Motorola sells chip plant to China’s SMIC

Motorola China Electronics Ltd. has signed an agreement to sell its MOS-17 chip fabrication plant (fab) in the northeastern Chinese city of Tianjin to Semiconductor Manufacturing International Corp. (SMIC), according to a Motorola statement.

Under the terms of the agreement, announced Thursday, Motorola will transfer its Tianjin fab to SMIC in exchange for a stake in the company and will contract some future chip production to SMIC. The value of the deal was not disclosed.

The announcement comes as Motorola looks to get out of the chip-making business. Earlier this month, the company announced plans to spin off its Semiconductor Products Sector, which makes networking processors, applications processors for handheld devices, and digital signal processors.

MOS-17, which is used to produce microcontrollers and other chips, is Motorola’s only fab in China and was one of the first advanced chip plants built there. Construction of the US$1.9 billion fab began in 1997 but was halted in 1998 as a result of the Asian financial crisis. Work on the plant resumed in 2000 and Motorola began production at the plant using 200-millimeter silicon wafers in 2001.

The fab is part of Motorola’s Tianjin Integrated Semiconductor Manufacturing Complex, which also includes the company’s BAT-3 test and assembly facility. BAT-3 will continue to be owned and operated by Motorola, the statement said.

The deal to transfer ownership of MOS-17 ties Motorola closely to SMIC, one of China’s most important chip makers. Founded in 2000, SMIC has sought to grab a piece of the contract chip-production market and has expanded rapidly, focusing on companies looking to tap China’s growing appetite for semiconductors. The company currently has three fabs in Shanghai producing chips on 200-millimeter wafers. In addition, the company is building a 200-millimeter fab and a pilot line for 300-millimeter wafers in Beijing.

The sale of MOS-17 will make Motorola one of SMIC’s largest investors, the statement said. Motorola will continue to hold an interest in the fab through its stake in SMIC and will take a seat on SMIC’s board of directors, it said.

This deal is the second announced over the last week that has seen Motorola sell a manufacturing facility to an Asian company. On Oct. 17, the company said it would sell a cell-phone factory in Chihuahua, Mexico, to Taiwan’s Hon Hai Precision Industry Co. Ltd. for an undisclosed sum. Hon Hai will continue to produce handsets for Motorola at the Chihuahua factory under a multi-year manufacturing agreement.