Semiconductor Manufacturing International Corporation (SMIC), the biggest chipmaker on the Chinese mainland, responded to the first round of questions for the listing on the Sci-Tech innovation board (STAR Market) on June 7 when the company provided approximately 200 pages of responses.
The reply means that it took only four days for the company to respond after receiving the first round of questions on June 4, setting a record for the fastest response to a STAR Market review question.
In its response, the company said that SMIC, as the most technologically advanced, largest, best-supported and multinational professional wafer foundry in mainland China, will be able to provide a full range of services to its customers.
In 2019, SMIC's first-generation 14nm FinFET technology started mass production, but behind the ramp times of competitors such as TSMC, GlobalFoundries, and United Microelectronics Corporation.
Its second-generation FinFET technology platform is in the customer introduction phase.
The company's fund-raising investment project 12-inch SN1 project process technology level is 14nm and below, facing the surge of downstream market demand, the company's existing capacity shows a situation of huge demand and supply shortage.
SMIC also said that the 28nm process technology mainly serves end customers in the fields of mobile phone SOC chip, IoT, digital TV, etc., and the 14nm process IC wafer foundry business mainly serves end customers in the fields of mobile phone application processors.
There are currently four pure-play foundries worldwide that have the technical capability to provide 14nm technology nodes, while there are currently three actual foundries with 14nm technology nodes. There are only three pure-play foundries left in terms of revenue. These two types of process technologies currently account for a relatively small share of the global market.
SMIC said that, at present, no company in mainland China has the mass production capacity of the advanced process below 14nm. As the first IC foundry in mainland China to achieve mass production at 14nm, it has the advanced technology of 14nm and below. technology base and financial strength required for process development.
Compared to 14nm in first-generation FinFET technology, the company expects that second-generation FinFETs will be more cost-effective. The technology is expected to improve performance by about 20% and reduce power consumption by about 60%.
Advanced processes of 14nm and below are mainly applied in emerging fields such as 5G, artificial intelligence, intelligent driving, and high-speed computing. The development prospects are bright.
In response to the STAR Market's question about the gross margin of the two types of products, SMIC indicated that the current gross margin of 14nm and 14nm products is about 1.5 percent. The process technology is in a steady ramp-up phase in terms of capacity and production, with a positive gross margin during the reporting period.
Wafer foundry for the 14nm process has been in volume production since Q4 2019 and is currently producing 6,000 wafers per month.
The negative gross margin for 28nm was mainly due to the global 28nm market, which was affected by industry supply and demand. Current 28nm product prices are down compared to 2017 average prices and the associated production lines continue to face high depreciation pressure.
SMIC has issued a risk warning, saying that with the production and expansion of 28nm, 14nm, and next-generation processes, there will be a significant increase in the number of devices that can be produced.
SMIC said it will face greater depreciation pressure over a certain period of time, posing a risk that the overall gross margin will fluctuate, which will have an impact on the company's profit levels Some impact.
On the R&D front, in the first quarter, Chief Executive Officer H.E. Zhao said he would significantly increase capital spending by $1.1 billion. SMIC's production capacity has increased to $4.3 billion to fully meet market demand.
As previously planned, SMIC 14nm and subsequent process are expected to ramp up production to 4,000 units per month in March and 9,000 per month in July. It is expected the combined capacity will expand to 15,000 per month by the end of 2020.
Approximately 40% of the proceeds from the SMIC will be used for the 12-inch chip SN1 project, and approximately 20% will be used for the 12-inch chip SN1 project. The remaining 40% will be used as additional working capital.