SMIC procrastinating on Wuhan fab, says analyst

Semiconductor Manufacturing International Corp. (SMIC) has postponed the ramp up of its 300mm wafer fab in Wuhan, China, according to Steven Pelayo, an analyst with the Hongkong and Shanghai Banking Corp. Ltd (HSBC).

"We hear that the new Wuhun fab is being delayed due to ongoing pricing discussions with Elpida,'' said Pelayo. "This will impact near term management fees and any potential profit sharing next year. It may also impact semicap equipment players that were counting on these orders for Q3 '07.''

Pelayo was referring to Japanese DRAM maker Elpida Memory Inc. Elpida has a foundry deal with the Chinese silicon foundry provider. Early this year, Elpida sold some 200mm fab gear to an entity run by China's SMIC. The equipment was sold to Cension Semiconductor Manufacturing Corp., which is based in Chengdu.

'Topsy-turvy ride
Meanwhile, as reported, SMIC last year began construction of a 300mm wafer fab in Wuhan East Lake New Technology Development Zone, Hubei Province, China—but not for itself. This fab is being paid for by the local authorities with SMIC being asked to manage the facility.

Wuhan Xinxin Semiconductor Manufacturing Corp. will own the facility and has engaged SMIC to manage the facility. The fab is scheduled to be completed by the end of 2007, and commercial production is scheduled to start in the first half of 2008. The manufacturing capacity is estimated to be 12,500 wafer starts per month initially with the ability to increase progressively up to 20,000 wafers per month or 25,000 wafers per month in 2009.

Indeed, it's been a topsy-turvy ride for SMIC in recent times. The company has not seen many profits since its inception for good reason.

"SMIC continues to increase its 300mm memory output; however, with DRAM pricing hitting new lows and no signs of a potential increase anytime soon, they are essentially working harder to simply run in place,'' said Pelayo. Memory is still about 30 percent of its revenue, the analyst noted.

It's a mixed bag on the logic side. Its 300mm logic business is ''weak as top logic customer Texas Instruments has recently cut wafer starts,'' he said.

''On the positive, we do hear the 200mm Shanghai fab is running strong with a notable new customer Qualcomm,'' he said. ''This fab is about 50 percent of capacity, but less in revenue. It is a more trailing edge fab that can only go down to 130nm.''

- Mark LaPedus
EE Times