The Semiconductor Manufacturing International Corporation (SMIC) has secured final regulatory approval for its $6.4 billion acquisition of Semiconductor Manufacturing North China (SMNC). This deal is a landmark event in China's semiconductor sector, likely marking the largest transaction on the STAR Market, the Shanghai exchange dedicated to science and technology stocks.
Under the terms of the acquisition, SMIC will take an additional 49% stake in SMNC, a foundry established in 2013 that specializes in 12-inch wafer production and serves as SMIC's primary manufacturing site in Beijing. With SMIC already owning a 51% stake, this agreement will make SMNC a wholly owned subsidiary of SMIC. The company aims to enhance its operational capabilities while maintaining its core business.
Financially, SMIC plans to issue approximately 547.2 million shares at 74.2 yuan (about $16) each to a group of five institutional investors, including the National Integrated Circuit Industry Investment Fund, known as the Big Fund. These investors will face a one-year lock-up period on selling their shares, which aligns with SMIC's long-term growth strategy. The total investment for the 49% stake is set at 40.6 billion yuan (around $6.4 billion).
SMIC expects this acquisition to increase its net profit and boost its earnings per share, projecting a rise from 0.49 yuan to 0.55 yuan after the deal closes. This move comes as the Chinese government pushes for greater self-sufficiency in semiconductor production, a goal that gains urgency amid the global surge in demand for artificial intelligence technologies and a semiconductor super cycle.
In its latest financial disclosures, SMIC reported an 11.5% year-on-year revenue increase in the first quarter, reaching $2.51 billion (approximately $3.8 trillion won). The company also noted a wafer utilization rate of 93.1%, reflecting strong demand from global clients during a continued supply shortage of mature-process chips. Looking ahead, SMIC projects revenue growth of 14% to 16% for the second quarter, underscoring its confidence in the ongoing semiconductor boom.
As SMIC advances its plans, the ramifications of this acquisition extend beyond immediate financial gains. It represents a strategic move in a competitive industry increasingly shaped by the rise of AI technologies. By consolidating its manufacturing capabilities, SMIC is not only preparing to meet domestic needs but also positioning itself to capitalize on the expanding global market for semiconductors critical to AI applications. This acquisition could pave the way for further consolidation in the industry as companies adapt to government policies and evolving technological demands.
