SMIC Chengdu to build a new factory analysts are not optimistic about the prospects for the development of

Beijing on May 4th news, according to Hongkong media reports, SMIC and Singapore combined technology (UTAC) recently announced that the two sides will invest $100 million in Chengdu to build a joint venture factory, provide chip testing, assembly and packaging services for customers. However, industry analysts believe that, due to the intense competition in the chip packaging market, SMIC's new plant prospects worrying. SMIC will invest $51 million in the joint venture to occupy 51% of the shares. United Technologies will invest $30 million, financial investors and corporate employees will hold the remaining 19% stake. SMIC CEO Zhang Rujing in Singapore, said: "the initial profits generated by the Chengdu plant will be mainly used for equipment investment." Chengdu joint venture plant will be put into mass production in the fourth quarter of this year, is expected to be profitable next year, sales in 2007 reached $300 million.

SMIC has two consecutive quarters of losses, the company has been trying to get rid of dependence on a single chip foundry business. In the first quarter of this year, SMIC sales of $248 million 800 thousand, down 14.7% from the previous quarter, gross margin was only $3.4%, down sharply from the previous quarter of 20.3%. In fact, the whole chip foundry industry has been at a low ebb for a period of time.

ISuppli research firm predicts that this year the total revenue of the global chip foundry business will decline 6.2%, from $16 billion 950 million last year to $15 billion 900 million. ISuppli also predicted that this year the growth rate of the global chip business will exceed the OEM market, which is the first time in the history of the industry. Gartner predicts that last year, the global chip testing and packaging services revenue of $13 billion 700 million, this year will grow by 11% to $12%.

SMIC is not only a hope from outside the foundry business to find new revenue sources of chip manufacturers. Said the world's largest chip foundry TSMC's day before, because the OEM market competition is becoming increasingly fierce, the company is considering to carry out circuit design and packaging operations. However, the Merrill Lynch bank research department director of Asia Pacific chip Dan Heller (Dan Heyler) believes that the core international invest and build factories in Chengdu is not with the performance of the company, and is mainly in order to create a "back in China food chain."."

Heller also said that SMIC Chengdu joint venture to win business is not easy. He said: at present, there are a lot of manufacturers in China to carry out chip testing and packaging business, has taken over most of the market share." A Hongkong analyst also believes that the chip packaging market competition has reached a white hot, many manufacturers are not profitable. "There is nothing special about SMIC's joint venture in Chengdu," he said."

Source: Sina Technology