Chipmakers hope it also means cheaper prices to get their chips made, as access to capital markets helps foundries expand and competition among them heats up.

Already, SMIC is the world�s fifth largest independent chip foundry, says analyst Jeffrey Hirschkorn at IPO analyst firm Current Offerings Inc. �It shows that with semiconductor manufacturers, you don�t have to be around 25 years to succeed,� he said. �One thing that helped is they got key investors like Motorola to back them.�

SMIC bought a Motorola chip plant in Tianjin, China, last October. In exchange, Motorola got part ownership in SMIC.

�SMIC will remain a pure-lay foundry focused on servicing a global customer base,� SMIC Chief Executive Richard Chang stated at the time. Officials weren�t available last week to comment on the IPO.

SMIC�s revenue grew from virtually nil in 2000 and 2001 to $50 million in 2002 and $366 million in 2003. It turned its first profit last quarter, earnings 2 cents a share. Analysts forecast growth in sales and earnings this year.

More Chinese IPOs Seen

SMIC�s offering is the second largest IPO this year worldwide, just behind Assurant Inc. New York-based insurer Assurant raised $1.8 billion on Feb. 5.

SMIC is one of many Chinese companies vying for funds on the world market. Current Offerings expects they�ll raise as much as $22.8 billion this year.

The IPO follows on the heels of two other Chinese high-tech IPOs this month. Both companies trade on the Nasdaq, and both provide service to mobile phone users.

With stocks under pressure most of last week, neither did that well.

Tom Online Inc., based in Beijing, sold 11.3 million shares at $15.55 each, raising $175 million. The stock traded as high as $17.22 its first day of trading march 10, but closed Friday at $13.98.

Linktone Ltd. of Shanghai raised $86 million a week earlier, selling 6 million shares at $14. It traded as high as $19.50 coming out of the gate, but by Friday it had slid to $12.01.

Still, industry observers expect SMIC to do well. Among them is Bing Yeh, CEO of Sunnyvale, Calif. flash memory chipmaker Silicon Storage Technology Inc.

Recently, he went looking for another chip foundry partner. He didn�t pick SMIC. Instead, he chose another Chinese foundry, private Grace Semiconductor Manufacturing Corp. He says smaller Grace can give his company more attention.

But based on SMIC�s track record, Yeh says it�s poised to do well. And by giving SMIC $1.7 billion to expand its business, he says, the stock offering will benefit chip companies that contract with foundries.

�My guess is (the IPO) is going to reduce the selling price of wafers,� he said.

Yeh says it�s not so much that many more chips will be available. It�s that customers can play one foundry off the other, bargaining to get the best price.

�When you have a new competitor, that�s going to affect the entire industry,� he said. �TSMC customers are going to use SMIC as leverage to ask for lower prices.� He was referring to Taiwan Semiconductor Manufacturing Co., the world�s biggest foundry.

SMIC�s customers include Fujitsu Ltd., Texas Instruments Inc., Samsung Electronics Co., STMicroelectronics NV, Broadcom Corp. and Marvell Semiconductor Inc.

Current Offerings� Hirschkorn says SMIC is a taste of the kinds of IPOs to expect from China in the future. Chinese foundries benefit from lower labor costs, rapid growth in the domestic economy and strong government support. He thinks they could knock Taiwan firms like TSMC out of the top spot.

Pressure On Taiwan Firms?

China is going to take significant business from Taiwan,� he said.

SMIC�s IPO also may encourage other young foundries to go public.

Steve Della Rochetta is executive vice president of sales and marking at Silterra Malyasia Snd. Bhd., a private chip foundry in Malaysia.

Like SST�s Yeh, Della Rochetta says SMIC�s entry to the world capital market is a sea-change event.

�It�s obviously a big offering,� he said. �It raised the visibility of foundries and highlights the opportunities in this space.�

He added: �We intend to access the public market � (possibly) within the next year. The SMIC IPO is a help. It will educate investors about the foundry industry.�