SMIC: Chaos at the top of China’s largest chip maker

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Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip maker, said Wednesday it was trying to confirm the Chinese state The media reports that his co-CEO, Liang Mong Song, had resigned, apparently in protest of the appointment of Chiang Shang-Yi, former co-CEO of Taiwanese chip maker 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 knew of Liang’s “willingness to resign under certain conditions.”

“Currently, the company is actively verifying Dr. Liang’s true intention to resign with him and any other announcement on the above matters will be made in due course,” the company added in its statement.

The turbulence of leadership comes at a difficult time for SMIC. He faces growing U.S. threats to his company as he tries to play a critical role in China mission become much more self-sufficient in semiconductors to drive their future technological ambitions.

Chinese media – including Daily Economic Information and Beijing News – he issued a letter of resignation from Liang in which he warned that US pressure was seriously threatening the development of advanced technology at SMIC and said he was concerned about the board’s appointment.

“I think today’s staff proposal will inevitably affect the company’s prospects,” he reported. “I was surprised and baffled by the decision, because I didn’t know anything about it beforehand. I feel deeply that they no longer respect me or trust me.”

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

“Because SMIC’s recent technological advancement was directly attributable to Liang, we believe its exit will provoke a negative market response,” analysts said. They added that Liang has been “personally leading SMIC’s technological development” and that the company may suffer a setback in its “future technological progress” if its departure is confirmed.

SMIC shares fell after the news. Shares have slipped almost 5% in Hong Kong and 5.5% in Shanghai.

SMIC has recently entered the U.S. government’s crossover pilots as tensions between Washington and Beijing increase and potentially threaten the firm’s attempts to build cutting-edge chip technology.

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

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

SMIC stays three to five years behind industry leaders Intel (INTC), Samsung i TSMC (TSM) and analysts say there is still a long way to go to be a global competitor. Washington pressure threatens to make this 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 impossibility of accepting American investments.

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

But any level of American control is worrisome. Chinese technology company Huawei, for example, has received a number of sanctions that have effectively paralyzed its global business.

Unlike Huawei, SMIC has not been added to a Department of Commerce list that would essentially cut it off from U.S. supplies and technologies. But the company has warned investors that possible restrictions on U.S. exports are a concern.

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