China-based Semiconductor Manufacturing International Corp (SMIC) agreed to partner with the Shanghai government to build an $8.9 billion chip factory in a free trade zone in the city, to boost capacity and keep up with demand.

The company agreed to establish a joint venture with the Lingang Free Trade Zone Administration, committing to invest at least 51 per cent of the required capital with the Shanghai government contributing up 25 per cent. The organisations plan to seek additional investors to commit the remaining capital.

SMIC’s factory will have a production capacity of 100,000 12-inch wafers per month, and focus on manufacturing ICs using 28nm node technology and above.

The company operates fabrication facilities in Shanghai, Beijing, Tianjin and Shenzhen.

In its Q2 earnings statement, SMIC explained a capacity expansion is progressing as planned, but noted “uncontrollable factors such as licence approvals, supply chain tightness and logistics impacted by the epidemic have also inevitably affected the equipment arrival times”.

It added despite facing the impact of US sanctions imposed in 2020, it expects 2021 revenue to increase 30 per cent.

During Q2, the Shanghai-headquartered chipmaker’s net profit attributable to shareholders increased fourfold year-on-year to $687.8 million, while revenue grew 43.2 per cent to $1.3 billion.

SMIC’s chairman Zhou Zixue resigned on 3 September citing personal health reasons, with CFO Gao Yonggang named acting chairman.