SMIC announces establishment of JV in Beijing

CHINA:  Semiconductor Manufacturing International Corp. has entered into the JV agreement with SMIC Beijing, BIDIMC and ZDG in relation to the establishment of the Joint Venture Company (subject to the approval of the relevant PRC authorities).

Following its establishment and depending on the environment in which the Joint Venture Company operates and market conditions, the Joint Venture Company is expected to establish and build up significant manufacturing capacity with a focus on 45-nanometer and finer technologies and aims to reach a manufacturing capacity of 35,000 wafers per month.

The total investment is estimated to be $3.59 billion. $1.2 billion of the total investment will be contributed by the parties in the form of registered capital, and the remaining amount is intended to be funded through the Joint Venture Company's internal cash flow, shareholders' further contribution to share capital, shareholders' loan and/or bank loans.

SMIC and SMIC Beijing shall contribute 55 percent of the registered capital in an aggregate amount of $660 million, ZDG and BIDIMC shall contribute 45 percent of the registered capital in an aggregate amount of $540 million. The registered capital shall be made by the parties within two years from the establishment of the Joint Venture Company.

Funding to the Joint Venture Company in the form of shareholders' further contribution to share capital or shareholders' loan, if any, will be contributed as to 55 percent by SMIC and SMIC Beijing, and as to 45 percent by ZDG and BIDIMC. In addition, the Joint Venture Company and the parties involved may seek debt financing on terms beneficial to the Joint Venture Company.

The progress of contributions by the parties to the Joint Venture Agreement may be adjusted by the Joint Venture Company in accordance with its actual operational needs. If a party does not fully make its relevant contribution by the timing required, until such contribution is fully made, the party may only enjoy its shareholder rights based on its proportional actual contribution.

Each of the parties may transfer its rights to subscribe to the share capital and contribution obligations under the Joint Venture Agreement to its affiliates, subject to certain conditions. The cash capital contribution from SMIC will be funded by internal cash flow and, if necessary, other form of financing.