Beijing has announced an investment of approximately $4.6 billion to build a new 12-inch wafer manufacturing plant, a project led by state-owned companies and funds aimed at boosting domestic semiconductor production. This strategic move is part of the country’s efforts to reduce its reliance on foreign technology amid rising geopolitical tensions.
Involvement of Industry Leaders
Among the companies involved in the project is Beijing Yandong Microelectronics (YDME), listed on the Shanghai Star Market, which announced an investment of 4.99 billion yuan to acquire a controlling stake of 24.95% in Beijing Electronics IC Manufacturing, the subsidiary behind the new factory. Additionally, BOE Technology, China’s leading display manufacturer, will contribute 2 billion yuan to obtain a 10% stake in the project.
Other notable investors include affiliates of Beijing Yizhuang Investment, Beijing State-owned Capital Operation and Management, and ZGC Group. Together, the shareholders will contribute 20 billion yuan, while the rest of the financing will come from debt.
Objective: Closing the Semiconductor Production Gap
With this factory, Beijing aims to strengthen its position in the semiconductor industry, which has traditionally been dominated by the Yangtze River Delta region, home to giants like Semiconductor Manufacturing International Corporation (SMIC). Beijing lacks sufficient players in manufacturing processes and later stages such as packaging and testing, areas that this project intends to address.
YDME estimates that the Chinese integrated circuit (IC) market will reach a domestic production rate of 21.2% by 2026, up from 16.7% recorded in 2021. The new facility is designed to produce chips with mature nodes, such as those at 28 nanometers or larger, and is expected to reach a capacity of 370,000 wafers per month by 2027.
Sector Evolution in China
Beijing’s initiative adds to a series of recent advancements in the semiconductor industry in China. Companies like Huahong Semiconductor, China Resources Microelectronics, and Guangzhou ZenSemi have announced progress in building 12-inch wafer plants.
Meanwhile, SMIC, which established China’s first 12-inch foundry in 2004, reported full utilization of its capacity in the third quarter of 2024. 12-inch wafers accounted for 78.5% of its quarterly revenue, totaling 15.6 billion yuan. SMIC plans to increase its capacity by 30,000 wafers per month in the fourth quarter.
International Pressure and the Future of the Market
The project also comes at a time of increasing restrictions from the United States on the export of advanced technologies to China. Recently, Taiwanese company TSMC, the global leader in chip manufacturing, announced that it would stop accepting orders from Chinese clients for advanced 7-nanometer nodes after its technology was found in products from Huawei, a company sanctioned by Washington.
The new Beijing plant represents a significant step toward strengthening China’s technological autonomy in semiconductors, a key industry in the global economy. With this investment, the country aims to reduce its dependence on foreign suppliers and ensure access to critical technology in an increasingly competitive international environment.
via: SCMP