SEMICONDUCTOR Manufacturing International Corp plans to set up a US$3.59 billion joint venture in Beijing with three partners that will help boost production capacity, the biggest semiconductor firm in the Chinese mainland said in a statement yesterday.

The venture, which still needs government approval, will principally engage in testing, development, design, manufacturing, packaging and sale of integrated circuits.

To be located in the Economic Technological Development Area in Beijing, the venture will focus on 45-nanometer, the most advanced technology, and reach a production capacity of 35,000 wafers per month, SMIC said.

Gu Wenjun, analyst of iSuppli, a US-based research firm, said: "SMIC's investment will solve the problem of the production shortage of the domestic integrated circuit market."

Shanghai-based SMIC signed a deal with SMIC Beijing, Beijing Industrial Developing Investment Co and Zhongguancun Development Group to establish the venture, Hong Kong-listed SMIC said.

The partners will contribute US$1.2 billion of the total investment in the form of registered capital, and the balance is to be funded through the venture's internal cash flow as well as more contribution by the partners and loans from them and banks.

SMIC and SMIC Beijing, its wholly owned subsidiary, will contribute 55 percent, or US$660 million, of the registered capital. The other investors will provide the remaining 45 percent, or US$540 million.