now we know why smic is moving so slow. the bosses want to make a tiny profit... those mothafukas.. smic is state-owned company with full government support, why do they even care about profit? they got their priority all wrong. fire em all
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Co-chiefs of China’s top chipmaker SMIC fighting over strategy
Pair battle over whether to pursue profits or state demands for cutting-edge technology
The co-chief executives of China’s largest chipmaker are fighting over whether to build a profitable business or focus on leading-edge technology, highlighting the problems plaguing the government’s push to build an indigenous semiconductor manufacturing sector.
Zhao Haijun, co-CEO of Semiconductor Manufacturing International Corporation, is considering leaving the company because Beijing policymakers are prioritising the work of co-CEO Liang Mong-song to develop more advanced chip production at 14-nanometre resolution (14 billionths of a metre) and smaller.
This is taking priority over Mr Zhao’s own efforts to expand commercially viable operations using older generations of process technology, according to seven people familiar with the situation.
Scores of executives are being replaced to align management more closely with Mr Liang’s goals, the people said.
The upheaval indicates that in China’s current programme for creating a domestic chip manufacturing base, state diktat is gaining the upper hand over commercial objectives.
In 2015, Beijing launched its seventh large-scale plan for developing an integrated circuits industry since the 1950s with the intention of relying on private equity and industry experts, diverging from past approaches that were dominated by state instructions and subsidies.
But analysts said things were slipping back to China’s traditional approach of state instructions and subsidies. “In the second phase of this plan there has been a lot of government money. In China if there’s no government money, people will not join,” said Roger Sheng, an analyst at Gartner. “A lot of government people have been put in charge of these companies recently.”
The fallback to traditional tactics comes as China’s semiconductor manufacturers show no sign of catching up to global leaders in making advanced chips. While SMIC has yet to start 14nm mass production, South Korea’s Samsung was already producing to that standard in 2014.
The problems have been exacerbated by the US government’s attempts to slow China in its pursuit of technological power.
A person close to Mr Zhao said he wanted to leave because the government’s focus on pushing leading-edge technology had made Mr Liang irreplaceable while Mr Zhao was seen as expendable.
An executive who left SMIC recently said entire teams of managers were being pushed out as Mr Liang had been given a free hand to hire people focused on leading-edge technology development. “There is a big purge under way right now,” said a senior executive at a supplier to SMIC. “Zhao and Liang have been fighting for a while, and Liang is winning.”
Mr Liang, a former research and development chief at Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, joined SMIC in 2017 after a stint at rival Samsung.
Another person with inside knowledge of SMIC said: “The goal under the government plan is that China must achieve 14nm by 2020. Liang is working on that and has actually made progress a lot faster than expected, so the government is fully backing him.”
SMIC did not comment on the situation in detail. But a company spokesperson said: “The rumours are untrue.”
SMIC’s revenue in the first quarter decreased by 19.5 per cent compared with the same period last year to $668.9m, and net profit dropped by 58.2 per cent to $12.3m year-on-year, although the company reversed a fourth-quarter loss. The company reported a gross margin of 18.2 per cent, missing its target of 20-22 per cent.
The company said the gross margin would remain between 18 and 20 per cent for the full year — less than half the level of TSMC.
In a call with investors on Thursday, Mr Zhao said he intended to continue making SMIC’s operations more efficient, cost-effective and competitive, adding that the company had grown strong in speciality chips with “a solid customer base and reasonable demand”.
Analysts said SMIC had managed to gain customers with more mature technology but would struggle to increase profitability.
“They have made a lot of progress on 14nm but it will be very hard to commercialise that because those customers that use 14nm would rather use TSMC,” said an industry expert.
Code:
https://www.ft.com/content/994bca54-7212-11e9-bf5c-6eeb837566c5