[News] SMIC Announced Two Massive Capital Investment

SMIC to Buy the Remaining 49% Shares of SMIC North and to Bring in New Investors

On December 29, Semiconductor Manufacturing International Corporation (SMIC) released an announcement widely seen as a textbook case of balance-sheet management. By buying profits and introducing state capital in lockstep, the company deftly balanced short-term earnings pressure with long-term R&D investment needs.

According to the announcement, SMIC plans to acquire the remaining 49% equity interest in Semiconductor Manufacturing North China (SMIC North) currently held by Big Fund Phase I and the Beijing Integrated Circuit Fund, among others, through a share issuance. The transaction is approximately CNY 40.6 billion and upon completion, SMIC North will become a wholly owned subsidiary of SMIC. SMIC North is one of the fabs within the SMIC system, primarily operating 12-inch mature-node (28nm–65nm).

Wafer fabs are a typically capital-intensive business, with equipment depreciation often accounting for more than 50% of production costs. SMIC North’s Phase I production lines were put into operation between 2013 and 2014, while Phase II lines came online gradually after 2016. Under the industry’s standard 5–7 year depreciation policy, a large part of SMIC North’s expensive stepper lithography and etching tools had been fully depreciated by 2024–2025.

The end of the depreciation cycle translates into a cliff-like drop in production costs and an explosive increase in marginal profits. Previously, SMIC held only a 51% stake in SMIC North, meaning nearly half of the “depreciation dividend” flowed to minority shareholders.

After the acquisition, 100% of SMIC North’s net profit will be attributable to the listed parent company’s shareholders. Financial reports show that SMIC North recorded revenue of around CNY 11.576 billion in 2023, rising to CNY 12.979 billion in 2024, and achieved CNY 9.012 billion in revenue in the first eight months of 2025, remaining solid growth momentum. Notably, net profit growth has far outpaced revenue growth: net profit reached CNY 585 million in 2023 and surged to CNY 1.682 billion in 2024, nearly tripling year-on-year.

This growing trend became even more pronounced in 2025. In the first eight months alone, net profit reached CNY 1.544 billion, already approaching the full-year 2024 level. With depreciation continuing to dilute, annual net profit is expected to exceed CNY 3–4 billion over the next three years.

Industry analysts note that for a group currently ramping capacity at new fabs such as SMIC Beijing and SMIC Oriental—and facing substantial depreciation pressure—full control of SMIC North indeed allows SMIC to use the strong cash flow released by outmoded lines to offset investment gaps during new fab construction, thereby smoothing earnings volatility at the group level.

SMIC Gains Big Fund Phase III, State Bank Support

On the same day, SMIC also announced the introduction of Big Fund Phase III alongside six major state-owned banks—ICBC, ABC, BOC, CCB, Bank of Communications, and Postal Savings Bank of China. The capital increase is sizable, totaling USD 7.778 billion, of which USD 3.577 billion will be recorded as registered capital and USD 4.2 billion as capital reserves.

SMIC South is the operating entity for SMIC’s 14nm FinFET and below advanced technologies. Under the current international environment, capacity expansion at 14nm and below faces stringent equipment constraints, resulting in long-term supply lagging demand. The capital injection will be primarily used for technology breakthroughs and the challenging expansion of capacity under constrained conditions.

(Photo credit: SMIC)