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Sat, Oct 25, 2003 - Page 12 News List

Motorola inks agreement with SMIC on chip plant

AFP , SHANGHAI

Motorola Inc and China's Semi-conductor Manufacturing Interna-tional Corp (SMIC, 中芯國際集成電路) said yesterday they have inked an agreement to transfer ownership of a wafer facility to the Chinese company in exchange for an equity stake.

The deal is part of the troubled US-based telecoms equipment maker's plan to spin off its billion-dollar a year global semiconductor business as a separate, publicly traded company.

Under the terms Motorola will become "one of the major equity holders in SMIC, and will gain a seat on SMIC's board of directors," the companies said in a joint statement.

"In connection with the completion of the transaction, Motorola will transfer its MOS-17 wafer fabrication facility in Tianjin to SMIC, in exchange for SMIC shares."

It did not provide any details on the size of the stake it is taking in SMIC, which is partly owned by Singapore investors Chartered Semiconductor (特許), Temasek Holdings and the Government of Singapore Investment Corp.

Goldman Sachs also has a small stake in the company which was set up by a former Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) executive and is now one of China's largest chip manufacturers.

In 1995 US-based Motorola invested one billion dollars in its wafer plant in northern city of Tianjin. But the plant is believed to have been unprofitable and rumors of its sale surfaced in the Chinese media in July.

Its global semiconductor business racked up US$4.8 billion in sales last year, or about 20 percent of total revenue, but the unit did not post an operating profit.

The deal with SMIC will allow the MOS-17 factory to be fully utilized and continue Motorola's chip production in China, the fastest-growing region in the world for the consumption of semiconductors.

"This agreement with SMIC maximizes the use of our manufacturing and RD resources," Scott Anderson, president and CEO of Motorola's Semiconductor Products Sector, said in the statement.

The MOS-17 wafer facility is part of the Tianjin Integrated Semiconductor Manufacturing Complex owned by Motorola China Electronics Ltd, which also includes the BAT-3 facility.

China has been trying to turn itself into a chip-making center and several big Chinese manufacturers have established manufacturing and design facilities, mostly in Shanghai, with overseas investment including SMIC and Grace Semiconductor Manufacturing Corp (宏力半導體).

Taiwan's chipmakers, including TSMC, have also set up manufacturing bases in China and invested heavily in domestic firms.

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