Manufacturing capacity need drove SMIC’s LFoundry deal

Manufacturing capacity need drove SMIC’s LFoundry deal

Business news |
By Peter Clarke

China’s largest dedicated semiconductor foundry, said Friday (June 24) it had agreed to acquire a 70 percent stake in specialty foundry LFoundry SRL for €49 million (about $55 million).

In a webcast conference call with analysts to discuss the deal, SMIC executives indicated that it had moved to buy LFoundry as quick way to boost manufacturing capacity and meet immediate customer needs and to gain access to the automotive semiconductor market as LFoundry is qualified for automotive supply. It has promised to retain all the LFoundry management and workforce.

Tzu-Yin Chiu, CEO of SMIC, added that the company looked forward to being a contributing corporate citizen in Europe and that the company was not just buying capacity but also gaining access to semiconductor talent in Italy.

LFoundry has a manufacturing capacity of 40,000 8-inch wafer starts per month but has been running at 60 percent utilization providing scope for SMIC to install its 0.13-micron copper process. The executives said there is scope for expansion of the total manufacturing capacity at Avezanno without making a commitment to do so.

The executives said that it expected LFoundry’s Aptina business with On Semi to continue as LFoundry’s becomes a subsidiary of SMIC. “We are the optimistic the partnership will continue and expand,” said Tzu-Yin Chiu, CEO of SMIC.

One way SMIC could most quickly expand in Avezanno is buy performing back end metallization of wafers brought from China and then returned there for packaging.

The executives said SMIC is preparing for a thrust into industrial and automotive applications, which can provide superior margins to communications and consumer ICs, and that the acquisition of LFoundry would help SMIC increase its presence in the industrial and automotive markets both in Europe and in China.

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