- 10 March 2005 -

China turns to Japan for equipment

China's largest chip maker,Semiconductor Manufacturing International (SMIC), is considering buying manufacturing equipment from Japan amid uncertainty over a planned $769m syndicated loan offered primarily by Citigroup to buy American-made machines from Applied Materials Inc, Novellus Systems Inc and KLA-Tencor Corp.

The US Export-Import Bank has not approved the loan to Shanghai-based SMIC to buy the chip.m.aking equipment, largely thank to lobbyists efforts for the sole US and world-ranked No 2 DRAM memory chip maker, Micron Technology Inc that argues the loan would boost China's industry and put Americans out of work.

SMIC has been in talks since the start of this year with Japanese equipment vendors including Tokyo Electron Ltd, and a syndicate of Japanese banks would fund the purchase with a loan comparable in size to the pending US loan.

Financing for SMIC purchases in 2005 has already been lined up and the US loan would have funded equipment purchases for 2006. Currently around half of SMIC's chipmaking equipment comes from the US, about 35% from Japan and the rest from Europe.