that its factories are running “fully loaded” to meet demand from the global chip shortage.
China’s largest contract component maker wants to expand its production capacity, but U.S. trade restrictions have stymied its efforts.
However, the firm recently secured a $12 billion investment from the Chinese government to build a sub-14nm fab. Since the company can fabricate 7nm products, the new facility could significantly elevate its status within the global marketplace.
Supply Crunch Challenges
During its recent Q4 2020 earnings call, SMIC co-CEO Zhao Haijun explained the corporation cannot meet demand for its services. The firm worked to address the bottleneck by fully utilizing its production lines but end-market interest is still outpacing its capabilities. That said, its recent brisk business pushed its holiday quarter income to $981 million, up 16.9 percent year-over-year.
Zhao said the corporation is keen to expand manufacturing output but lacks the necessary equipment for a major buildout.
Last year, Washington blacklisted SMIC, meaning it cannot acquire specific advanced American-designed semiconductor technology, like state-of-the-art software or machinery. Without those tools, it has struggled to further its research and development and expand its production capacity.
Nevertheless, Zhao noted the firm intends to increase its output at its 12-inch fab by 10,000 wafers per month. It also plans on ramping up production at its 8-inch factory by 45,000 units. However, its procurement challenges will prevent it from making those upgrades until the second half of 2021.
Ultimately, the company expects its sourcing issues to limit its annual growth to the “mid-to-high” single digits this year.
Long-Term Growth Plans
Despite its current problems, SMIC has big plans to overcome its deficiencies and meaningfully grow its business.
Earlier this month, the Shanghai Municipal Development and Reform Commission announced it would invest in 166 projects intended to bolster China’s infrastructure. The organization will provide SMIC with $12.04 billion to establish a new chip-making complex in the Pudong sub-district. Once operational, the factory will perform R&D tasks and mass-produce 35,000 wafers per month at 14nm or below.
Admittedly, SMIC’s new foundry will not contribute heavily to its overall output. At present, the firm’s least productive fab creates 70,000 8-inch components per month. But the Shanghai facility could give it a significant technological advantage over its rivals in China.
Last October, the corporation revealed it had taped out 7nm integrated circuits utilizing its N+1 node. With its new plant, it could begin using its most advanced manufacturing process at volume. Because of its sourcing restrictions, it probably will not be fabricating near current generation semiconductors right away.
However, its $12 billion capital infusion and Beijing’s interest in creating a domestic component ecosystem indicate it will reach the 7nm mass production benchmark relatively soon.
At that level, SMIC’s nodes would still be a generation behind market leaders Samsung and Taiwan Semiconductor Manufacturing Company (TSMC). But its technology would make it the most sophisticated chipmaker in mainland China. That distinction will undoubtedly attract the attention of many local providers and boost the foundry’s revenue.
With robust government support and higher income, SMIC could become one of the world’s most prominent semiconductor providers.