SMIC recently announced that it will acquire the remaining 49% stake in its subsidiary, SMIC Northern Integrated Circuit Manufacturing (Beijing) Co., Ltd., through a share issuance, for a consideration of RMB 40.601 billion.

This move will transform SMIC Northern from a subsidiary to a wholly-owned subsidiary of SMIC, marking a key step forward for the company in integrating mature process technology capacity and optimizing its governance structure.

As a crucial production base for SMIC in Beijing, SMIC Northern has long been responsible for wafer foundry services at 28nm and more mature process nodes, serving as a core force supporting chip supply in key areas such as automotive electronics, industrial control, and power management in China. Previously, although SMIC held a 51% controlling stake, it still needed to coordinate the opinions of the other five state-owned shareholders on major investment decisions or technology route adjustments. Following this acquisition and the achievement of 100% control, the company is expected to improve operational efficiency, accelerate capacity allocation response, and more flexibly meet the needs of domestic customers amidst the accelerating trend of domestic substitution.

The transaction will be conducted through a pure share payment method, issuing new shares at a price of RMB 74.2 per share to existing minority shareholders, including the National Integrated Circuit Industry Investment Fund (“Big Fund I”), Beijing Yizhuang International Investment, and Zhongguancun Development Group. It is worth noting that after the transaction, the National Big Fund and its affiliates will hold a combined 8.66% stake, becoming a significant shareholder with over 5% ownership, but this will not change the company's governance status of having "no controlling shareholder and no actual controller."

From a valuation perspective, SMIC North's net assets as of the end of 2024 were approximately RMB 40.757 billion. The overall valuation of this transaction reaches RMB 82.859 billion, representing a premium of nearly 98%. Although some market voices have expressed concerns about the pricing being too high, considering its stable profitability (net profit of RMB 1.682 billion in 2024) and its irreplaceable role in the domestic supply chain, this valuation is generally considered a balanced result achieved within a reasonable range. Alongside this integration, SMIC is also simultaneously increasing its capital investment in another important subsidiary, SMIC South, further optimizing the group's internal capital structure. These actions reflect the company's focus on consolidating and expanding its mature process ecosystem under the constraints of limited advanced process technology, aiming to build a more resilient domestic semiconductor manufacturing system.

The capital market reacted with mixed reactions. On the day trading resumed after the announcement, the stock price fell by more than 10%, indicating investors' caution regarding short-term dilution effects and industry cyclical fluctuations. However, in the long run, most analysts believe that this full acquisition not only strengthens SMIC's control over its core assets but also clears institutional obstacles for subsequent technology upgrades and capacity expansion, aligning with the national direction of promoting self-reliance and control over the industrial chain.

In the current evolving global semiconductor landscape, SMIC's move is both an inevitable choice for the company's own development and a microcosm of the deep integration and endogenous growth of China's semiconductor industry. In the future, how to improve governance efficiency while maintaining technological iteration capabilities will be key to evaluating the effectiveness of this integration.