Contract chipmaker Semiconductor Manufacturing International Corporation (SMIC) has announced a definitive investment agreement between the company and China Investment Corporation (CIC), China's sovereign wealth fund.

Under the terms of the agreement, CIC will invest US$250 million in SMIC to acquire 360,589,053 convertible preferred shares at HK$5.39 (US$0.69) per convertible preferred share. After issuance and conversion of the new shares, CIC will own approximately 11.6% of SMIC's outstanding share capital.

The agreement also provides CIC with warrants for investing an additional US$50 million in SMIC on the same terms, and entitles CIC to nominate one member of SMIC's board of directors.

"Their investment in SMIC provides a source of capital that allows us to take full advantage of our project pipeline," said company chairman Jiang Shangzhou. "Partnering with CIC is conducive to realizing our development objectives and enhancing our competitive advantage in the international arena."

The agreement between SMIC and CIC is subject to customary conditions, regulatory approvals and shareholder approval.