Print  |  Send  |   

SMIC CEO: China foundry vendor back on track

October 11, 2010 // Mark LaPedus

SMIC CEO: China foundry vendor back on track

After a tumultuous period, Chinese foundry provider Semiconductor Manufacturing International Corp. (SMIC) is back on track, according to the company's top executive.   David N.K. Wang, the new executive director, president and chief executive of SMIC (Shanghai), said the foundry vendor has moved to restore customer confidence, put more emphasis on becoming profitable and narrowed its technology focus.

Page 1 of 1

SMIC appears to be focusing on a core group of major foundry markets--logic, analog, mixed-signal, among othersas opposed to being all things to all people.

''We've put a higher priority on service,'' Wang told EE Times during an interview at the company's technology event here on Friday (Oct. 8). The end goal for SMIC is to ''be as good'' or better than the competition, he said.

At the event, Chinas largest foundry vendor also rolled out its process roadmap, in which the company is clearly lagging behind its rivals. ''We want to close the (technology) gap with our peers, he said. 'We also want to be the preferred second-source foundry for first-tier customers and ''the first choice among chip makers in China.

Time will tell if SMIC can achieve those lofty goals. As before, the company continues to face stiff competition from GlobalFoundries, Samsung, TSMC, UMC and others in the foundry business. And IC business is slowing, leaving some to believe that the ongoing shakeout in the foundry business will accelerate.

Many believe SMIC will survive. It has the backing of the mighty Chinese government, which wont let a prized firm like SMIC fail, analysts said. Last year, TSMC remained the world's largest foundry in terms of sales, followed in order by UMC, Chartered, SMIC and GlobalFoundries, according to IC Insights Inc.

Right now, the foundry business is heating up. ''We readily agree that an arms (capital spending) race is continuing in the foundry space thanks to 28-nm spending from TSMC, and capacity adds from Samsung LSI and GlobalFoundries, said C.J. Muse, an analyst with Barclays Capital, in a report. ''But we do expect foundry spending to decline 3 percent to 19 percent in 2011.

The two main Chinese foundries SMIC and Hua Lei will see ''limited spending into next year, he said. ''Based on our checks, neither company is looking to migrate aggressively to advanced nodes in 2011 (maximum 1 immersion tool for each). As for capacity, SMIC has discussed expansion of their Beijing fab by (about) 6,000 (wafers) from now until 2Q '11 however, most of the tooling will be installed by the end of this year, suggesting more limited spillover into 2011. For modeling purposes, we have assumed flat at a combined $1.1 billion in (capital spending in) 2011 with risk potentially to the downside.

Grace Semiconductor Manufacturing Corp and Shanghai Hua Hong NEC Electronics Co. Ltd. (HHNEC) have begun construction of a 300-mm wafer fab at Zhangjiang Hi-Tech Park, Shanghai. The venture is called Hua Lei.

In any case, Wang has made strides at SMIC as part of a major turnaround strategy. Wang was named to the top post at SMIC about 11 months ago. Prior to joining SMIC, Wang was the CEO of Huahong (Group) Co. Ltd. and chairman of Huahong NEC, a subsidiary of Huahong Group between 2005 and 2007.

Wang replaced Richard Chang, who resigned to pursue other personal interests. Under Chang, SMICs CEO since its inception, SMIC experienced an endless string of losses and technology delays. The company continued to build fab capacity-sometimes at the expense of profits and even before it had committed customers.

And in the beginning, SMIC wanted to compete in the breakneck technology race against TSMC, UMC and others. And it wanted to be all things to all people, as SMIC entered into the analog, MEMS, LCD, solar and other foundry fronts.

That strategy proved to be flawed. And worse, SMIC last year lost a bitter patent suit against Taiwan Semiconductor Manufacturing Co. Ltd. TSMC alleged that SMIC had been using its trade secrets and infringing patents. Under the terms of the settlement, SMIC agreed to pay TSMC $200 million plus stocks equivalent to 8 percent holding in SMIC and warrants to purchase a further 2 percent.

To fix the companys damaged reputation and bottom line, the board last year hired Wang, a long-time semiconductor executive. Under Wang, SMIC has shaken up the organization, cut jobs, and brought in new and seasoned management.

He has also narrowed the companys technology focus and shed unwanted capacity. For example, SMIC reportedly exited the solar foundry business.

SMIC has been managing fabs in Chengdu and Wuhan, China for the respective municipal governments in those Chinese cities. Seen as a major distraction, the company has reportedly exited from its arrangement in Chengdu. Texas Instruments Inc. has reportedly bought the Chengdu fab. SMIC is looking to exit from its arrangement in Wuhan. Reports have surfaced that Micron Technology Inc. is looking at that fab.

In addition to the 300-mm fab under pilot production and three 200-mm wafer fabs in Shanghai, SMIC also operates two 300-mm wafer fabs in Beijing and a 200-mm wafer fab in Tianjin.

More importantly, Wang also instilled some new business practices at SMIC: It is looking for sustained profitability. Right now, SMIC also has a better product and customer mix than before, Wang said. And to help matters, SMIC recently received a capital injection from Datang Telecom of China.

Under the previous regime, SMIC was trying to ''get big before it was solid,'' he said. Now, SMIC ''needs to get strong before it gets big.''

Thanks to a settlement with a rival, SMIC recently posted its first quarterly profit since 2007. SMIC's sales hit $381.1 million in the second quarter, up 8.4 percent from $351.7 million in the first quarter and up 42.5 percent compared to the like period a year ago. Net income attributable to holders of ordinary shares was $96.0 million in the second quarter, compared to loss of $181.9 million in the first quarter and a loss of $97.4 million a year ago.

The profit was driven by a one-time gain of $105.9 million of commitment to grant shares and warrants. The gain came from securities issued to TSMC as part of a settlement in a suit last year.SMIC also doubled its capital spending. 2010 annual capital expenditures are expected to range from $700-to-$750 million.

At present, however, there is a slowdown in the IC market. Going forward, Wang is still bullish despite the slowdown, saying SMIC is seeing good demand. ''I think we're in a pretty good cycle,'' he said.

Wang said the company has restored customer confidence after the IP snafu with TSMC. Several customers that were reluctant to do business with SMIC have switched gears and ''now they are approaching us,'' he said.

One of the advantages for SMIC is clear: It has a large manufacturing base in the world's largest consumer market in China. SMIC has fabs in Beijing, Taijin, and Shanghai.

But one of the challenges is that SMIC is lagging in terms of technology. At present, SMIC is ramping up its leading-edge technology: a 65-nm process.

Wang acknowledged that SMIC is at least five years behind the competition at 65-nm and two-to-three years behind at 45-nm. The goal for the company is to narrow the gap between SMIC and its rivals.

To do so, SMIC will require massive capital and technical prowess to narrow the gap. It has licensed some technology from IBM Corp., but the challenge is to put the process into mass production.

Recently, SMIC has moved its low-leakage 65-nm process technology into volume production at its 300-mm facility in Beijing. It is also working on the transition to 55-nm technology, which is due in pilot production by the third quarter of 2011.
SMIC is also working on a 55-nm general purpose process, which is due in pilot production in the fourth quarter of 2011.

SMIC is also working on a 45-/40-nm low leakage process, which is due in pilot production in the fourth quarter of 2011. SMIC is also working on a 45-/40-nm general purpose process, which is due in pilot production in the second quarter of 2012.

SMIC licensed the 45-nm process from IBM in 2007. SMIC is also devising a 32-nm process, which was also licensed from IBM.SMIC is also working on analog and mixed-signal. It is devising a bipolar-CMOS-DMOS (BCD) process.


All news


Follow us

Fast, Accurate & Relevant for Design Engineers only!

Technical papers     

Linear video channel


Read more

This month Ambiq Micro is giving away five of its 'Apollo EVB' evaluation boards, worth 9 each for EETimes Europe’s readers to assess the capabilities of their cutting-edge Apollo sub-threshold microcontroller.

The new suite of Apollo MCUs is based on the 32-bit ARM Cortex-M4 floating point microcontroller and redefines 'low power' with energy consumption that is typically five to...


Design centers     

Infotainment Making HDTV in the car reliable and secure

December 15, 2011 | Texas instruments | 222901974

Unique Ser/Des technology supports encrypted video and audio content with full duplex bi-directional control channel over a single wire interface.


You must be logged in to view this page

Login here :