SOURCE / COMPANIES
SMIC shares sink after leadership shift, likely to hurt client confidence
Published: Dec 16, 2020 08:58 PM

SMIC Photo: VCG


Shares in Chinese mainland-based chipmaking giant Semiconductor Manufacturing International Corp (SMIC) went through a turbulent day, first halting trading and then sinking on Wednesday, after what is seen as an abrupt senior management change. 

Experts said that internal conflicts among senior management would have a negative impact on the company, which has been facing tough sanctions from the US government. The impact includes hurting client confidence and capital investment, but the influence should be transitory, they said. 

On Wednesday morning, the Hong Kong Exchanges and Clearing issued a statement saying that SMIC had halted trading of its shares temporarily at 9:33 am. Trading resumed in the afternoon. By the end of the day, the shares were down 4.94 percent to HK$20.2 ($2.6). 

The company is also listed on the mainland Science and Technology Innovation Board, where its shares slid 5.53 percent to 55.2 yuan ($8.46) on Wednesday. 

The shares gyrated after co-CEO Liang Mengsong reportedly handed a resignation letter to the board of directors. SMIC issued a statement saying that the company is confirming with Liang whether he really intended to resign, and will publish a further notice on the matter at an appropriate time. 

The previous day, the company announced plans to appoint Jiang Shangyi as vice chairman of the board of directors, a second-category executive director and member of the strategy committee of the company. Jiang used to be chief operating officer of Taiwan Semiconductor Manufacturing Co (TSMC), a chipmaking giant that had been supplying Huawei until US sanctions kicked in. 

According to media reports, the 74-year-old Jiang had taken the lead in the research and development of core technologies such as 16-nanometer FinFET at TSMC. 

Some media reports linked Liang's resignation to the sudden appointment of Jiang, speculating that Liang had not been informed of the move and felt it represented a vote of no confidence in his leadership.

The sudden change of senior executives at SMIC also happened at a time when the company is facing a crackdown by the US government in an effort to hurt China's technological rise. According to a statement by the company, it was recently sued in a court in the US state of California, by a plaintiff who claimed that some of the company's statements and documents breached US securities trading laws. 

Ma Jihua, a telecom industry expert, said that it has been one of SMIC's flaws that its core leadership changes too fast, with power decentralized too much. 

"It brings instability to the company as the corporate strategy will change along with the leadership. Besides, it is not good for corporate cohesion, and investment in the firm might also be hurt as a result," he told the Global Times.

Zhang Yi, CEO of Guangzhou-based market research firm iiMedia Research, said that people tend to read Liang's resignation as a signal that he does not agree with Jiang's strategy, rather than a personal conflict, and this would make them fear uncertainties in the company's direction and undermine their confidence in doing business with the company. 

"Clients will doubt if the company's future strategy will be stable, if they see the company's senior executives can't get along well," he told the Global Times. 

But experts also stressed that frequent senior management staff changes are not unusual in the chip industry. Therefore, the negative influence of such a move might not be as large as people thought, and should be just temporary.
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