Datang Holdings to invest $172mn in SMIC

SHANGHAI, CHINA: Semiconductor Manufacturing International Corp. (SMIC) and Datang Telecom Technology & Industry Holdings Co. Ltd announced that the two companies have reached a definitive agreement under which Datang Holdings is investing US$172 million in common equity in SMIC for a 16.6 percent interest in the Company proforma for the new shares issued.

Datang Holdings will acquire 3,699 million new SMIC common shares at HK$ 0.36 per share. Upon closing of the investment, Datang Holdings will have the right to nominate, for the appointment by the Board, two Board representatives out of a total of nine members of the Board of Directors at SMIC. In connection with the investment, Datang Holdings will also have the right to nominate a Vice President at SMIC in charge of Time Division-Synchronous Code Division Multiple Access (TD-SCDMA), an international 3G standard and also China's self-developed 3G wireless standard.

SMIC, a leader in semiconductor manufacturing, together with Datang Holdings, a leader in China's self-developed mobile telecommunication technologies, have also agreed to use commercially reasonable efforts to enter into a strategic co-operative agreement at or prior to closing of the investment. Both companies have identified numerous areas of collaboration. This alliance will provide SMIC with a valuable strategic partner as both parties seek to enhance their global market share, capture business opportunities around the world and penetrate the growing mobile telecommunication terminal integrated circuit market.

"We are looking forward to working with Datang Holdings and leveraging its technology and industry expertise, resources and relationships in wireless communication. This investment represents a validation of our strategy, strength of our business, and reflects the strides we have made in the worldwide semiconductor manufacturing space. Further, Datang Holdings' leadership in TD-SCDMA 3G development will enable us to capture the large market opportunity presented by China transitioning from 2G to 3G wireless communication," said Morning Wu, SMIC's Acting Chief Financial Officer.

"We intend to use proceeds from this investment to pursue strategic opportunities, strengthen our domestic and global position, retain maximum flexibility in a difficult and challenging public financing market, improve our working capital condition, and assist our capital expenditures needs, among other general corporate purposes."

Dr. Chen Shanzhi, Datang Holdings' Vice President, said: "We have attached great importance to our investment into SMIC, a world-class semiconductor manufacturing and service company. With SMIC and Datang Holdings working together, I am confident this powerful alliance will significantly promote the development of China's semiconductor as well as mobile telecommunication industries, and improve the international competitiveness of both companies by taking advantage of the opportunities arising from the rapid development of TD-SCDMA 3G in China."

The closing of Datang Holdings' investment is subject to customary conditions, and approval from the relevant government authorities.