As first reported in June, sources indicated that Motorola sold the fab to SMIC. SMIC swapped $260 million in shares to buy a stake in Motorola's MOS-17 fab in Tianjin, China, according to industry sources familiar with the deal.

Under the plan, which was disclosed today, Motorola will transfer its MOS-17 wafer fabrication facility in Tianjin to SMIC, in exchange for SMIC shares. Motorola will retain an interest in the MOS-17 fab, by becoming one of the major equity holders in SMIC, and will gain a seat on SMIC's board of directors.

SMIC will build out and operate the fab, a 200-mm, 0.35- to 0.25-micron plant. Motorola currently produces microcontrollers and other integrated circuits in MOS-17. The Chinese company will act as a strategic foundry partner, supporting Motorola in a full range of technologies from the MOS-17 facility as well as other SMIC fabs.

Motorola will continue to own and operate its nearby BAT-3 semiconductor assembly and test facility, which employs 1,200 workers. Motorola also will continue to grow the number of employees at its Tianjin Semiconductor Design Center.

The move is aimed to advance Motorola's so-called "asset light" strategy, in which the company plans to eliminate certain plants and outsource more and more of its chip production to outside foundries, such as TSMC, UMC, and now, SMIC.

It also follows Motorola's plan to spin-off its chip unit into a new and independent company. In doing so, the company appears to be downsizing its operations in an effort to getting into fighting shape, according to analysts.

"This agreement with SMIC maximizes the use of our manufacturing and R&D resources," said Scott Anderson, president and CEO of Motorola's Semiconductor Products Sector, in a statement. "It will eliminate the overhead and capital costs for Motorola at MOS-17, maintain our presence in Tianjin and China, and grow that country's contributions to our short- and long-term sales."

It also expands SMIC's 200-mm fab capacity. At present, the company has three 200-mm fabs in Shanghai and has set plans to build three 300-mm plants in Beijing (see September 30 story).

"SMIC will remain a pure-play foundry focused on servicing a global customer base," said Richard Chang, president and CEO of SMIC, in a statement. "We feel this will be a very positive long-term relationship and will further solidify SMIC as the leading foundry in China."

Closing of the transaction is subject to receipt of governmental and third-party approvals. As part of the transaction, SMIC will make employment offers to all Motorola employees associated with MOS-17. Motorola will retain full ownership of the BAT-3 site, where several assembly and test operations from around the world were consolidated in 2002.