(Yicai) Oct. 20 -- Shares of Silan Microelectronics surged by the daily trading limit after the Chinese chipmaker said it plans to invest CNY20 billion (USD2.8 billion) with local government-backed partners to build a high-end analog chip factory.

Silan Micro [SHA: 600460] was trading up 10 percent at CNY32.92 (USD4.62) as of lunch break in Shanghai today.

Located in Haichang district in Xiamen, China's eastern Fujian province, the factory will produce 12-inch high-end analog integrated circuit chips, the Hangzhou-based firm announced yesterday.

This project, which will be built in two phases, will help Silan Micro seize business opportunities brought by the rapid development of emerging industries, such as new energy vehicles, computing servers, and robots, the firm noted.

The first phase of the project will begin construction by the end of the year, come on stream in the fourth quarter of 2027, and reach full production capacity in 2030, according to Silan Micro. It will cost CNY10 billion and have a monthly output of 20,000 wafers.

The second phase will also cost CNY10 billion but have a monthly production capacity of 25,000 wafers.

Silan Micro will establish a joint venture with two investment firms owned by the local government for the investment, construction, and operation of the first phase of the project. Silan Micro and its subsidiaries will own nearly 30 percent of the JV.

Sixty percent of the investment will come from the JV’s registered capital, and 40 percent will be covered by bank loans.

Once the project achieves full capacity or reaches the break-even point, Silan Micro will buy some of the partners' shares in the JV based on a pre-agreed pricing, gradually increasing its stake to 51 percent and then to 70 percent to 75 percent.

The project will help fill the gap in China's supply of key chips for industrial application fields, such as automobiles, manufacturing, robots, large servers, and communications, and drive the agglomeration of companies along the upstream and downstream of the supply chain in Xiamen, Silan Micro pointed out.

Silan Micro mainly designs and manufactures silicon-based and compound semiconductors. In May last year, it announced it planned to build an eight-inch silicon carbide chip factory in Xiamen's Haicang district for about CNY12 billion.

Editor: Futura Costaglione