China's SMIC gets govt injection, negotiating loan -sources
* SMIC has received $500 mln injection from govt - sources
* Company is negotiating a syndicated loan - sources
* Injection likely to be used for Beijing expansion - source
TAIPEI, Oct 29 (Reuters) - SMIC (0981.HK), China's largest contract chipmaker, recently received a $500 million cash injection and is pursuing a major syndicated loan, seeking new funds as it moves toward its goal of sustained profitability, two sources familiar with the situation said.
In the decade since its founding, Semiconductor Manufacturing International Corp (SMI.N) has been trying to attain the scale to effectively compete with the world's top chipmakers, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW) and United Microelectronics Corp (UMC) (2303.TW), both of Taiwan, but has consistently lost money.
Company founder and longtime Chief executive Richard Chang was ousted late last year and replaced with another industry veteran, David Wang, who has set about overhauling the company with a repeatedly stated goal of sustained profitability.
"The government is investing $500 million in SMIC's second stage in Beijing," said one of the sources, speaking on condition of anonymity because he was not authorised to speak to the media.
He added that the specific manner of injection for the $500 million had not yet been determined, but the company had a relatively urgent need for the money.
Another source familiar with the situation said the money would likely be used to expand capacity at the company's Beijing plant, specifically to quickly ramp-up production of chips using 65-nanometre technology, where SMIC is playing catch-up in a space now dominated TSMC and UMC.
A spokesman for SMIC had no comment.
The new investment follows an earlier $172 million investment in the company in 2008 by Datang Telecom Technology Co Ltd (600198.SS), a state-run Chinese maker of telecommunications equipment.
In Wang's one-year tenure, SMIC has overhauled its top management team and exited a number of non-core operations to focus on its core business of making high-end made-to-order microchips for the likes of Texas Instruments Inc TXN.N.
The company's Hong Kong-listed shares rallied early this year on hopes that Wang could engineer a quick turn-around, tripling from HK$0.33 at the beginning of the year to more than $1 in late March. But they have since given back some of those gains, and were down 3.1 percent at HK$0.63 in Friday afternoon trading. (Reporting by Jennifer Yang, writing by Doug Young; Editing by Chris Lewis)
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