TAIPEI -- A former senior executive from Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, is set to join China's Semiconductor Manufacturing International Co. as an independent board member. The move comes at a time when China is working aggressively to build its own semiconductor sector to reduce reliance on foreign chip companies.
SMIC said on Wednesday that it will pay Chiang Shang-Yi, former TSMC co-chief operating officer, an annual salary of $40,000 in cash and an additional 187,500 shares in common stock and another 187,500 shares in restricted stock. Shares in Hong Kong-listed SMIC closed at 10.38 Hong Kong dollars on Wednesday.
Chiang "has helped TSMC grow from a market follower to the technology leader," SMIC said. TSMC now controls 55% of the global contract chip manufacturing market.
While SMIC is lagging significantly behind TSMC in technology, it is still China's largest contract chipmaker with government backing.
On Wednesday, Chiang confirmed his new position to the Nikkei Asian Review. "Independent board director will not and cannot involve in any daily operations or running the company," said Chiang in an email response to the Nikkei Asian Review. "It basically only requires attending meetings four times a year." TSMC was not immediately available for comment.
Chiang joined TSMC in 1997. He retired in 2006, but was invited by founder and chairman Morris Chang to return in 2009, and led the Taiwanese chipmaker as it developed advanced technologies, including the 16-nanometer chips used in Apple's latest iPhone 7 range.
Chang called Chiang, his longtime right-hand man, "the most important contributor to TSMC in the past 16 years," when Chiang was about to retire from the company for a second time in October 2013.
Chiang continued to serve two more years as adviser to Chang until 2015.
"We don't see much impact on TSMC besides some short-term downside stemming from the news at this moment," said Mark Li, an analyst at Sanford C. Bernstein. "However, with such a high-caliber semiconductor expert, SMIC can avoid a lot of wrong paths in developing leading and critical chip technologies."
Recruiting top-level talents like Chiang highlights China's ambitions to develop a strong semiconductor industry, said Li.
"It's possible that more and more high-level talents in the chip industry from Taiwan could come to China, as China offers a bigger stage and a better salary," said Wang Yanhui, secretary general of Mobile China Alliance, an agency affiliated with China's Ministry of Industry and Information in Beijing.
To tap into China's growing customer base, TSMC is currently building its first advanced chip facility in China, in the city of Nanjing. It is set to produce 16-nanometer chips in the second half of 2018. Huawei Technology's chip arm Hisilicon Technology, Beijing-backed Spreadtrum Communications of China, and another 470 chip designers such as Apple, Qualcomm, and Nvidia are all TSMC customers.
TSMC's revenue of $26.61 billion for all 2015 is nearly 14 times bigger than that of SMIC, while its net income of $9.67 billion for the same period is more than 43 times of that of its smaller Chinese competitor.