SEMI: Chinese Spending on Chip Plants to Rise

In a sign of China’s growing importance as a center of semiconductor manufacturing, Chinese chip makers will spend more than ever before on cutting-edge factories over the next two years.

Chinese spending on chip plants will top US$9.8 billion between 2006 and 2008, with most of these funds going toward the construction of factories that produce chips on 300-millimeter wafers, industry group SEMI said. If realized, this spending forecast will top combined Chinese spending on chip plants over the past five years, which amounted to US$8.7 billion, it said.

Around 70 percent of the money that will be spent on new Chinese plants will go toward factories that use 300-millimeter wafers, which will result in an annual increase in production capacity of 16 percent by 2008, SEMI said. At least five new 300-millimeter plants are expected to come online by 2008, it said.

While the fast growth of China’s market presents opportunities for established chip makers as well as new entrants, established players—especially those with Chinese government backing and overseas funding—will fare better over the long term, SEMI said.

Leading China’s charge forward in chip production is Semiconductor Manufacturing International, the country’s largest chip maker. Among a string of production plants across China, SMIC has one 300-millimeter plant in production and another two under construction in Beijing. The company has also signed an agreement to manage the operations of other plants, including a 300-millimeter fab to be constructed in Wuhan.

That agreement helped spark a lawsuit by rival Taiwan Semiconductor Manufacturing, which said the deal violated the terms of a 2005 settlement agreement that ended a patent infringement lawsuit brought against SMIC by TSMC. The latest lawsuit is pending in a California state court.

-Sumner Lemon, IDG News Service (Singapore Bureau)

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