SMIC announces management overhaul

China’s largest contract chipmaker by capacity, announced sweeping management and strategy changes and said it was negotiating a fresh capital injection following a widening loss last quarter.

The company “confirms that it is currently in negotiations with an investor in respect of a proposed investment in the company”, SMIC said.

Mr Wang was installed in November to replace Richard Chang, the company’s founder and long-time CEO, after SMIC settled a long-running legal battle with Taiwan Semiconductor Manufacturing (TSMC) by agreeing to pay the market leader $200m and give the Taiwanese company a stake of up to 10 per cent in SMIC.

The settlement widened SMIC’s loss to $482.3m in the fourth quarter from $139.5m in the same period a year earlier despite a 20 per cent rise in revenue to $333.1m.

Together with the results, SMIC announced that Simon Yang would take over as chief operating officer; and chief technology officer Gary Tseng as chief financial officer; and Chris Chi as chief business officer.

Mr Yang comes from Chartered Semiconductor, SMIC’s larger rival. Mr Tseng worked at China Solar Corporation with Mr Wang before and was at Quanta Computer, UMC, the world’s second-largest contract chipmaker, and Philips Taiwan.

Mr Chi is a former consultant and has also extensive experience at other contract chipmakers including UMC and Chartered.

In his first conference call with analysts, Mr Yang said he wanted to make SMIC more efficient and put it on track to sustainable profitability.

“Our first priority is to reduce cost,” he said, pointing to the fact that TSMC’s revenues were eight times that of SMIC with double its headcount, and UMC was achieving three times SMIC’s revenues with the same workforce.

“Since I joined, we have made it a priority to improve our cycle time,” Mr Wang said.

SMIC has struggled since the company opted to build decentralised “fabs” – facilities for contract chipmaking – on the back of government incentives. This footprint has made it more difficult to build fast, smooth production processes unlike its competitors who typically build clusters of fabs in one place.

For Friday's closed - SMIC's ADR was traded higher too, so coming Mondsy SMIC will continue it's climb when HKex starts trading. Happy trading, cheers!