SMIC, UMC and others are involved in the shakeout--or consolidation--as there are simply too many foundry vendors in China. The shakeout includes the ''pending merger'' between Shanghai Hua Hong NEC Electronics Co. Ltd. (HHNEC) and Grace Semiconductor Manufacturing Corp. (GSMC), according to iSuppli Corp.

''This will significantly reshape China's foundry industry,'' according to the research firm.

Founded in 1997, HHNEC (Shanghai) is a joint venture between state-run Shanghai Hua Hong and NEC Electronics. Located in the Zhangjiang Hi-Tech Park in Pudong, Shanghai, GSMC has struggled in recent times. In 2007, GSMC named Ulrich Schumacher, a former executive of Infineon Technologies AG, as its president and CEO. Three fabs based on 300-mm wafer specifications have been constructed by GSMC.

There are other moves in China. In April, Taiwan's United Microelectronics Corp. (UMC) said it will pay $285 million to acquire the 85 percent of Chinese foundry He Jian Technology Co. Ltd. that it did not already own,

''Looking ahead, Semiconductor Manufacturing International Corp. (SMIC) very well may acquire Cension Semiconductor Manufacturing International and Wuhan Xinxin Semiconductor Manufacturing Corp., two companies it is managing,'' according to iSuppli.

Cension is based in Chengdu and run by SMIC. Wuhan Xinxin is based in Wuhan.