SMIC to pay TSMC to settle claims

TAIPEI, TAIWAN: SMIC, China's largest contract chipmaker, said on Tuesday that it will pay $200 million and give the right to purchase up to 10 per cent of the company to TSMC to settle lawsuits between the two.

That could help TSMC, the world's biggest contract chipmaker, to beef up its presence in the Chinese market and would also likely boost SMIC's share price after it resumes trading on Wednesday as TSMC would become a strategic investor, analysts said.

Semiconductor Manufacturing International Corp (SMIC) said the $200 million would be paid in installments over the next four years and would cover current and previous claims against the company by TSMC, according to a SMIC statement.

A source close to the case told Reuters earlier in the day that SMIC would pay $140 million to TSMC to cover the latest claim, with payments to cover previous claims bringing the total to $200 million.

"Overall, it is a win-win solution," Yuanta Securities analyst George Chang said.

"For TSMC, it will have a powerful partner in China, and it is also positive for SMIC after the settlement."

SMIC will grant 8 percent of its issued share capital to TSMC, worth about $88 million based on SMIC's last closing price, and a warrant to purchase additional shares that could bring TSMC's holding to as much as 10 percent.

"With new certainty, opportunity, and synergy for our customers and management, SMIC looks forward to improving shareholder value," SMIC said in the statement. "TSMC is welcomed as a new shareholder."