[Chipformation] The Place Founded by the 'Semiconductor Godfather'... China's Foundry Pride

China's No.1 Foundry, Global 5th SMIC

Richard Chang (Jang Rujing), founder of SMIC.

[Asia Economy Reporter Han Yeju] Behind China's 'semiconductor rise' lies the unwavering will of the central government and strong policy support. SMIC (Semiconductor Manufacturing International Corporation), the leader in China's foundry (semiconductor contract manufacturing), is at the forefront, dominating the market.

SMIC was founded in 2000 by Richard Chang (張汝京), known as the 'godfather of Chinese semiconductors.' Born in Nanjing, China, and raised in Taiwan, he studied at National Taiwan University and the State University of New York at Buffalo. Richard Chang worked for nearly 20 years at the American semiconductor company Texas Instruments (TI) before returning to Taiwan to establish a semiconductor company. After his company was acquired by Taiwan's TSMC, he and many employees moved to China and founded SMIC in Shanghai. Since its founding, SMIC has been dedicated to China. As reflected in SMIC's Chinese name meaning 'China's chip (中芯),' its management philosophy aligns with China's 'semiconductor rise.'

With the overt backing of the Chinese Communist Party government and state-controlled finance, SMIC aggressively attracted investments and thrived. By 2021, it held a 5.3% share of the global foundry market, entering the 'global top 5,' largely due to the Chinese government's support.

According to SMIC's business report released on March 30, 2022, the company's 2021 revenue increased by about 39.3% year-on-year to $5.443 billion (approximately 6.64 trillion KRW), and net profit rose about 138% to $1.7 billion (approximately 2.074 trillion KRW). High demand for 5G smartphones, smart vehicles, and home appliances significantly contributed to SMIC's record-breaking performance. In fact, SMIC's sales composition by product is 32.2% for smartphones, 23.5% for consumer electronics, 12.8% for smart furniture, and 31.5% for others. This year is expected to mark the highest performance ever. SMIC's rapid growth is ongoing.

Recently, news that SMIC completed and pilot-produced a 7-nanometer (nm, one-billionth of a meter) process shook the industry. Until now, due to U.S. sanctions against China, SMIC could not import ASML's extreme ultraviolet (EUV) lithography equipment and had only produced 14nm products. Some analysts suggest SMIC is withholding announcement due to fears of additional U.S. sanctions, while others believe it has not disclosed the technology because of low yield and stability issues. There are also allegations of technology imitation since SMIC's 7nm process technology is similar to Taiwan's TSMC. In the past, TSMC sued SMIC twice, accusing it of copying its technology. However, considering Samsung Electronics and TSMC commercialized 7nm in 2020, the technology gap of over five years with SMIC has narrowed to about 2-3 years.

SMIC is rapidly expanding its factories. Currently, it operates three 8-inch wafer fabs and three 12-inch wafer fabs in Shanghai, Beijing, Tianjin, and Shenzhen, and has been constructing new fabs in Beijing, Shenzhen, and Shanghai since last year. In August, SMIC announced plans to invest about 10 trillion KRW to build an additional factory in Tianjin, China. The company aims to double its production capacity by 2025.

SMIC is increasing volume by backing domestic fabless companies. TrendForce reported that Chinese companies achieved a 10.2% share of the global foundry market in the first quarter of this year, marking the first time they reached double-digit market share. This level closely follows Samsung Electronics by a margin of 6.1 percentage points.