China's Champion Chip Maker Checks if Co-CEO Still Wants to Work There

 China's Champion Chip Maker Checks if Co-CEO Still Wants to Work There

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Shares of Semiconductor Manufacturing International Corp. fell about 5% both in Shanghai and Hong Kong on Wednesday. Pictured, a staff member showed off a server chip at an expo in Shanghai, Oct. 14.

Shares of Semiconductor Manufacturing International Corp. fell about 5% both in Shanghai and Hong Kong on Wednesday. Pictured, a staff member showed off a server chip at an expo in Shanghai, Oct. 14.

Photo: Costfoto/Barcroft Media/Getty Images

Shares of China’s top chip maker fell sharply Wednesday over uncertainty surrounding the possible departure of one of its two chief executives and
MSCI Inc.’s
decision to exclude the company from its indexes.

In stock-exchange filings Wednesday,
Semiconductor Manufacturing International Corp.
said it had noted media reports that Co-Chief Executive

Liang Mong Song
was proposing to resign, and that the company had since become of aware of his “intention of conditional resignation” but was now double-checking with him about his plans.

The day before, SMIC had appointed 74-year-old

Chiang Shang-Yi,
a former co-chief operating officer of Taiwan Semiconductor Manufacturing Co., as vice chairman.

Dr. Liang, who also spent a large chunk of his career at TSMC, abstained from voting on the appointment, without giving a reason, a filing showed. The Wall Street Journal couldn’t reach Dr. Liang for comment. SMIC didn’t respond to a request for comment.

SMIC stock fell 5.5% in Shanghai, after earlier dropping as much as 9.8%. Its Hong Kong-listed stock lost nearly 5%.

Kevin Chen,
an analyst with China Merchant Securities Co., said Dr. Liang had spearheaded research and development at SMIC, and was key in helping the company bridge technological gaps with rivals in recent years.

Additional selling pressure came from MSCI’s decision, Mr. Chen said. It follows similar moves by rivals such as FTSE Russell after an executive order by President

Trump
barred American investment in companies the U.S. says helps China’s military.

Dr. Liang’s potential departure could set back the company’s future technological progress, Bernstein analysts including

Mark Li
wrote in a note to clients.

“Being a national champion with huge governmental investments, SMIC inevitably has some considerations that professional managers may not share,” the Bernstein analysts added. “Building a team that collaborates together toward a common goal is essential, but is something that money alone can’t buy.”

SMIC, which is a central player in Beijing’s push to become self-reliant in semiconductors, is facing U.S. pressure on several fronts.

The Commerce Department has told U.S. computer-chip companies they must obtain licenses before exporting certain technology to SMIC, The Wall Street Journal reported in September. The department said exports to SMIC risked being used for Chinese military activities.

Those restrictions could cut SMIC off from equipment used to manufacture chips, since American companies are major suppliers of such hardware.

SMIC also said Tuesday it faced a civil lawsuit in the U.S. seeking compensation for alleged violation of securities laws.

Write to Xie Yu at Yu.Xie@wsj.com

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