SMIC To Expand Wafer Capacity By Year-End
SMIC (Semiconductor Manufacturing International Corp.),
one of the leading chip foundries in Shanghai, plans to
expand its 200 mm wafer capacity from the current monthly
capacity of 100,000 to 125,000 by year-end. By 2005, it
plans to boost monthly production to 185,000.
This runs in contrast to Intel's recent announced cut
in earnings projections, and suggest that demand remains
strong. SMIC believes that it will continue to manufacture
at or near full capacity throughout 2005.
High initial capital investments for foundries require
that they utilize 70% of their capacity before they can
break even. The cyclical nature of the business means
that if they hit a bad economic cycle, they are unable
to recoup their equipment investment in a new generation
of manufacturing and testing equipment, which may require
US$1-5 billion of capital for each new foundry.
SMIC has been able to perform well, even with a rocky
IPO
in the US earlier in the US. The company has also
been sued
in the US by TSMC (Taiwan Semiconductor Manufacturing
Co.), which contends that SMIC has violated the intellectual
property rights of TSMC and hired some of its leading
engineers and management. Recently, TSMC has attempted
to block the export of SMIC chips to the US on these grounds.
TSMC is the largest chip foundry in the world, and is
widely regarded as the "grandfather" of almost
all the other chip foundries in Taiwan and China.
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