China's leading chipmaker Semiconductor Manufacturing International Corporation (SMIC) has inked an agreement with Shenzhen's government to build a $2.35 billion chip-making plant in the southern municipality, the company said Wednesday in a filing to Hong Kong's bourse.

SMIC Shenzhen will focus on the production of 28-nanometer and above integrated circuits and technical services with a goal of producing 40,000 12-inch wafers per month, with production expected to commence in 2022.

SMIC will own a 55-percent stake, while state-owned Shenzhen Major will own up to 23 percent.

The 28nm node, introduced by Taiwan Semiconductor Manufacturing Corporation in 2011, has been used in industries from automaking, smartphones to smart TVs.

The Trump administration has set restrictions on exports to SMIC, where U.S. suppliers to the chipmaker must apply for a license to sell equipment and materials to the Chinese wafer fab over alleged national security concerns.

Despite the U.S. ban, SMIC reported record-high financial results of $3.91 billion in 2020 on robust demand for semiconductors in consumer electronics.

Beijing is acting swiftly to reduce dependence on the U.S. and other countries in the West for chip supplies, which became more urgent after a global shortage of semiconductors due to the pandemic. Its latest five-year economic plan also takes research into cutting-edge chips as a priority.

SMIC now has a total of seven fabrication plants in four Chinese cities – Beijing, Shanghai, Tianjin and Shenzhen – with four producing 12-inch wafers and three producing 8-inch wafers. The larger 12-inch wafers save on cost but are far more difficult to fabricate.

"Silicon wafer is a fundamental raw material in semiconductor manufacturing, yet it is also one of the areas in China's semiconductor supply chain that has the lowest level of local production, especially 12-inch silicon wafers," Li Wei, executive vice president of the National Silicon Industry Group was quoted by Bloomberg.

(With input from agencies)