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SMIC finds focus

Posted: 13 Oct 2010 ?? ?Print Version ?Bookmark and Share

Keywords:foundry? logic? analog? market?

China foundry provider Semiconductor Manufacturing International Corp. (SMIC) is getting back on track, according to David Wang, the new executive director, president and CEO, SMIC.

Wang noted that the foundry vendor has taken steps to restore customer confidence and emphasize profitability. The company is also narrowing its technology focus on logic, analog and mixed-signalamong othersinstead of trying to be all things to all people.

"We've put a higher priority on service," Wang told EE Times during an interview. The end goal for SMIC is to "be as good" or better than the competition, he said.

The company, China's largest foundry vendor, also unveiled its process roadmap. Lagging behind its rivals, Wang noted that "We want to close the (technology) gap with our peers." He added that "We also want to be the preferred second-source foundry for first-tier customers" and "the first choice" among chipmakers in China.

Only time will tell if SMIC will achieve these goals. The company continues to face stiff competition from GlobalFoundries, Samsung, TSMC, UMC and others in the foundry business. And the IC business is slowing, raising expectations that the ongoing shakeout in the foundry business will accelerate.

Analysts say that SMIC will survive, after all, it has the backing of the China government, which won't let the company fail. Last year, TSMC remained the world's largest foundry in terms of sales, followed in order by UMC, Chartered, SMIC and GlobalFoundries, according to IC Insights Inc.

Market matters
Currently, the foundry business is heating up. "We readily agree that an arm's (capital spending) race is continuing in the foundry space thanks to 28nm spending from TSMC, and capacity adds from Samsung LSI and GlobalFoundries," said C.J. Muse, an analyst with Barclays Capital, in a report. "But we do expect foundry spending to decline 3 percent to 19 percent in 2011."

Muse added that the two main Chinese foundries, SMIC and Hua Lei, will see "limited spending into next year." He said that "Based on our checks, neither company is looking to migrate aggressively to advanced nodes in 2011 (maximum 1 immersion tool for each). As for capacity, SMIC has discussed expansion of their Beijing fab by (about) 6,000 (wafers) from now until 2Q 2011 C however, most of the tooling will be installed by the end of this year, suggesting more limited spillover into 2011. For modeling purposes, we have assumed flat at a combined $1.1 billion in (capital spending in) 2011 with risk potentially to the downside."

More importantly, Wang also instilled some new business practices at SMIC: It is looking for sustained profitability. Right now, SMIC also has a better product and customer mix than before, Wang said. And to help matters, SMIC recently received a capital injection from Datang Telecom of China.

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