Datang Telecom Technology & Industry Group plans to buy about a 20 percent stake in Semiconductor Manufacturing International Corp, the biggest made-to-order chip maker on the Chinese mainland.

The deal value may reach more than two billion yuan (US$294 million), according to a source quoted by the China Business News.

Both of the companies involved declined to comment on the issue.

Shanghai-based SMIC expected to sell a stake to a strategic investor in less than six months, Chief Executive Richard Chang was reported as saying.

"It's a natural move (for SMIC) as it requires cash to support its expansion nationwide," said Li Ke, a senior analyst at CCID Consulting, a Beijing-based research firm.

SMIC has invested heavily to build advanced wafer plants in Shenzhen in South China and Wuhan, capital of central Hubei Province.

Chip demand growth is expected to slow with the increase in inflation which influences people's demand on mobile phones and televisions, industry insiders said.

This year China's semiconductor market revenue is expected to reach US$81 billion, a slight growth of 7 percent, only half of the growth rate of more than 15 percent in 2006, according to iSuppli, a US-based research firm.

State-owned Datang Group is parent firm of Datang Mobile, which developed China's own 3G technology called TD-SCDMA (time division-synchronous code division multiple access).

(Shanghai Daily July 23, 2008)