A Signaling Semiconductor Manufacturing International Corp. (SMIC) at the top of the company’s headquarters in Shanghai, China, on Saturday, December 19, 2020. SMIC is one of the largest chip manufacturers in China.
Qilai Shen | Bloomberg | Getty Images
In December, Washington put SMIC on a blacklist called the Entity List, which restricts US companies from exporting technology to it. The move was seen as a blow to SMIC’s ability to reach the most advanced chip manufacturing technology. The Chinese company is already far behind its rivals TSMC and Samsung.
The new plant in Shenzhen will help SMIC increase the production of so-called chips of 28 nanometers and over. Such chips are a fairly old technology. TSMC and Samsung manufacture 5-nanometer semiconductors, the most advanced chips used in smartphones.
But a recent global shortage of semiconductors has left some industries, such as cars, in need of chips. But such industries do not necessarily need the latest chip technology. An analyst previously told CNBC that SMIC could meet some of this demand with its older chip technology.
SMIC said the Shenzhen government’s money would allow it to “expand its scale of production, advance its nanotechnology service and thus achieve greater profitability.”
SMIC will take a 55% stake in the Shenzhen subsidiary, while the government’s investment arm will have no more than 23%. The remaining capital will come from third-party investors.