Beijing-based Datang Telecom Technology & Industry Holdings Co is to invest US$172 million in the No. 1 made-to-order chip maker in the Chinese mainland to become the biggest single shareholder of Shanghai-based Semiconductor Manufacturing International Corp (SMIC).

The investment will help the money-losing SMIC continue to expand, especially in China's 3G technology, despite the current financial crisis, according to industry insiders.

Datang Holdings, parent of home-grown 3G technology developer Datang Mobile, will take a 16.6-percent stake in SMIC. Datang Holdings will acquire 3.69 billion new SMIC common shares at HK$0.36 (5 US cents) per share, 137 percent higher than SMIC's closing price before trade was suspended last week.

Hong Kong-listed SMIC jumped 29 percent to close at HK$0.20 yesterday, compared to a decrease of 4.77 percent of the Hang Seng Index.

"It's significant to SMIC as the semiconductor industry is always a capital-intensive industry," said Li Ke, an analyst at Beijing CCID Consulting. "The industry will slow down the growth pace and the firm with enough capital will survive through the winter."

More importantly, state-owned Datang will bring SMIC the market for 3G chips and government support, said Li.

In the third quarter, SMIC lost US$30.3 million compared with a loss of US$25.6 million a year ago.

The deal still needs the approval from the relevant government authorities, the companies said.

(Shanghai Daily November 12, 2008)