China’s top chipmaker just lost a quarter of its board overnight

Semiconductor Manufacturing International Corporation (SMIC) announced a wave of resignations in stock exchange presentations Thursday afternoon. Up to four directors resigned with immediate effect, including Vice President Chiang Shang-yi, who had joined the company just a year ago from Taiwanese chipmaking giant TSMC.
The news further clouds the outlook for SMIC, which has been trying to move forward after being blacklisted by the United States last year. The former president of the company, Zhou Zixue, also Low in September for personal health reasons.
SMIC has also received a regulatory warning from the Shanghai Stock Exchange, which disclosed On Thursday his supervisory body had sent SMIC a letter of “supervision”. The exchange did not elaborate on what that message entailed, nor did it provide a reason behind it.

The announcements shook investors: The company’s shares fell about 4% in both Shanghai and Hong Kong on Friday.

The board now has 11 directors. Among those leaving is Liang Mong Song, current co-CEO of SMIC. The company said that Liang plans to remain in the executive position and that his resignation as director was to focus more on his high-level duties.

Chiang, on the other hand, has expressed a desire to spend more time with his family, according to the company. Gao Yonggang, SMIC’s interim president and chief financial officer, said on Friday that Chiang will remain an advisor.

The remaining two directors said in a regulatory filing that they had had no disagreements with the board and that they were leaving to spend more time on other work commitments.

In a call with analysts on Friday, Gao said the exits “would not have any material impact on the company’s operations.”

He also said the company had no plans in the near future to add more directors, noting that its current board size was similar to “other companies in the industry.”

SMIC reported strong earnings Thursday, with revenue increasing over 30% year-over-year to $ 1.4 billion in the quarter ending September.

A challenging year

SMIC, China’s largest chipmaker, has faced leadership tensions before.

Last year, the firm spooked investors by revealing that it was trying to confirm Chinese state media reports that Liang had resigned, apparently in protest of Chiang’s appointment to the board.

Liang had reportedly said at the time that he was concerned about the appointment of Chiang, the former deputy chief operating officer of Taiwanese chipmaker TSMC.

Since then, both executives had stayed, until now.

Chaos on top of China's largest chipmaker

But the company has also recently faced a series of public setbacks, including threats from the United States to its business by trying to play a pivotal role in China’s mission to become more self-sufficient in semiconductors.

Last year, the US Department of Defense added SMIC to a list of companies that the agency said were owned or controlled by the Chinese military, a decision that meant that SMIC would be subject to restrictions such as impossibility to accept US investments.

SMIC said at the time that its inclusion on the list “would not have a major impact” on its operations and that it had no relationship with the Chinese military.

The company’s problems were later compounded by a separate decision by the US Department of Commerce to add it to the entity list, which limits SMIC’s ability to acquire certain US technology by imposing more requirements on US exporters. The US agency cited national security concerns.
America strikes the heart of China's bid to become a tech superpower
SMIC came into the crosshairs of the US government as tensions between Washington and Beijing escalated on several fronts, including the future of technology.

Cutting-edge chip technology is at the heart of that. Much of China’s chipset supply has historically come from foreign companies, powering everything from Chinese smartphones and computers to telecommunications equipment.

Beijing is committed to improving its chip-making technology. SMIC, whose main shareholders are state-owned companies, said last year that it wanted to invest in technology and catch up with its global competitors.

The company did not immediately respond to a request for additional comment.

But “since the United States placed SMIC on a list of entities … the company has faced tremendous challenges in production and operations,” Gao told analysts on Friday.

“The year 2021 is not just any year,” he added.

CNN’s Beijing office contributed to this report.

Reference-www.cnn.com

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