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November 11, 2009

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SMIC offers sweetener to settle lawsuit

SMIC, the Chinese mainland's largest contract chip maker, yesterday said it would pay US$200 million and give the right to purchase up to 10 percent of the company to TSMC to settle lawsuits between the two.

That could help TSMC, the world's biggest contract chip maker, beef up its presence in the mainland market and would also likely boost SMIC's share price after it resumed trading today, analysts said.

Semiconductor Manufacturing International Corp said the US$200 million would be paid in installments over the next four years and would cover current and previous claims against the company by Taiwan Semiconductor Manufacturing Co.

"Overall, it is a win-win solution," Yuanta Securities analyst George Chang said. "For TSMC, it will have a powerful partner on the mainland, and it is also positive for SMIC after the settlement."

SMIC will grant 8 percent of its issued share capital to TSMC, worth about US$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 a statement. "TSMC is welcomed as a new shareholder."

TSMC shares closed up 0.83 percent inTaipei yesterday, outpacing the mainTAIEX's 0.75-percent rise.



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