SMIC: Good news, bad news

It is good news for SMIC's fabs that Simon Yang is back at SMIC as COO, which SMIC announced on February 9. Unfortunately, the board now is completely controlled by directors linked to the government, which was not the case as recently as a year ago. This situation cannot be good for the firm's governance and replicates the situation David N. K. Wang had with the heavy hand of the government when he was CEO of what the government originally promised would be a new improved "market-oriented" Hua Hong. The brand new Year of Tiger (though technically still Feb. 13 i.e. 除夕 here in London) will certainly be a fearsome challenge for SMIC's management.

Today on Beyond Beijing

I appeared on the radio program, Today on Beyond Beijing, with Professor Denis F. Simon to discuss innovation in China on Wednesday morning Beijing time.

The audio file link is here.

AMEC's settlement with Applied Materials

AMEC has reached an out-of-court settlement with Applied over patent infringement (link). While the amount of money AMEC has agreed to paid Applied has not been disclosed, I am tempted to think that this is a victory for AMEC i.e. they remain in business. China clearly is trying to promote its semiconductor capital equipment sector along with its semiconductor fabrication and AMEC is one of the most promising firms in China's semiconductor capital equipment sector. While Taiwan's attempts to leverage its large investment in semiconductor fabrication to enter the capital equipment sector (including lots of pressure on Applied according to insiders I've talked to) failed, China given its scale may be more successful. Of course, China's tendency to botch its industrial policy may work against realizing these dreams, but one day we might look back at this settlement as the beginning of the rise of China's semiconductor capital equipment industry.

Taiwan's other FTAs nixed

It appeared yesterday that Wang Yi from the PRC's Taiwan Affairs Office had signalled a major breakthrough in stating that China would not stand in the way of Taiwan signing FTAs with other regional economies. Unfortunately, today the Taiwan Affairs Office clarified that Wang had been misquoted (link). China clearly still wants an ECFA between Taiwan and itself before it will sanction Taiwan pursuing trade agreements with other regional economies. Of course, this ECFA looks less and less likely to happen given the push back from Taiwan's electorate.

Same Old Story on Chinese State Procurement

The petition earlier this month by an assortment of business associations from North America, Asia and Europe protesting the not actively circulated circular (Notice No. 618) issued jointly by China's Ministry of Finance, Ministry of Science and Technology and the National Development and Reform Commission (link here) is just howling at the moon. This notice just lays out formally one more way that China tries to steer procurement towards domestic companies. And there is not much foreign companies and countries can do as China is not a signatory to the WTO's Agreement on Government Procurement. But since China's state procurement from foreign companies was quite small to begin with, there may not be much for foreign firms to worry about. China has used procurement as one of many industrial policy tools to try to promote local technology. The recent announcement by MIIT setting inter-network fees for TD-SCDMA (the "indigenous" mobile technology) subscribers at half the rate for subscribers using other technologies just goes to show how anxious China is to think up news ways to promote domestic firms and technology and continue old ones like procurement.

End of Taiwan Memory?

Taiwan's Legislative Yuan (the national legislative assembly) has cut off further support for Taiwan Innovation Memory Corporation (formerly Taiwan Memory Corporation). However, the Ministry of Economic Affairs (MoEA) does not seem to be completely giving up on this project since the cut-off applies to funding for next year. As the prices look better than they did in the recent past, the MoEA may find it very hard to pursue its plan of gobbling up failing memory makers on the cheap, without or without new funds from the legislature.

Richard Chang's Exit: Quick Note

Rumors are flying fast around Richard Chang's departure from SMIC. Some claim that Chang's departure was required by TSMc as part of the deal to end TSMC's lawsuit against SMIC. Others speculate that bringing in David NK Wang means that SMIC will merge with another firm. Would that firm be HuaHong? I'll be back more with more in a few days after reading all the tea leaves.