When 28-nanometer process is all you really need

Amid a global semiconductor chip shortage, news of plans to invest in new chip plants appears welcome, and timely. So, who is investing, in what, and where?

China, the world’s largest vehicle market, is expected to sell 1.7 million new energy vehicles (NEVs) in the first eight months of this year, up from 600,000 units in the same period last year. The figures were included in comments made by Xin Guobin, vice minister at China’s Ministry of Industry and Information Technology, at an industry conference in Tianjin hosted by China Automotive Technology and Research Center (CATARC). NEVs include vehicles in the electric battery, plug-in hybrid and hydrogen fuel-cell categories.

Xin said overall auto sales are expected to hit over 16 million vehicles between January and August, up by around 10% from 2020. Nevertheless, he warned that price increases and the global auto-chip supply shortage still exert downward pressure on China’s auto production.

In this situation, it’s really no surprise that China’s leading foundry, SMIC (Semiconductor Manufacturing International Corp.), is to invest US$8.87 billion in a new 28-nanometer chip plant in Shanghai, expanding capacity, amid a global chip shortage, as Beijing boosts its independence in the sector.

SMIC said it had agreed to build a production line with a monthly capacity of 100,000 12-inch (300mm) wafers in the Lingang Free Trade Zone (FTZ) in the Pudong district of Shanghai. The plan is to focus on integrated-circuit foundry production and technology services for the 28-nanometer node.

The joint venture is to be majority-owned by SMIC, with the JV partner the Lingang FTZ. The JV will, meanwhile, seek other third-party investment for a total registered capital of US$5.5 billion.

SMIC’s unveiling of the new fab follows similar expansion plans in recent months for new plants in Shenzhen and Beijing.

SMIC is partly backed by China’s state-affiliated chip fund which, over the last decade, has helped domestic IC producers compete globally, notably with rivals in Japan, Korea and the United States.

In terms of today’s cutting-edge semiconductor process technology, the chip-geometry target of 28 nanometers is relatively modest, but it does answer the need for commodity chips for numerous industrial sectors, including the hard-hit automotive sector, which now relies, in a very fundamental way, globally, on a wide range of auto-electronics.

In a much wider perspective, SMIC’s move also marks a confident reliance on China’s own internal supply chains. According to Teng Ran, head of the Integrated Circuit Industry Research Center at CCID Consulting, a firm affiliated with a think tank under the Ministry of Industry and Information Technology (MIIT), “China urgently needs to move toward mid-to-high end chip production, and being able to produce 28nm chips means that it can meet most of the demand for chips without relying on other countries”.

Teng also emphasized that SMIC represents competitive positioning for China at the 14nm node, noting that as chipmaking at the 14nm process matures next year, SMIC will join the ranks of Intel, TSMC and Samsung as the first Chinese company to acquire 14nm technology and put it into mass production.