SMIC Caught Between Huawei And A Hard Place

SMIC, the Shanghai foundry, is in a bit of a quandary.

If it wants to expand its fabs, and it does, it needs to buy more US-made manufacturing equipment.

But if it continues to supply Huawei, it will very likely be banned from buying US-made manufacturing equipment.

In the wake of TSMC being stopped by the US from supplying Huawei, Huawei is reported to have turned to SMIC – putting in orders for 14nm chips.

14nm is SMIC’s best process and SMIC is, reportedly, still on a yield improvement curve. It is currently running 6,000 14nm wafers a month but plans to get that number up to 35,000.

SMIC has just been given $2.2 billion by the China government. It is planning to raise $3.2 billion on the Shanghai STAR market. It has $2 billion cash.

So it may be able to raise the resources to expand its 14nm capacity but is still faced with a dilemma as to whether it takes Huawei’s orders and, by doing so, cuts itself off from supplies of US-made manufacturing equipment

On the other hand, having taken China government money, it will be under under considerable pressure to keep on supplying Huawei.