Semiconductor Manufacturing International Corp (0981.HK, SMI.NYSE), China’s largest contract chipmaker, announced sweeping management changes during its earnings call Wednesday morning. David Wang, who replaced SMIC’s founder Richard Chang as CEO last year, announced the appointment of a new chief financial officer and chief operating officer as the company aimed to reverse the last 14 quarters of losses.
The company posted its most recent quarterly loss of US$482 million following payment of a US$299.7 million penalty to settle its long-time IPR battle with Taiwan Semiconductor Manufacturing Company (TSM.NYSE, TMSD.LSE). Sources earlier in the week stated that the company’s strategic investor Datang Telecom Technology and Industry Holding (600198.SS) will make additional future investments in the struggling company.
Simon Yang, the newly appointed COO, comes from rival Chartered Semiconductor (CHRT:NASDAQ, CSMF.SI), and stated that his first priority will be to cut costs. TSMC’s revenues were eight times SMIC’s with only double the number of workers. Creating a leaner, more efficient workforce will take time, but it may allow SMIC to reassert itself in the sector despite its recent troubles. Reforms might also involve a recentralization of SMIC’s chip fabrication facilities, which were previously decentralized under a government incentive plan.
If the new management team is successful, the company can begin to pose a serious threat to manufacturers in Singapore and Taiwan, including Chartered, United Microelectronics (UMC.NYSE), and TSMC, albeit in a way that avoids its previous tangles with IPR infringement.