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Semiconductors
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Tech war: China’s top chip maker SMIC rushes to hoard semiconductor tools with big spending bump amid US sanctions

  • Semiconductor Manufacturing International Corp revised its annual budget to US$7.5 billion, an 18 per cent jump over 2022
  • The spending boost and a rise in Dutch shipments to China indicate a rush to stockpile chip-making equipment ahead of tougher US sanctions

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A Chinese flag hangs from a pole near the Semiconductor Manufacturing International Corp headquarters in Shanghai on December 19, 2020. Photo: Bloomberg
Che Panin Beijing
China’s top foundry Semiconductor Manufacturing International Corp (SMIC) has increased its capital expenditure this year, a sign that it is rushing to purchase chip-making tools ahead amid Washington’s escalating sanctions on China’s access to advanced equipment.
SMIC has raised its annual budget to US$7.5 billion for 2023, 18 per cent higher than the company’s US$6.35 billion in spending last year. The Shanghai-based chip giant spent US$5.1 billion in the first three quarters and previously estimated that spending this year would remain flat.
The bump in spending is a reflection that SMIC is accelerating equipment purchasing and installation after the US updated its already-stringent tech export controls last month, again lowering the threshold for the types of chip-making tools that cannot be sold to Chinese firms.

China’s imports from the Netherlands also soared in October, in what is seen as another indication of the country’s scramble for the expensive lithography systems that come only from Dutch firm ASML. Despite a broad decline in trade with the European Union, Chinese customs data released on Tuesday shows Dutch shipments rose by 29.5 per cent last month from a year earlier.

SMIC did not provide details about its purchases, but co-CEO Zhao Haijun said geopolitical factors have some “grey rhino” risks for the industry, referring to obvious dangers that often go ignored.

“Geopolitical factors have brought about a grey rhino effect to the mid- to long-term development of the industry,” Zhao said at an earnings conference call on Friday, adding that all participants in the industry are exploring strategies and paths forwards.

Zhao said SMIC will allow tool suppliers to make earlier deliveries to “ensure ramp-up production at plants that have been initiated” due to the increasingly complicated impact of geopolitics on shipment times.

Zhao said the amount of equipment to be delivered to the fab before the end of this year will “increase substantially” over its original forecast.

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