According to a report by the South China Morning Post, Beijing plans to invest 33 billion yuan (US$4.6 billion) in building a 12-inch wafer fabrication facility. The initiative, spearheaded by state-owned enterprises and funds, represents a significant step in China’s efforts to strengthen its domestic semiconductor production capabilities.

Key Players and Investments

The new facility will involve several leading firms, including Beijing Yandong Microelectronics (YDME), listed on Shanghai’s Star Market, and BOE Technology, China’s leading display manufacturer.

The report highlights that Yandong Microelectronics (YDME) announced on Saturday a 4.99 billion yuan investment into Beijing Electronics IC Manufacturing, a subsidiary of state-owned Beijing Electronics Holding overseeing the wafer fabrication project. This move secures YDME a controlling 24.95% stake in the venture through a concerted action agreement, as detailed in a corporate filing. Separately, BOE Technology revealed it would invest 2 billion yuan for a 10% stake in the project.

Other shareholders in the project include affiliates of Beijing Yizhuang Investment, Beijing State-owned Capital Operation and Management, and ZGC Group. Together, they will collectively invest 20 billion yuan, while the remaining funds will be raised through debt financing.

Closing the Semiconductor Gap

The South China Morning Post report also highlighted YDME’s projection that China’s domestic integrated circuit (IC) production rate will increase from 16.7% in 2021 to 21.2% by 2026. Despite this growth, a substantial supply-demand gap is expected for mature nodes—those with feature sizes of 28 nanometres or larger—with the new facility targeting a monthly production capacity of 370,000 wafers by 2027.

Currently, Beijing lags behind the Yangtze River Delta region, China’s semiconductor hub near Shanghai, in both manufacturing and back-end processes like packaging and testing. The project aims to address these shortcomings and solidify Beijing’s position in the semiconductor sector.

The South China Morning Post also noted growing concerns among Chinese chip design firms about potential restrictions from TSMC. By advancing its semiconductor capabilities, Beijing aims to reduce reliance on foreign suppliers and address geopolitical challenges in the tech supply chain.

(Photo credit: YDME)