Saturday, May 23, 2020

China Invests US$2.2 Billion Into Chipmaker SMIC After Recent US Restrictions

China’s only ruling government, the Chinese Communist Party, recently made the decision to pump US$2.2 billion (~RM9.57 billion) of its funds into a local chipmaker called Semiconductor Manufacturing International Corporation (SMIC).

According to a report by the Nikkei Asian Review, the move comes as a response to the US’ sanctions extension on Huawei and Taiwan-based TSMC stating that it will not receive anymore orders from the Chinese smartphone and telecommunications brand. However, TSMC says that it will honour its production quota and the contract made with Huawei prior to the ban extension, which should arrive in the company’s hand sometime before the middle of September.

That said, losing TSMC as its supplier is both an undeniable and major blow to Huawei’s production line; the Taiwan-based foundry is is expected to be a major provider of both 7nm and 5nm process nodes to not just Huawei. But also NVIDIA and Apple. Moreover, it was also recently reported that the company is planning on opening another chip factory within the US, possibly to the tune of US$12 billion (~RM52.2 billion).

It’s both clear and obvious that China’s intervention and fund injection into SMIC is to fill the gap left by US restrictions. It’s also clear that the funding is more or less a wake-up call to SMIC; TSMC was primarily responsible for the production and provision of several products, including mobile, AI, and networking chipsets. Simply put, the China-based company has some pretty big shoes to fill.

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