In response to media reports that the US was considering its inclusion on the entity list, SMIC denied any links to the Chinese military.
Earlier today it was reported that the US is considering whether to put SMIC on its "entity list". If the company is placed on the "entity list," it would mean that it could no longer trade with US companies, and SMIC's production line contains a lot of US technology.
On the afternoon of September 5, SMIC issued a statement in response, saying that SMIC, as an internationally operating integrated circuit manufacturer listed on both the Hong Kong Stock Exchange and the A-share market in the Chinese mainland, strictly complies with the laws and regulations of relevant countries and regions, and has been operating in accordance with the law on this basis.
According to SMIC, it has established long-term relationships with many well-known US and international semiconductor equipment suppliers, and the US Department of Commerce has issued a number of important export licenses over the years.
SMIC says its products and services are used for both civilian and commercial applications, and it has never had any business practices involving military applications and has no relationship with the Chinese military.
In 2016 and before, SMIC was a "Validated End-User" officially recognized by the US Department of Commerce, and several US Department of Commerce officials have visited SMIC on site.
Any reports about "SMIC involved in military applications" are false news. "We are shocked and puzzled by this," the company said.
SMIC said it is willing to communicate with all relevant US government agencies in a sincere, open, and transparent manner to resolve any possible disagreements and misunderstandings.
SMIC A-shares have fallen 19.38 percent since August, while its H-shares have fallen 20.77 percent in the same period. The company's latest Hong Kong shares have a market capitalization of HK$136.2 billion, while its A-shares have a market capitalization of 128.4 billion yuan.
Once listed on the "entity list", it may affect SMIC's expansion plans.
SMIC recently announced that it and the Beijing Development Zone Administrative Committee entered into a cooperation framework agreement on July 31, which will establish a joint venture to develop and operate projects focused on the production of 28nm and above ICs.
The first phase of the project is planned to invest $7.6 billion.
However, a large amount of SMIC's equipment needs to be imported from abroad, especially from the United States. A production line for advanced semiconductor products accounts for more than 75 percent of the total investment in equipment.
If the US sanctions, US manufacturers will also be a great impact.
SMIC announced on March 23, the company signed a purchase agreement with Lam Research equipment, the total purchase price of $397 million.
SMIC and Applied Materials reached an equipment purchase agreement for a total purchase price of $543 million, according to a March 2 announcement.
Notably, SMIC announced in its first quarterly report that it had increased its planned capital expenditures this year to approximately $4.3 billion from approximately $3.2 billion disclosed in its 2019 annual report.
In its second quarterly report, the company again raised its capex plan from approximately $4.3 billion to approximately $6.7 billion. The increase in capital spending is mainly for machinery and equipment expansion.
China is stepping up efforts to build "independent control" of the integrated circuit industry chain, especially equipment and materials, but due to the late start, patent barriers, the past emphasis on the lack of the high degree of multiple factors, it is difficult to get rid of the dependence on overseas manufacturers in a short period of time.
Although China has developed some substitute equipment, some equipment manufacturers still rely on overseas suppliers for some key components.
From another perspective, if SMIC is listed on the entity list, it may accelerate the process of China's adoption of independent technologies, and domestic semiconductor equipment and material manufacturers are expected to get more opportunities to enter the SMIC production line validation.
SMIC co-CEO Zhao Haijun said on a second-quarter conference call that local Chinese equipment, parts and materials manufacturers have been working hard to develop, but the scale is still relatively small.
What SMIC is doing now is to do innovation with the industry. Will try to use domestic products, but SMIC is an international company, "Industry followers can't replace the leader in one day, we welcome leading foreign companies to build local factories and supply chains, this is an opportunity for everyone."
SMIC is one of the most technologically advanced, well-supported, large-scale, and multinational integrated circuit manufacturing conglomerates in China, providing foundry and technical services at various technology nodes from 0.35 micron to 14 nanometers.
Currently, SMIC has seven wafer fabs, including a 300mm wafer fab and a 200mm wafer fab in Shanghai, as well as a 300mm advanced process wafer fab in which it has a controlling interest.
It has a 300mm wafer fab in Beijing and a holding 300mm advanced process wafer fab in Beijing, and 200mm wafer fabs in Tianjin and Shenzhen. In addition, the company has a 300mm bump processing joint venture plant in Jiangyin, in which it has a controlling interest.