Manufacturers in China are increasingly looking to source chips locally because they fear that the US and other governments might prioritize domestic users of the semiconductors vital to national security, a senior executive at Semiconductor Manufacturing International Corp (SMIC, 中芯) said yesterday.
Customers are telling SMIC that they need to secure a certain amount of capacity within China itself because of concerns the industry could become more fragmented, disrupting inflows from abroad, SMIC cochief executive officer Zhao Haijun (趙海軍) said.
Companies in China, where everything from Apple Inc iPhones to Volkswagen AG vehicles are manufactured, have increasingly turned to local component suppliers and assemblers.
“What we can make here is less than 10 percent of what they need. They are worried,” Zhao told analysts on an earnings call. “In the future, we may see that there is an oversupply of chips of certain nodes in some markets, but there will still be a shortage in some other markets.”
Governments from Tokyo to Washington and Brussels are racing to bolster chip ecosystems at home, wary of a heavy reliance on manufacturing in Taiwan and South Korea after a global component shortage affected the auto and electronics industries.
The US has also sought to limit flows of technology to China, which it considers a geopolitical rival, especially if it ends up for military use.
The global shortages have been particularly acute in more mature but traditionally underinvested 28 nanometer to 40 nanometer technologies, common in vehicles and machinery, spurring an aggressive buildup in those areas, including in China. That in turn has spurred fears of a glut.
SMIC intends to spend US$5 billion on upgrades and expansion this year, much of which is to go toward three giant new plants in Shanghai, Beijing and Shenzhen.
SMIC itself has been hit with US sanctions, which the company said has a major impact on its advanced technology development.
Zhao did not identify the customers he was referring to, although the company’s main customers include Datang Telecom Technology Co and Qualcomm Inc, data compiled by Bloomberg showed.
Shares of China’s biggest contract chip manufacturer jumped as much as 4.3 percent in Hong Kong after the company reported net income of US$534 million, beating analysts’ estimates.
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