Chipmaker ensures capacity in deal extension

Semiconductor Manufacturing International Corp is to pay US$1.2 billion to extend a deal with ASML Holding NV for equipment purchases, which will ensure the Chinese mainland’s biggest chipmaker’s production capacity.

Netherland-based ASML is the world’s largest supplier of the photolithography devices, which are needed by wafer plants to make chips.

The deal helps SMIC, which is still facing US tech ban, solve a potential capacity problem and is expected to relieve a chip shortage in the domestic market, analysts said.

In a filing to the stock exchanges, SMIC disclosed it had entered into a volume purchase agreement with ASML Shanghai on February 1, a one-year extension to the original term that was valid to December 31 last year. The deal includes a US$1.2 billion purchase for ASML machines used in producing wafers, SMIC said. 

The deal means SMIC is capable of making chips with “mature technology” of up to 14-nanometer processing which can be used in automobiles, computers and some smartphones . 

Devices with advanced processing technology such as 7-nanometer are still facing a US tech ban. Such imports still need US licenses, industry officials and analysts said.

SMIC shares gained in the Shanghai and Hong Kong markets.

STAR-listed SMIC rose 1.09 percent to close at 59.31 yuan (US$9.26), compared with a 2.09 percent decrease of the STAR 50 Index.

SMIC said it would continue to work with global supply chain partners to make sure it can continue to manufacture products. It said its capacity expansion plan remains uncertain in the long term.