Chinese Semiconductor Giant SMIC Seeks $28 Billion in Fresh Funding

China's largest chipmaker is pursuing a substantial funding round as it works to strengthen the nation's semiconductor independence amid ongoing technology tensions with Western countries.

According to four people familiar with the matter, Semiconductor Manufacturing International Corp (SMIC) is seeking to raise about 200 billion yuan ($27.6 billion) in new capital to expand its chip manufacturing capabilities.

Strategic Funding for National Tech Independence

The Shanghai-based company has been in discussions with local governments and state-backed funds about the potential investment. This massive capital raise would support SMIC's expansion plans as it continues its partnership with Chinese tech giant Huawei to develop advanced semiconductor technologies.

Two sources indicated that SMIC and Huawei have been working closely on chip development projects, with their collaboration intensifying after U.S. export controls limited Huawei's access to advanced chip technologies from global suppliers.

One source noted that the funding aims to support several new fabrication plants (fabs) for manufacturing advanced chips, including projects in Beijing, Shanghai and potentially other locations across China.

Government Support Amid Tech Competition

The Chinese government has made semiconductor self-sufficiency a national priority, particularly as technology competition with the United States has intensified. This funding effort reflects the strategic importance Beijing places on developing domestic chip manufacturing capabilities.

"The capital raise could be a mix of debt and equity, and they are still working out the details," said one source with direct knowledge of the matter, who requested anonymity due to the sensitivity of the issue.

SMIC, which currently operates multiple chip fabrication facilities across China, has emerged as a critical player in the country's push to reduce reliance on foreign semiconductor technologies. The company has been under U.S. trade restrictions since 2020, when it was added to a trade blacklist that limits its access to American equipment and technology.

Market Position and Technology Development

Despite facing significant challenges from Western export controls, SMIC has continued to advance its manufacturing capabilities. The company has reportedly helped Huawei produce 7-nanometer chips for its Mate 60 Pro smartphone, which surprised industry observers when it was released last year.

The funding round comes at a time when global semiconductor manufacturers are investing heavily in new production facilities. SMIC competitors like Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung Electronics have announced major expansion plans in recent years, often with government support.

Industry analysts suggest that while SMIC remains several generations behind the most advanced global chipmakers in terms of technology, the significant capital injection could help accelerate its technological progress and manufacturing scale.

Future Outlook and Challenges

The success of this funding effort will be closely watched by industry observers as an indicator of China's commitment to developing its domestic semiconductor ecosystem. However, technical challenges remain significant as the company attempts to advance its manufacturing processes without access to certain critical foreign technologies.

SMIC, Huawei, and China's State Council Information Office did not immediately respond to requests for comment about the funding plans.

The semiconductor industry has become increasingly geopolitical in recent years, with chips at the center of technology competition between major powers. As countries worldwide recognize the strategic importance of semiconductor manufacturing, government support for domestic chip production has increased globally.