SMIC & Chinese Pursuit of Latest 5nm Chip Process Will Be Gutted By C.E.O.’s Sudden Departure

Mr. Liang's at TSMC's award ceremony in 2003.

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China's Semiconductor Manufacturing International Corporation (SMIC) suffered a blow when its joint C.E.O. Mong-song Liang announced a surprise decision to resign from his role. Mr. Liang, who has been a key player in the Southeast Asian semiconductor landscape has years of experience when it comes to developing leading-edge semiconductor process nodes, and is thought by many to be behind Korean chaebol Samsung's foundry division Samsung Foundry's ability to catch up to its Taiwanese rival, the Taiwan Semiconductor Manufacturing Company (TSMC) in the manufacturing process arena.

As news of his resignation sent SMIC's shares tanking in Hong Kong yesterday, it's clear that should the executive be allowed to depart the company, China's ability to evade American sanctions by developing advanced semiconductor process will become extremely hard, if not impossible.

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The tale of Mr. Liang's journey to SMIC starts from 2008 when he departed TSMC, where he was responsible for spearheading the company's development of the 130nm process. This development placed him right at the top of TSMC's development hierarchy, with the executive coming only second to TSMC's vice president of research and development Mr. Shang-yi Chiang - who's joining SMIC seventeen years later has made Mr. Liang resign unexpectedly from China's premium semiconductor foundry.

His decision to resign from TSMC is thought to have been motivated by failing to be appointed as one of the company's two VPs for R&D in the wake of Mr. Shang's departure in 2006. As he officially joined Samsung in 2011, he enabled the company to jump directly from the 28nm process to 14nm - an achievement that enabled Samsung to win Apple's orders for its A9 system-on-chip (SoC) for the iPhones 6s.

TSMC's subsequent lawsuit failed to convince the court that Mr. Liang had actively leaked secrets to Samsung but prevented him from taking any positions at Samsung before 2016.

Following this, Liang joined SMIC in 2017, and with him, he brought a team of 200 engineers from Samsung and SMIC's executive vice president of technology R&D, Dr. Zhou Mei Sheng. The state of the Chinese foundry's production plans was revealed in Mr. Liang's resignation letter, where he recounted his contributions to the company for advancing processing node development.

Mr. Liang's original letter.

SMIC Waiting On EUV Lithography Machines For Developing Advanced 5nm Chip Manufacturing Process

On this front, he expressed indignation at being left out of the loop for Mr. Shang-yi's appointment and highlight that during his tenure at the company, SMIC has jumped from developing a 28nm manufacturing process to the 7nm node. The 7nm node was the latest in the tech world only until early this year when Huawei Technologies introduced its Kirin 9000 SoC with TSMC's 5nm process node. The U.S. government's decision to limit TSMC from providing the Chinese company with products manufactured on this node, fuelled by fears of the technology making its way to the Chinese military, spurred China's attempt to develop a fully localized semiconductor manufacturing industry - an attempt which SMIC is spearheading.

More importantly, Mr. Liang also revealed in his letter that SMIC will commence risk production of the 7nm process in April this next year. This stage of the production process aims to finetune affairs to prevent problems from disrupting mass production later on. Additionally, he also revealed that when it comes to the leading edge 5nm and 3nm nodes, SMIC has completed developing eight of the processes most difficult technologies (highlighted in bold in the fully translated letter below) - with production now contingent on extreme ultraviolet (EUV) machines exclusively manufactured by the Dutch company ASML.

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His departure was not surprising given the tough history between him and Mr. Shang-yi. While the latter was his superior at TSMC, with their relationship thought by many to be that of a teacher and discipline, Mr. Liang was left open-mouthed when actions by Mr. Shang-yi resulted in TSMC initiating the aforementioned legal proceedings against him.

This bit of saga took place when soon before Mr. Liang joined Samsung as an executive (prior to which he was teaching at the company's university) he emailed Mr. Shang-yi as he sent his regards for the latter's birthday. This email, which was sent from a Samsung address led to Mr. Shang-yi alerting TSMC of Mr. Liang's new employment at Samsung, following which TSMC sued him.

Whether Mr. Liang will actually depart SMIC is unclear for the time being, but what is clear that if he does, and manages to take a team of engineers with him like he did when he joined the company, then SMIC will be unable to expeditiously develop advanced manufacturing processes and catch up to TSMC and Samsung in the process.

The full translated text of Mr. Liang's letter, courtesy of STCN, is as follows:

Letter to the Board of Directors

Hello, chairman and directors!

I know that we will make a very important personnel appointment decision at this meeting today.

Currently, SMIC is facing various pressures from the United States, leading to serious threats to the development of advanced technology. I believe that today's personnel proposal will inevitably affect the company's prospects.

It has been more than three years since I was appointed as the co-CEO by the board of directors in November 2017. In these more than 1,000 days, I almost never took a vacation. Even in June 2019, when I was experiencing life At the most dangerous moment, I never gave up, and I never let you down.

During this period, I tried my best to complete five generations of technology development from 28nm to 7nm. This is a task that an average company takes more than ten years to accomplish. And these results are obtained by more than 2,000 engineers led by me, working hard day and night. Of course, the trust and support of the chairman and the directors in the past is also a key element of success.

I originally came to mainland China not to seek high-ranking officials, but simply to contribute to the mainland's high-end integrated circuits. At present, 28nm, 14nm, 12nm, and n+1 technologies have all entered mass production, and the development of 7nm technology has also been completed. Risk mass production will be available in April next year. The 8 most critical and most difficult technologies of 5nm and 3nm have also been carried out in an orderly manner [EMPHASIS ADDED]. Only when the EUV lithography machine arrives, we can enter the full development stage.

It seems that my short-term goal seems to have exceeded expectations and was successfully achieved.

I received a call from the chairman of the board on December 9th, last Wednesday morning: Mr. Jiang is about to become the vice chairman of the company. I was very surprised and puzzled about this, because I didn't know anything about it beforehand. I deeply feel that I am no longer respected and distrusted. I think you should no longer need me to continue to work hard for the company's prospects. I can rest for a while.

After the company’s board of directors and the shareholders’ meeting approve Mr. Jiang’s nomination, I will formally submit my resignation. But the company should give a comprehensive and fair evaluation of my contributions over the past three years, and I should have the right to accept and appeal.

I solemnly tell you that I do not have the slightest intention to influence your next vote on this personnel appointment, but I think I should let everyone know my true feelings.

My statement hopes that Ms. Guo Guangli, secretary of the board of directors, can be included in the official meeting minutes of this interim board of directors.

Thank you all.

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