A signage of Semiconductor Manufacturing International Corp. (SMIC) at the company’s headquarters in Shanghai, China, on Saturday, December 19, 2020. SMIC is one of the leading chip manufacturers in China.
Qilai Shen | Bloomberg | Getty Images
In December, Washington put SMIC on a blacklist called the Entity List, which restricts U.S. companies from exporting technology to it. The move was seen as a blow to SMIC’s ability to catch up with the most advanced chip manufacturing technology. The Chinese firm is already far behind its rivals TSMC and Samsung.
The new Shenzhen plant will help SMIC increase the production of so-called chips of 28 nanometers and above. These chips are a fairly old technology. TSMC and Samsung manufacture 5-nanometer semiconductors, the most advanced chips used in smartphones.
But the recent shortage of semiconductors worldwide has left some industries, such as automobiles, in need of chips. But these industries do not necessarily need the latest chip technology. An analyst previously told CNBC that SMIC could meet part of that demand with its old chip technology.
SMIC said the Shenzhen government’s money will allow it to “expand its production scale, advance its nanotechnology service and thus achieve a higher return.”
SMIC will take a 55% stake in the Shenzhen subsidiary, while the government investment will have only 23%. The rest of the capital will come from external investors.