China’s largest chipmaker Semiconductor Manufacturing International Corp is planning to raise up to $1.5bn in an IPO that will be a prelude to a spate of flotations designed to meet investors’ appetites for a stake in China’s fast-growing economy.
SMIC has filed with the SEC for an offering of American Depository Shares worth $714m. It also plans an international offering for investors outside the US and one on the Hong Kong stock exchange that will take the total amount to approximately $1.5bn.
The company was formed in 2000 by Texas Instruments veteran Richard Chang in Taiwan and moved quickly to tap the potential of the market on the mainland by offering foundry facilities. With funding from companies such as Goldman Sachs, it expanded rapidly. Revenue expanded from $50.3m in 2002 to $365.8m last year though net losses grew over the same period from $102.6m to $103.3m.
Given the cost of new fabs, SMIC faces enormous capital expenditure to maintain expansion. It predicts that capital expenditure will be $1.95bn this year and $1.37bn in 2005. It boasts one of the fastest ramp-ups of production in the history of the industry. It says that its monthly capacity reached 49,000 8-inch wafers and 9,000 copper interconnects at the end of 2003 and is expected to reach 114,750 8-inch wafer equivalents and 10,000 copper interconnects by the end of 2004. It plans to increase this to 170,000 8-inch wafer equivalents and 15,000 copper interconnects by the end of 2005.
SMIC has just concluded a deal under which it took a over a wafer fab in Tianjin, China from Motorola, that is believed to have cost $1bn to build, and in return Motorola took a stake of more than 10% in the company. The two companies also have a cross-licensing agreement and SMIC will provide foundry services to Motorola.
Inevitably SMIC has clashed with foundry giant Taiwan Semiconductor Manufacturing Co. In the Taiwan courts, TSMC won a ruling that prohibits Shanghai from poaching certain categories of its employees.
It now faces action in the US courts after TSMC claimed SMIC had infringed its patents and was guilty of misappropriation of its trade secrets relating to methods for conducting semiconductor fab operations and manufacturing integrated circuits.
This article is based on material originally published by ComputerWire