The co-CEO of China’s largest chipmaker Semiconductor Manufacturing International Corp (SMIC), Liang Mongsong, is planning to leave the company, according to a resignation letter circulated online, after SMIC announced on Tuesday that it hired Chiang Shang-yi, the former COO of Taiwan Semiconductor Manufacturing Corp (TSMC), as its vice-chairman.
SMIC (HKEX:0981; SSE: 688981) said in a filing on Wednesday that the board is aware of Liang’s intention to resign from his role and therefore suspended stock trading in the Hong Kong market. SMIC’s Shanghai-listed stock once plunged by over 7% to RMB 54.3 today and Hong Kong-listed fell by 5.2% to HKD 20.2 so far after re-opening.
On December 15, the firm’s board decided to invite Chiang to return as vice chairman and executive director. During the meeting, co-CEO Liang suddenly submitted his resignation, while a company announcement later said that he abstained from voting without reason.
“Last Wednesday morning, December 9, I received a phone call from the chairman of the board informing me that Mr. Chiang would be taking up the position of vice chairman of the company,” read Liang’s resignation. “I was dismayed and puzzled by this, as I had no prior knowledge of it. I deeply felt that I was no longer respected and trusted.” Liang joined SMIC in 2017 as co-CEO from TSMC.
On the same day, December 15, SMIC appointed Chiang, who previously served as an independent board director with SMIC in 2016 and later joined Wuhan-based Hongxin Semiconductor Manufacturing as CEO in 2019, before Hongxin sunk into serious financial woes this summer.
The management shakeup comes at a time when the Chinese semiconductor champion is feeling the pressure from strict US export rules. Earlier this month, the US Department of Defense added SMIC to a blacklist of alleged Chinese military companies, in a move to restrict it from trading with American investors and corporates.
Civil lawsuit in California
MSCI, a major US investment index provider said on Tuesday that it will remove SMIC’s Hong Kong and Shanghai-listed stock from the MSCI Global Investable Market Indexes (GIMI). Other companies affected include China Communications Construction Company, China Spacesat, China Railway Construction Corp, CRRC, Hikvision, and Dawning Information Industry.
SMIC is also facing lawsuits in the US. According to an announcement from Tuesday evening, the company is concerned about a civil complaint filed in the US District Court for the Central District of California on December 10, claiming that SMIC violated the US Securities Exchange Act and asking for financial compensation. “We’re carefully evaluating the above matters and will vigorously defend ourselves,” the company responded.
For the third quarter of 2020, SMIC booked a record-high USD 1.1 billion in revenue, up 32.6% year-on-year (YoY) and 15.3% quarter-on-quarter (QoQ), and it saw achievements in its FinFET technology development.
