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Chinese chipmaker SMIC inks deal worth USD 1.2 billion with ASML

Written by Wency Chen Published on     2 mins read

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The company could be a beneficiary of the global chip shortage due to growing demand.

China’s largest chip company Semiconductor Manufacturing International Corp (SMIC) in an official statement on Wednesday announced that it expanded its deal with Netherlands-based semiconductor-equipment maker ASML until the end of 2021, amid an ongoing global semiconductor shortage.

The initial agreement from 2018 expired at the end of last year. SMIC said that it has spent USD 1.2 billion with the toolmaker over a 12-month period from March 16, 2020. However, it didn’t reveal details such as volume or the product models of the purchase agreement.

According to ASML’s statement, the deal with SMIC relates to deep ultraviolet lithography (DUV), a technology that can produce chips down to the 7nm node. ASML is the sole supplier of extreme ultraviolet (EUV) lithographic technology, which is designed to make faster and more powerful microprocessors, but shipping these tools to China requires approval by the Dutch government, which reportedly hasn’t been granted, under pressure from the US. Meanwhile, SMIC’s Taiwanese counterpart, Taiwan Semiconductor Manufacturing Company (TSMC) is a major buyer of ASML’s EUV machines.

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SMIC is included in the US blacklist that requires American companies to obtain a license before exporting products to China, which has launched efforts to gain more self-reliance in the semiconductor sector. The country is developing its own EUV technology but isn’t expected to be able to produce the equipment any time soon.

For the fourth quarter of 2020, SMIC raked in USD 981.1 million in revenue, representing a 9.4% quarter-on-quarter (QoQ) drop and a 16.9% year-over-year (YoY) growth. The capacity utilization stood at 95% in the fourth quarter, while SMIC’s monthly production capacity rose to 520,750 8-inch equivalent wafers due to the capacity expansion in its Beijing 300mm fabrication plant.

In spite of the fact that its technology lags behind TSMC and Samsung, SMIC could be a beneficiary of the current worldwide chip shortage, which has affected the consumer electronics sector and the automobile industry, CNBC wrote, citing an analyst.

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