Friday, November 14, 2008

State Looms Larger on SMIC's Board

The announcement that SMIC has sold 17 percent of the firm to state-owned Datang Telecom is very disturbing once one considers that Datang will have two seats on the nine-person board of directors. Currently there are eight members of the board, and three of them can be deemed linked to the Chinese state. Two of them, Zheng-Gang Wang and Jiang-Shang Zhou, are clearly representatives of the Shanghai municipal government. The third, Yang-Yuan Wang, is the head of the Institute of Microelectronics at BeiDa so he is less of a direct link to the government. What remains unclear is which board member will be replaced by a Datang representative. If one of the other directors other than the three above is replaced, that would mean four or five (if Yang-Yuan Wang is counted as linked to the state) of the nine person board were linked to the Chinese state. Given how poorly performing the state-owned firms in China's IC sector are, effective state control does not bode well for SMIC.

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