SMIC, UMC and others are involved in the shakeout--or consolidation--as there are simply too many foundry vendors in China. The shakeout includes the ''pending merger'' between Shanghai Hua Hong NEC Electronics Co. Ltd. (HHNEC) and Grace Semiconductor Manufacturing Corp. (GSMC), according to iSuppli Corp.

''This will significantly reshape China's foundry industry,'' according to the research firm.

Today, Grace Semiconductor Manufacturing Corp and Shanghai Hua Hong NEC Electronics Co. Ltd. (HHNEC) have begun construction of a 300-mm wafer fab at Zhangjiang Hi-Tech Park, Shanghai, according to local reports.

The two companies, both of which have a large degree of local government control, have been tipped to merge. Grace is controlled by the Assets Supervision and Administration Commission of Shanghai while HHNEC is a joint venture between state-run Shanghai Hua Hong and Japan's NEC Electronics.

The two companies are due to spend about 14 billion yuan (about $2 billion), of which the Shanghai municipal government will contribute about 4.5 billion yuan (about $650million), the reports said.

By: DocMemory
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