China’s largest contract chipmaker, Semiconductor Manufacturing International Corp (SMIC), is taking a decisive step to tighten its grip on a key manufacturing arm as Beijing pushes for deeper self-reliance in semiconductors amid sustained U.S. technology curbs.
SMIC said on Monday it plans to acquire the remaining 49% stake in its subsidiary SMIC Ningbo (SMNC) for 40.6 billion yuan ($5.79 billion), a move that will give the Hong Kong- and Shanghai-listed foundry full ownership of the unit. The transaction will be settled through the issuance of about 547.2 million A-shares to five existing SMNC shareholders, including the powerful China National Integrated Circuit Industry Investment Fund, widely known as the “Big Fund.”
SMNC is a strategic asset within SMIC’s manufacturing network, focusing on 12-inch wafer fabrication across a range of process technologies. These larger wafers are the industry standard for more advanced and cost-efficient chip production, making the unit central to SMIC’s medium- and long-term capacity expansion plans. In its filing to the Shanghai Stock Exchange, SMIC said the acquisition would improve asset quality, streamline governance, and strengthen support for its long-term development strategy.
The deal also fits squarely into China’s broader industrial policy goals. By consolidating ownership of critical fabs, SMIC reduces internal complexity and gains greater operational flexibility at a time when access to foreign equipment and advanced manufacturing tools remains constrained by U.S. and allied export controls. Full control of SMNC could make it easier for SMIC to coordinate capital spending, technology deployment, and customer allocation without minority shareholder considerations.
The involvement of the state-backed Big Fund is notable. While the fund has been a cornerstone investor across China’s semiconductor ecosystem, its gradual exit from certain holdings has been interpreted by analysts as part of a portfolio rebalancing, rather than a retreat from the sector. The share-based structure of the deal also allows SMIC to preserve cash, which remains critical as chipmaking requires sustained, capital-intensive investment.
In a separate regulatory filing, SMIC said changes in another subsidiary, SMSC, will significantly lift its financial firepower. Exiting shareholders and new investors will raise SMSC’s registered capital to $10.1 billion from $6.5 billion, underscoring continued investor and policy support for domestic chip manufacturing projects, even as profitability across the global foundry industry remains uneven.
The consolidation push comes as SMIC continues to benefit from strong domestic demand. The company reported a 9.7% increase in third-quarter revenue from a year earlier to $2.38 billion, driven largely by Chinese customers seeking local alternatives to foreign chip suppliers. Profit rose 28.9% to $191.75 million, comfortably beating analysts’ expectations, according to LSEG data.
That performance highlights a growing divergence in the global semiconductor market. While many international foundries are grappling with inventory corrections and softer consumer electronics demand, SMIC has been buoyed by localization efforts across China’s automotive, industrial, and consumer sectors. Still, margins remain under pressure due to higher depreciation costs and ongoing investment in capacity that may not immediately translate into high-end output.
Taken together, the SMNC acquisition and the capital expansion at SMSC point to a clear strategy: deepen control over core assets, align more closely with state-backed investors, and reinforce SMIC’s role as the backbone of China’s chipmaking ambitions. The company appears to be betting that scale, consolidation, and domestic demand will help offset the technological barriers it still faces as geopolitical tensions continue to shape the semiconductor industry.
