SMIC infighting: Datang Telecom and management control of the battle

SMIC (0981.HK) Chairman Jiang Shang Zhou’s death, set off a major shareholder of Datang Telecom and management control of the battle of the war.

Known as the “five years to help out even the loss of SMIC’s hero,” the CEO Dr. Wang was removed from the board of directors, is to increase shareholders and management of conflicts, fears, the benchmark for China’s domestic semiconductor industry representatives, will into the next wave of unrest.

Infighting

June 27, SMIC chairman of river boat sudden death, after the battle of SMIC into controlling the chaos.

June 29, SMIC’s shareholders’ meeting, due to opposition from major shareholder of Datang Telecom, the SMIC CEO Dr. Wang accidentally losing executive director, was removed from the board. July 2, SMIC emergency board meeting, photo courtesy of Dr. Wang to replace CEO, he served as executive director.

Dr. Wang is known as “SMIC out of the five years to help even the loss of the hero,” a number of surprising results.

But this is still not satisfied that several parties, after pushing Datang Telecom COO Yang Shining win, but was rejected. After one of the shareholders by the China Investment Co., Ltd. (“CIC”), director photo courtesy of the proposed new Executive Director. Photo courtesy of just a week before the selection board of directors, non-executive director, previously served as vice minister of the former Ministry of Electronics Industry, after Ren Huahong NEC chairman.

Datang Telecom uses the “harm the interests of shareholders,” refused to photo courtesy of the board, Datang Telecom believes that there SMIC and Hua Hong NEC competition. “As the largest shareholder, SMIC direct impact on the development of group interests.”

Datang Telecom is currently the SMIC “strategic investors”, in 2008, SMIC in exchange for a 16.6% stake in Datang Telecom U.S. $ 172 million investment in August 2010, Datang Telecom replenishment of $ 102 million, the proportion of equity holdings of 19.14% which has become the largest shareholder of SMIC. In early 2011, $ 250 million in investment, 11.6% stake held by SMIC. In addition, the Shanghai Industrial and TSMC shares accounted for 8.2% and 6.543%.

The industry believes that Datang International SMIC increase control over, is to turn it into a subsidiary to improve the status of the central enterprises. However, the river boats, and other management have stressed that SMIC do not want to be transformed into a strong sense of state-owned enterprises, because it can not determine the characteristics of the industry closed development.

SMIC insiders said Dr. Wang, after losing the board, shareholder representatives were asked to resign in disguise, but this was his refusal. Dr. Wang had been invited to host a boat on the river overall, last year, completed a turnaround of historic task.

Observers believe that Dr. Wang major shareholders want to leave, and the management team wants its left, the two sides of the contest will continue, and, if Dr. Wang left, SMIC will fall into the next wave of personnel turbulence.

Unrest

To Deadline, SMIC chairman of the board is still to be selected.

SMIC just after five consecutive years of losses, the first profitable. Reported in 2010, SMIC sales of $ 1,554,800,000, an increase of 45.3%. Net profit of $ 14 million for the first time full-year profit. The industry believes that, at the moment the outbreak of the battle for control, which would be involving the development of the company.

In 2000, Chang founded by Mr. $ 1 billion SMIC. In 2005, Yang Yuan replacing founder Richard Chang, SMIC as chairman, the former vice mayor of Sanya City on the river boat as the third chairman. SMIC localization of the progressive realization of the road.

The end of 2009, Richard Chang, founder due to poor management, and Taiwan Semiconductor Manufacturing and Company (hereinafter referred to as “TSMC”) litigation handled properly, the board of directors was dismissed. Hastily, Dr. Wang took over as CEO.

Over the years, SMIC in the “ischemic” state, in addition to continued losses year after year, are also affected with TSMC’s patent lawsuit against, Richard Chang, founder of departure and other unrest.

After taking over on the boat in the river, he of the company’s “Twelfth Five Year Plan” proposed “to introduce strategic investment” program. In addition to the introduction of foreign investment in stocks, but also with the Hubei Province, Wuhan City, the relevant government reached an agreement, U.S. $ 1 billion acquisition of stake in Wuhan Xinxin became controlling shareholder, had, under the ownership of Wuhan Xinxin under the jurisdiction of Hubei Province and Wuhan City enterprises, SMIC only perform “hosting” functions.

SMIC plans for the next five years is to achieve annual sales target of $ 5 billion, 50 percent of the domestic fabless market share continues to expand production capacity and catch up with 12 inches of advanced process technology such as 45nm and 32nm technologies .

This means that the next five years, SMIC’s total investment to be $ 12 billion. Previously, Dr. Wang has announced that this year’s capital spending will remain at around $ 1 billion, to expand production of 65 nanometer technology.

In fact, with the vote heavily in shares, you can see, the chip industry’s importance has been recognized at the national level, the outside world also look forward to SMIC in the follow-up policy be driven by good performance.

Industry analysts have said Gu Jun, SMIC had six cities in the layout of production base, the concept of reasonable, but the technical reserves, operations, customer relations, etc. is also a lack of support, now get the new SMIC core, at least 12 inches on the number of plants , close to the UMC and the Middle East business, and will not be opened, if the process is then improved rapidly, with the transfer of industry trends, it should be there to win more orders from competitors.

Not expected, just a better company performance, but set off serious internal strife, resulting in frequency management for a large number of key employees away.

SMIC is currently ranked fourth in the world, among TSMC, GlobalFoundries, UMC after. The next five years, if companies can not catch up, it will be difficult to compete.

For today’s management turmoil, announced that Richard Chang, founder, “I will not go back, I will not trouble to others, do not give yourself trouble.” And the old old rival today speak of the shareholder side TSMC others said the company only as “passive shareholders” not to interfere with the daily management.

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