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SMIC raises US$630 million in share sales

Semiconductor Manufacturing International Corp (中芯國際集成電路), China's biggest chipmaker, raised US$630 million in a private share sale to help boost production capacity, stepping up rivalry with Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電).

Government-backed Shanghai Industrial Holdings Ltd, JP Morgan Chase & Co unit H&Q Asia Pacific Ltd and three other existing shareholders bought preference shares, the Shanghai-based chipmaker said in a statement. New investors include Oak Investment Partners and Beida Microelectroics Investment Ltd.

The money will be used to increase capacity at the company's Shanghai factories, which manufacture so-called eight-inch wafers, and to develop a new 12-inch wafer plant in Beijing, Semiconductor Manufacturing said.

The sale comes amid speculation that Semiconductor Manufacturing may buy a stake in an idle US$1 billion Motorola Inc plant in northern China.

"They need a lot of money because when you look at the expansion schedule, it's very aggressive," said Rick Hsu (徐禕成), a Taipei-based analyst at Nomura Securities.

"They've been behind schedule. Money was an issue," he said.

China's chip market will grow 18 percent this year to US$27 billion, according to market researcher Gartner Inc, outpacing a 10 percent forecast growth in global semiconductor sales.

Companies that have shifted manufacturing to China to take advantage of lower labor costs -- including Motorola, the world's second-biggest cell-phone maker, and Dell Inc, the No. 2 personal computer maker -- still import most of their chips from overseas.

China's top 10 chip suppliers last year were all overseas, led by Intel Corp, the world's biggest chipmaker, according to Gartner.

The Chinese government has said it hopes to attract more investment from makers of chips used in electronic products.

Semiconductor Manufacturing will probably be the first Chinese chipmaker to open a factory that uses 12-inch silicon wafers.

The company may be interested in taking a stake in a Motorola plant in Tianjin that's been running at less than a tenth of capacity since the US company started building it in 1995, analysts said.

TSMC, the world's biggest supplier of made-to-order chips, plans to boost spending on its Shanghai plant by a quarter to US$1.12 billion, Shanghai Daily reported yesterday, citing Sheldon Wu, the company's chief representative.

Other existing Semiconductor Manufacturing shareholders that took part in the latest sale included Walden International, Temasek Holdings Pte and a Singapore group led by Vertex Management.
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