The foundry business is very difficult and companies are struggling to adjust. There was a management shakeup last month in GlobalFoundries, which announced that Doug Grose had stepped down as CEO and would be replaced by Ajit Manocha, who was previously vice president of operations at memory company Spansion.

TSMC is technologically more advanced than SMIC, which is key in attracting customers, McClean said. SMIC has said it would implement the 40-nanometer manufacturing process by the end of the year, while TSMC is already manufacturing chips in volume using the 40-nm process.

Being based in China is also a challenge for SMIC in attracting customers, McClean said. China is notorious for not protecting intellectually property, and companies are concerned about sending their products for manufacturing to the country.

Earlier in the week SMIC also announced that the company's chairman, Jiang Shang Zhou, had passed away.