The Shanghai-based foundry SMIC (Semiconductor Manufacturing International Corp) will build its headquarters for South China in Shenzhen and invest $1.58 billion to build an IC R&D centre and two IC chip production lines.

The R&D and production base for the front process of IC will be built in phases and consist of an IC R&D centre and two production lines for 8-inch chips and 12-inch chips, respectively, according to a statement from the Shenzhen government.

The first-phase construction of the 8-inch production line will begin in the first half of this year and is slated to be completed at the end of 2009 with initial monthly output estimated at 30,000 to 50,000 chips.

The Shenzhen government gave little details on the 12-inch line, only saying that the line will mark the first time South China will have a production for ICs larger than 8 inches and that advanced technology will be introduced from IBM there.

In December 2007, SMIC announced that it had licensed 45-nm bulk CMOS process from IBM for use in its 300-mm wafer foundry services. Separate from the Shenzhen government, the company confirmed on its Q4 2007 conference call Tuesday that the IBM technology will be used for its 12-inch lines.

"In terms of operations, we are pleased to announce that SMIC plans to start a new IC production project in Shenzhen. In connection with this project, SMIC will register an independent legal entity, the Semiconductor Manufacturing International (Shenzhen) Corporation Ltd., which will set up an IC technology research and development centre, an 8-inch wafer production line and a 12-inch fab. The 12-inch fab will introduce advanced process technology licensed from IBM pursuant to the licensing agreement," SMIC CEO Richard Chang said.

Also in December, SMIC reported that it had begun production on its Fab 8, Shanghai's first 12-inch wafer fab. Construction of Fab 8 began in October 2005.

"SMIC's establishment of the IC chip production lines in Shenzhen will make Shenzhen ascend to the forefront of the development of the IC industry in China and play an extremely important role in optimising Shenzhen's industrial structure, improving the industrial chain and raising the development level of the electronic information industry. Meanwhile, the advantages and good foundations of Shenzhen's high-tech industries, especially the electronic information industry, will also provide much room for the development of this project," the Shenzhen government said.

According to the statement, Shenzhen is the largest whole machine production base and the largest IC market in China.

By Suzanne Deffree, Managing Editor, News - Electronic News

For more on SMIC's quarterly results, see "UMC, SMIC Q4 results reflect seasonal softness, DRAM price drops."