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7/28/2010
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TI Eyeing $175M Purchase Of China Chip Foundry

Texas Instruments is expected to buy a wafer plant run by Semiconductor Manufacturing International Corporation.

An 8-inch wafer plant in China's Chengdu that is run by Semiconductor Manufacturing International Corporation (SMIC) for the local government will be sold for $175 million, a local asset exchange government department wrote on its website. SMIC is China's largest chipmaker.

A source with knowledge of the deal said that the plant is going to be purchased by Texas Instruments, the second biggest U.S. chipmaker. The parties involved are expected to sign a contract in the middle of next month to formalize the deal and the plant is expected to be handed over by the end of October.

Reports said a TI representative confirmed that the company is involved in talks with the Chengdu government but said that a deal had yet to be reached.

Cension Semiconductor Manufacturing has been run by SMIC, China's largest chipmaker, for years under an agreement with the local government, which owns the plant.

If the deal is confirmed, it would become the first fab owned by TI in China. For SMIC, giving up operations at the plant would be part of efforts by new top-level management to turn the semiconductor manufacturer into a profitable company after running at a loss for five straight years.

The obscure unit that released the report is called the Southwest Union Equity Exchange, which is based in Chengdu. It said that a one-time payment will be used to purchase the plant. The deal includes land covering 140,000 square meters, buildings on the site, equipment, and inventory. Terms include that the plant will have to remain in the Chengdu Hi-Tech Industrial Development Zone and the buyer will have to retain at least 90% of employees at the plant.

SMIC was in conversations with TI, which is one of its customers, back in March about taking over the plant. But reports of talks had died down in recent months and ebbed further when TI announced plans two weeks ago to purchase two semiconductor wafer manufacturing plants and equipment in Japan from a unit of the California-based Spansion.

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