Case | HBS Case Collection | January 2009 (Revised October 2012)

Semiconductor Manufacturing International Corporation: 'Reverse BOT'

by Willy Shih

Abstract

Semiconductor Manufacturing International Corporation (SMIC) is executing a strategy that leverages the desires of municipalities in China to build clusters of high technology companies. By partnering with those cities to build new semiconductor fabs that SMIC would then operate under contract, the company could build scale without necessarily confronting immediate large capital outlays. Unlike the Build-Operate-Transfer model that some municipalities were using to build infrastructure like the new subway in Shenzhen, in the SMIC 'Reverse BOT model' a municipality would build a capital-intensive fab and SMIC would operate it, sharply lowering its capital costs. This model gave the company a unique level of flexibility in an industry where capital costs were the major driver of product costs.

Keywords: Growth and Development Strategy; Industry Clusters; Infrastructure; State Ownership; Business and Community Relations; Semiconductor Industry; China;

Citation:

Shih, Willy. "Semiconductor Manufacturing International Corporation: 'Reverse BOT'." Harvard Business School Case 609-062, January 2009. (Revised October 2012.)