Chinese fab SMIC outlines semiconductor plans

SMIC operates three fabs in the area of Shanghai. Fab one and two are supported by a third fab that interconnects the first two facilities. Together, SMIC expects the three facilities to have a monthly manufacturing rate of 30,000 wafers at the end of the year. The three fabs are expected to achieve maximum capacity at the end of the year 2004, turning out 85,000 wafers a month.

Three additional SMIC fabs are being built in Beijing, designed after the layout of the Shanghai fabs. The design involves two fabs at the front and another fab in the rear. The fab in the back supports the two fabs at the front and interconnects them. This minimizes contamination during the technical process and allows greater flexibility for planning additional facilities. In Beijing, fab four will manufacture 8 inch wafers and is expected to have a maximum capacity of 30,000 wafers a month. Fab five will manufacture 12 inch wafers and fab six will be the backend, the SMIC term for support facilities.

I asked Chris Chang about regionalism in China. Apparently, the founder of SMIC originally thought of operating out of Hong Kong. The Hong Kong government, however, proved “more rigid” in negotiations and was not forthcoming about tax incentives. Beijing likewise negotiated to no effect the first time Richard Chang traveled there in the year 2000. As Chris Chang explains, the earlier negotiations in Beijing went nowhere because “no one who could make the appropriate decisions was in town.” The decision makers evidently took greater care to be available the next time around.

SMIC was founded in Shanghai, Chang said, because the Shanghai government is efficient and maintains a pragmatic attitude towards potential investments, in contrast to the lengthy negotiations often required with regional governments elsewhere in China.

The larger semiconductor facilities in Shanghai cluster in three regions. The likes of SMIC and Grace are located in the Zhangjiang Technological Park and SIM BCD, Belling and ASMC are in the Caohejing High Tech Park. Intel manufacturing facilities are in the Waigaoqiao Free Trade Zone, a place where the roads are named after, for instance, the Taiwanese capital. I wonder, will Beijing ever name a road, Taipei Street, to attract semiconductor corporations there?

I know that the tax incentives of the Free Trade Zone are significant and that government officials have invested a great deal of money to improve transportation and the provision of electricity to the Free Trade Zone for Intel. I asked Chris Chang whether or not SMIC felt isolated from policy incentives or infrastructural improvements that are intended only for those corporations within the Waigaoqiao area. Chang replied that SMIC faces no infrastructural disadvantages. The municipal government added a station to the metro line in order to link the Zhangjiang Technological Park to downtown. Presumably, that lessens the burden on engineers making their way home after long overtime hours. SMIC sends most of its products via air freight and the fabs are located between the two airports. It takes about a half hour to forty five minutes for wafers to arrive at either one. I wondered why it would not be better to be located closer to one of the airports specializing in freight rather than equidistant from both airports. Unfortunately, this was a brief interview and I never had the chance to ask the question.

Chang mentioned that SMIC does miss out on a few policy incentives that corporations in the Waigaoqiao area enjoy. Chang elaborated, Chinese legislation is a patchwork affair and when the government does patchwork in a hurry, it is not often consistent. Many corporations have complaints about these inconsistencies. However, the government is aware of the problem and taking steps accordingly, said Chang. He believes the inconsistencies are only a temporary inconvenience. Ah, to be the twinkle in the eye of the government.

The people at SMIC have decided that the most efficient way to develop technology is through technical partnerships. Although Chang remarked that SMIC is a young company and is therefore only beginning to build its relationship with existing technical partners, he noted that SMIC is already working with Toshiba and Fujitsu, old customers that Richard Chang knows from the time he spent with Worldwide Semiconductor Manufacturing. Other existing technical partners are, for instance, Chartered and IMEC. Of note, SMIC hopes to rapidly increase the number of its grants to have greater leverage in negotiating cross licensing agreements. It has a goal of having more than one hundred patents in the United States and China by the end of the year. µ