SMIC attempts to upgrade technology

China's largest contract chip maker is the latest firm to report losses from the continuing fall in prices of DRam memory chips.

Semiconductor Manufacturing International Corporation (SMIC) suffered a net loss of $25.6m in the third quarter, which chief executive Richard Chang attributed to " ongoing severe price declines in the DRam market".

The company's DRam revenues were reduced to 23.6 per cent of total revenues, compared to 28.9 per cent in the second quarter of 2007.

"We expect revenues from DRam as a proportion of our total revenue to decrease in the next two quarters," Chang said.

SMIC's third-quarter revenue rose by 6.1 per cent year on year to $391.4m and by 4.4 per cent from $374.8m in 2Q07.

The company's production lines are now running at 94.1 per cent of capacity, compared to 84.3 per cent one year ago, Chang said.

Contract chip foundries such as SMIC do not generally sell chips under their own brand name. Instead they manufacture chips designed by other companies which lack their own production facilities.

They also offer a library of pre-designed modules, such as memories, that can be incorporated into clients' chip designs.

While SMIC lags behind foreign firms in its technical expertise, it is attempting to catch up by setting up a 65nm chip production line and upgrading other areas of production.

The company has inked a technology transfer deal with Spansion to boost its 65nm effort.

"Commercial production of 2Gb Nand Flash started in September 2007 and we are developing an 8Gb Nand Flash product," Chang added.