Semiconductor Manufacturing International Corporation (SMIC) has obtained the final regulatory approval to acquire the remaining 49% stake in Semiconductor Manufacturing North China (SMNC), marking a significant milestone in China’s semiconductor sector consolidation.
- SMIC to issue 547.2 million shares to acquire SMNC stake
- Deal valued at 40.6 billion yuan (approx. $6 billion)
- Transaction expected to boost SMIC’s earnings and capacity
What happened
The deal values the stake at roughly 40.6 billion yuan ($5.97 billion), making it one of the largest merger transactions on Shanghai’s Star Market. Upon completion, SMNC will be fully owned by SMIC, which already holds a 51% controlling interest. SMNC focuses on 12-inch wafer foundry services and operates as a key manufacturing base for SMIC's larger chip production ambitions.
Why it matters
This acquisition consolidates SMIC’s control over its key manufacturing subsidiary, enhancing operational integration and unlocking potential earnings improvements. SMIC forecasts that the transaction will raise its net profit and earnings per share, as evidenced by a pro forma EPS increase from 0.49 to 0.55 yuan during early 2025 had the deal been completed then. This financial uplift comes without disrupting SMIC’s core foundry business, which continues to benefit from strong demand across mature semiconductor nodes.
The move reflects China’s strategic emphasis on securing domestic chip production capabilities amid global supply constraints and competitive pressures. SMIC’s recent financial performance supports this strategy, with a first-quarter revenue increase of 11.5% year-over-year and wafer utilization rates exceeding 93%. Rising AI-driven demand is intensifying shortages in mature-node capacity, further positioning SMIC as a pivotal supplier within China's semiconductor ecosystem.
What to watch next
Market participants and industry watchers will closely monitor the integration process of SMNC into SMIC and how effectively the company drives scale and efficiency gains from the acquisition. The transaction’s one-year lock-up period for sellers also means that significant share movements could influence stock dynamics in the medium term.
Looking ahead, SMIC projects robust revenue growth between 14% to 16% in the upcoming quarter with sustained gross margins around 20-22%. Observers will be watching how SMIC leverages the increased capacity to meet surging mature-node chip demand driven by AI and other high-growth consumer electronics sectors, as well as how geopolitical factors influence its business environment.