The country is running extremely low on advanced microchips following a US ban on many sales to the country, and after production lines were hit by the Covid-19 pandemic.

The US government blacklisted Semiconductor Manufacturing International Corp (SMIC) last September over security concerns, denying it access to advanced manufacturing equipment from American suppliers.

On Friday SMIC – which has denied links to the Chinese military – said it would pour investment into a new chip plant in the east of the country.

“The new plant in Shanghai will produce about 100,000 12-inch wafers per month,” SMIC said in filing to the Hong Kong stock exchange.

These are older-generation chips globally in short supply and used in everything from home appliances to self-driving cars.

“The US tech export ban has affected plans to develop smaller, more advanced chips,” the group’s CEO Zhang Haijun told state-run Global Times last month.

SMIC has received billions of dollars in support from Beijing and is at the heart of its efforts to improve the country’s technological self-sufficiency.

There has been a flurry of new investment pledges by chipmakers after major Chinese tech hubs announced concessions including tax breaks and low rents in recent months.

SMIC announced plans to build smaller semiconductor factories in Beijing and Shenzhen earlier this year.

In April, Taiwan Semiconductor Manufacturing Co – the world’s biggest contract chipmaker – said it would invest US$2.8 billion to expand its production capacity in Nanjing.