chip.gifPractising what Beijing has long preached, Chinese chip company SMIC is to build a fab in central China, its first located away from the coast.

The
facility, near Wuhan, will also be the first fab in central China
capable of producing 300-mm inch wafers, meaning it is capable of
competing with Asian and western giants in mass production of chips.

Construction
of the fab will not start until next year and it won't be producing
silicon wafers until 2008, which presumably gives SMIC enough time to
entice engineers to Wuhan and ensure the the infrastructure is up to
scratch.

The facility is being built in the Wuhan East Lake High-Tech Development Zone, a new hi-tech “cluster” that is designed to reduce Wuhan's dependence on traditional industries like metal-bashing.

Wuhan's
other two development zones are better known to westerners. One focuses
on automotive and Dongfeng Citroen, the French carmaker's Chinese JV,
has a big plant there, as does Honda. The other is for food
manufacturing and another French company, Danone, is an investor.

I
have not been to the area, so I'm not sure how much of Wuhan's rebirth
as a hi-tech city is wishful thinking and how much is for real.

A previous attempt to leverage local research strengths in optoelectronics by rebranding Wuhan as the “Optics Valley of China
appears to have been quietly shelved – optical networking no longer
being the investment magnet it was in in the internet boom.

While
China is home to a growing number of domestic chip companies — with
fabs or fabless — they tend to be located in the big coastal cities.
SMIC has a 300-mm fab in Beijing and plans to build another plant in
Shanghai. It also has fabs in Shanghai and Tianjin producing smaller
200-mm wafers.

China's central government is trying to encourage more development to China's inland provinces
and away from the overheating coast. But how do you create the
much-vaunted hi-tech cluster effect in an inland city best known for
food processors and car plants?

Wuhan's answer is to make a chip company an offer it can hardly refuse: a free fab. According to the Electronic Times, SMIC will manage the facility while an investment company associated with Wuhan's local authorities will pick up the tab:

Although
it is quite usual for local authorities to subsidise wafer fab
construction, SMIC has apparently pulled off the neat trick of getting
the local politicians to pay for the wafer fab entirely.”

The
paper says the cost of such a facility ranges from $1bn to $5bn. I
wonder whether Wuhan's politicians would be quite so generous with a
western chip company.

SMIC is best-known to western electronics
firms as a foundry firm, meaning it manufactures chips to
customer-supplied designs. But just like the rest of China's
manufacturing industry, it is now trying to move up the value chain
and, according to the Electronic Times, this year it will start manufacturing its own flash memory chips.

More on Wuhan's attractions for western businesses in this article from the EU's Chamber of Commerce in China.

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