China’s Semiconductor Manufacturing International Corp (SMIC) will set up a joint venture company to develop wafer production units in Beijing to enhance its semiconductor output and reduce costs.
SMIC, China’s biggest chipmaker, would partner with Beijing Economic-Technological Development Area Management Committee (BDAC) to develop facilities to produce 12-inch wafer, a slice of semiconductor used for the fabrication of integrated circuits.

The first phase of the project will have an estimated investment of $7.6 billion, with SMIC contributing about 51 percent of an initial registered capital of $5 billion.

SMIC aims to build foundries for the manufacture of computer chips that can compete with those operated by Taiwan Semiconductor Manufacturing (TSMC), the industry’s market leader.

The deal comes against a backdrop of tense Sino-U.S. relations as American restrictions on China’s Huawei Technologies Co Ltd threaten Huawei’s suppliers, which includes SMIC, Reuters reported.