Fri, Mar 29, 2002 page17

• Chinese chipmaker plans to go public sometime next year

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  Semiconductor Manufacturing International Corp (中芯國際集成電路), a start-up China chipmaker partly owned by Toshiba Corp and Fujitsu Ltd, said it plans to go public next year as it seeks to grab more of a market now dominated by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).

  "The NASDAQ is one possibility,'' said Richard Chang (張汝京), Semiconductor Manufacturing's chief executive officer, in an interview. ``The New York Stock Exchange is another, and there's also Hong Kong."

  Investment banks, who have been chasing the more than US$6 billion in Asian share sales shelved after Sept. 11, have started visiting the company on a monthly basis, according to Joseph Xie, a senior director at the company. Semiconductor Manufacturing expects to select an adviser for the sale in about six months, Chang said.

  The Shanghai chipmaker competes with Taiwan rivals TSMC and United Microelectronics Corp (UMC, 聯電) in the market of making chips for other companies. It's main rival in China will be Grace Semiconductor Manufacturing Corp (宏力半導體), a company founded by the son of Chinese President Jiang Zemin (江澤民), which expects to start production in March next year.

  Semiconductor Manufacturing, which started production late last year, said it has the advantage of lower costs in a domestic market worth US$12 billion, while TSMC and UMC have been barred by their government from investing in China.

  "China's value-added tax on foreign-made chips is 17 percent, and on locally made chips, 4.5 percent," said Chang, a Taiwan native who formerly led a company on the island that was acquired by TSMC. "Here we can hire talent from Taiwan, mainland China and the US. Taiwan restricts people from China, so they cut off a lot of talent. It's stupid -- narrow-minded."

  Semiconductor Manufacturing also enjoys other incentives from China that save the company about US$750 million, he said. It is exempt from income tax for five years, then subject to half the tax rate for the following five years.

  Semiconductor Manufacturing, TSMC and other chip companies in Asia will account for about 60 percent of the investment in new capacity worldwide this year, according to David Wang (王寧國), a vice president at Applied Materials Inc, the world's largest producer of chip-making equipment. By 2010, companies in China and Taiwan will make about 40 percent of the world's chips, he predicted.

  With startup capital of US$1.5 billion, the company expects to expand output to about 42,000 silicon wafers a month by the end of next year.

  Semiconductor Manufacturing has been buying equipment at a discount from chipmakers with idled capacity since last year, according to Chang.

  "I don't think anybody has done this before," said Chang, who helped Texas Instruments Inc, the world's largest maker of chips for cellphones, set up semiconductor plants around the world. "We bought quite a bit of used equipment from Chartered [Semiconductor Manufacturing Ltd of Singapore]. We also bought some from Japan."

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