Perhaps due to the contract, Asia Pacific Integrated Circuits took Hangzhou SMIC to court

Jiwei.com reported on June 13 that on December 18, 2018, Yaxiang Integration and Hangzhou SMIC Wafer Co., Ltd. (hereinafter referred to as "Hangzhou SMIC Wafer") signed the "Semiconductor Large Silicon Wafer (200mm, 300mm) Project Clean Package Contract", stipulating that Hangzhou SMIC Wafer will contract the Hangzhou SMIC Wafer Semiconductor Co., Ltd.'s semiconductor large silicon wafer (200mm, 300mm) project clean package project to Yaxiang Integration. The total fixed cost of the project is RMB 230,000,000.00, and the project site is the Dajiangdong Industrial Cluster Zone, Xiaoshan District, Hangzhou.

The signing of the contract was originally a beneficial thing for both parties. However, due to subsequent communication problems, it led to a lawsuit.

The announcement shows that after the signing of the above contract, Yaxiang Integrated actively organized personnel for construction, invested a lot of material and financial resources, and the project quality was praised by Hangzhou SMIC Wafer many times. However, during the construction process, Hangzhou SMIC Wafer did not hand over the construction site to Yaxiang Integrated in time, resulting in Yaxiang Integrated being unable to enter some construction sites in time.

After that, Hangzhou SMIC sent a letter to terminate the above-mentioned project contract on the grounds of quality problems and overdue construction period, and mobilized hundreds of social personnel to prevent Yaxiang Integration from entering the construction site on May 17, 2019. As a result, more than 400 workers and engineers of Yaxiang Integration have been unable to enter the construction site so far. The workers and construction machines have been stranded on site for several days. At the same time, the project was forcibly taken over without the permission of Yaxiang Integration.

On May 20, 2019, Yaxiang Integration wrote back to Hangzhou SMIC Wafer, informing it that there was no factual and legal basis for terminating the project contract and requiring it to continue to perform the contract, but Hangzhou SMIC Wafer still ignored it. Hangzhou SMIC Wafer's blocking of Yaxiang Integration from entering the construction site constituted a serious breach of contract and made it impossible for the project contract signed by the two parties to continue to be performed.

The above-mentioned completed project was settled by Yaxiang Integration at a cost of RMB 237,117,873.09. The losses incurred by Yaxiang Integration due to Hangzhou Zhongxin Wafer's breach of contract totaled RMB 1,271,845.30. As of the date of the lawsuit, Hangzhou Zhongxin Wafer had only paid Yaxiang Integration RMB 110,000,000.00 for the project, and the remaining RMB 127,117,873.09 and losses had not been paid to Yaxiang Integration. 

Therefore, Yaxiang Integrated Circuit took Hangzhou SMIC Wafer to court and filed the following claims:

(1) The court ordered the termination of the Clean Package Contract for the Semiconductor Large Silicon Wafer (200mm, 300mm) Project signed between the plaintiff and the defendant;

(2) Order the defendant to pay the project fee of RMB127,117,873.09;

(3) Order the defendant to compensate the plaintiff for losses in the amount of RMB1,271,845.30;

(4) Order the defendant to pay the overdue interest (based on the principal of RMB127,117,873.09, calculated from June 6, 2019 at the People's Bank of China's benchmark interest rate for similar loans during the same period until the actual payment date);

(5) The plaintiff is ordered to have priority in receiving compensation for the discounted price or auction price of the clean package project of the defendant's "Semiconductor Large Silicon Wafer (200mm, 300mm) Project" within the total amount of the above-mentioned claims 2, 3, and 4;

(6) All litigation costs in this case shall be borne by the defendant.

On June 11, 2019, Yaxiang Integration received the acceptance notice (2019) Zhejiang 01 Minchu 2127 from the Hangzhou Intermediate People's Court of Zhejiang Province. The case has been accepted by the court but has not yet been heard.

The cost of Asia Pacific Group is that, as the case is still in the stage where the court has accepted it but has not yet heard the case, it is not possible to predict the impact of the litigation on the company's current or future profits. At present, the company's business is normal.

According to the data, Hangzhou SMIC Wafer Semiconductor Co., Ltd. is a joint venture established by Ferrotec Holdings, Hangzhou Yamato Thermo-Magnetic Electronics Co., Ltd., and Shanghai Shenhe Thermo-Magnetic Electronics Co., Ltd. It is located in the Dajiangdong Industrial Cluster Zone in Hangzhou, with a registered capital of 2.9 billion yuan, covering an area of ​​more than 133,400 square meters, a plant area of ​​about 150,000 square meters, and a total investment of 6 billion yuan. After the project is completed, it is planned to produce 3.6 million 8-inch semiconductor silicon polishing wafers and 2.4 million 12-inch semiconductor silicon polishing wafers per year. It is expected to start trial production in early January 2019 and officially start production in April.

       Up to now, there has been no news of the Hangzhou SMIC Wafer Large Silicon Wafer Project going into production since the process equipment was introduced in January. The announcement also mentioned the problem of overdue construction period. Obviously, the plan to officially start production in April has been broken. We can only wait and see what the future holds.