Hua Hong Semiconductor, China’s No 2 contract chipmaker, on Wednesday announced the acquisition of its sister foundry in Shanghai, days after market leader Semiconductor Manufacturing International Corp (SMIC) said it would take full control of a subsidiary.
Those big-ticket transactions – 8.27 billion yuan (US$1.2 billion) for Hua Hong and 40.6 billion yuan for SMIC – signalled a fresh round of consolidation in the country’s semiconductor industry, as Beijing’s tech self-sufficiency drive gathered pace amid heightened rivalry between China and the US.
Hua Hong said it would acquire a 97.5 per cent equity interest in Shanghai Huali Microelectronics from its state-owned parent Hua Hong Group, as well as investment funds that include the Shanghai Integrated Circuit Industry Fund, the Shanghai Guotou Pioneer Fund and phase two of the China Integrated Circuit Industry Investment Fund, also known as “Big Fund”.
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The acquisition would help Hua Hong add a monthly production capacity of 38,000 65-nanometre and 40-nm chips, boosting its asset base and profitability, according to a filing with the Hong Kong stock exchange.
Hua Hong shares gained 9.42 per cent to close at HK$81.30 on Friday. SMIC’s stock in Hong Kong was up 5.11 per cent to close at HK$75.10.
The facade of Hua Hong Semiconductor’s headquarters in Shanghai. Photo: Handout alt=The facade of Hua Hong Semiconductor’s headquarters in Shanghai. Photo: Handout>
SMIC had earlier announced that it would acquire the remaining 49 per cent stake it does not own in subsidiary Semiconductor Manufacturing North China (Beijing) Corp. (SMNC). The deal was first proposed in September.
Taking full control of SMNC’s fabrication facility would “enhance the asset quality” of SMIC and benefit its long-term development, China’s No 1 chip foundry said.
Established in 2013, SMNC provided 12-inch wafer manufacturing services for different processes. SMNC was focused on “45-nm and finer technologies”, according to SMIC’s 2013 annual report.
SMIC said in November that its full-year revenue was on track to hit an all-time high of more than US$9 billion, as tight foundry capacity and China’s supply-chain localisation kept its fabs running at full capacity.
While SMIC and Hua Hong did not make chips on 7nm and more advanced processes like larger contract chipmakers Taiwan Semiconductor Manufacturing Co and Samsung Electronics, the two Shanghai-based firms remain major suppliers of so-called legacy chips.
