Shares of China’s biggest chipmaker fell sharply after it said it was “verifying” reports that its co-chief executive had abruptly quit, in what would be the latest blow to the company targeted by US sanctions.
Semiconductor Manufacturing International Corporation’s stock at one point fell nearly 10 per cent in both Shanghai and Hong Kong on Wednesday after the group said that it had “noticed media reports” that Liang Mong-song, its co-chief executive, had resigned.
“The company understands that Dr Liang wishes to resign under certain conditions . . . and is actively verifying Dr Liang’s true intentions,” SMIC said in a filing to the Shanghai stock exchange.
The Shanghai- and Hong Kong-listed shares ended trading down 5 and 5.5 per cent, respectively.
The resignation of Mr Liang would be another setback for SMIC after the US slapped sanctions on the company in September, blocking its access to crucial American technologies. The Trump administration said at the time that exports to SMIC posed an “unacceptable risk” of being diverted to “military end use”.
On Tuesday, index provider MSCI said it would delete SMIC’s shares from its stock indices, which are followed by trillions of dollars of funds, due to the group’s alleged military ties.
Mr Liang joined SMIC in 2017 and was leading the company’s push into the kind of advanced chips manufactured by Taiwan and South Korea. SMIC is at the forefront of Beijing’s ambitions for greater self-sufficiency in semiconductors.
Mr Liang “has been personally leading SMIC's technology development and his contribution directly resulted in the mass production” of 14 nanometre chips, wrote analysts at Bernstein on Wednesday, referring to the most advanced technology the company can currently produce.
In what appeared to be a resignation letter circulated on Chinese social media, Mr Liang said SMIC’s decision to hire Chiang Shang-yi as vice-chairman had pushed him to quit. Mr Chiang was previously vice-president of research and development at Taiwan Semiconductor Manufacturing Corporation, the world’s most advanced chipmaker, whose technology SMIC aims to rival.
“I was completely astonished and puzzled, because I had heard nothing about this beforehand. I deeply feel that I am no longer respected and trusted,” stated the letter. It added that SMIC’s chairman called Mr Liang a week ago to tell him about the hiring of Mr Chiang.
SMIC declined to comment on the veracity of the letter.
Mr Chiang’s position was confirmed on Wednesday, according to a Shanghai bourse filing by SMIC. Mr Liang was the only director to not cast a vote on his appointment, it said.
“SMIC currently faces all sorts of pressures from the US, causing serious threats to our development of advanced technology. I think that today’s personnel proposal will inevitably affect the company’s prospects,” said Mr Liang’s apparent resignation letter.
Mr Liang had previously worked under Mr Chiang at TSMC in the early 2000s before moving on to Samsung Electronics and then to SMIC.
Bernstein believed that the negative impact of Mr Liang’s likely departure would outweigh the positive one from hiring Mr Chiang, whose role will be advisory.
It would not be the first time Mr Liang has been embroiled in internal politics at SMIC. In 2019, he and co-chief executive Zhao Haijun battled over whether the company should develop costly cutting-edge technology in line with Beijing’s policy aims, as Mr Liang wished, or instead focus on mature and more commercially viable areas.
Mr Liang gained the upper hand and scores of executives were replaced to align management with his goals, according to people directly familiar with the matter, and Mr Zhao had considered quitting as a result.
Additional reporting by Qianer Liu in Shenzhen