Document:

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Fujitsu/SMIC Confidential

                                                                    Exhibit 10.4

                                License Agreement
                                 FUJITSU & SMIC

THIS LICENSE AGREEMENT (the "Agreement") is made and entered into as of the 14th
day of August, 2002 (the "Effective Date") by and between FUJITSU LIMITED, a
corporation organized and existing under the laws of Japan with its principal
office at 50 Fuchigami, Akiruno, Tokyo 197-0833, Japan ( "FUJITSU") and
Semiconductor Manufacturing International Corporation, duly organized and
existing under the laws of Cayman Islands (British), having its registered
office at P.O. Box 309, Grand Cayman, B.W.I. and Semiconductor Manufacturing
International (Shanghai) Corporation, duly organized and existing under the laws
of the People's Republic of China, having its principal place of business at 18
ZhangJiang Road, PuDong New Area, Shanghai, the People's Republic of China
(hereinafter collectively "SMIC").

                                 WITNESSETH THAT:

WHEREAS, FUJITSU and SMIC entered into certain Foundry Agreement on September
26, 2001 (the "Foundry Agreement"), in which FUJITSU transferred and SMIC
brought up the wafer process technology equivalent to FUJITSU'S 0.22um DRAM
("[***]") wafer process technology under said Agreement.

WHEREAS, SMIC desires to make better use of such [***] wafer process technology
to enhance its productivity by producing certain DRAM products and foundry
products for third party customers, and

WHEREAS, FUJITSU is willing to grant SMIC a license to do so under certain
intellectual property rights and technical information of FUJITSU,

NOW THEREFORE, in consideration of the above premises and mutual covenants
contained herein, both parties hereto agree as follows:

Article 1.    Definitions

1.1  "FUJITSU Process Technology" shall mean the front-end manufacturing process
     technology of 0.22-micron (what FUJITSU calls "[***]") for manufacturing
     Licensed Products (hereinafter defined) and Foundry Products (hereinafter
     defined) which is owned or developed by FUJITSU, which FUJITSU has the
     right to grant a license to SMIC without payment of any compensation to
     third parties, and which is described in the Deliverables (hereinafter
     defined) and has been brought up by SMIC under the Foundry Agreement.

1.2  "FUJITSU Product Design" shall mean the product design data for Licensed
     Products which is owned or developed by FUJITSU, which FUJITSU has the
     right to grant a license to SMIC without payment of any compensation to
     third parties, and which is described in the Deliverables.
1.3  "Licensed Products" shall mean certain 64Mbit synchronous dynamic
     random-access memory (SDRAM) devices, part number of which are listed in
     Exhibit A, using FUJITSU Process Technology and FUJITSU Product Design
     whether in a die form or in a wafer form.
1.4  "Foundry Products" shall mean semiconductor devices incorporating DRAM Cell
     Array (hereinafter defined) therein, whether in a die or in a wafer form,
     which are designed by SMIC's customer ("Foundry Customer") excluding
     FUJITSU and manufactured by SMIC on behalf of the Foundry Customer by using
     FUJITSU Process Technology, the photo-masks or data for making

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     photo-masks in a completed form provided by the Foundry Customer. The
     number of Foundry Customers shall be limited to eight (8) concurrently. Any
     additional Foundry Customers exceeding eight (8) will be discussed by the
     parties.
1.5  "DRAM Cell Array" shall mean certain portion of Foundry Product which
     portion consists of memory cell, boundary cell, sense amplifier and word
     decoder/driver, using memory cell, boundary cell, sense amplifier and word
     decoder/driver portion of FUJITSU Product Design based on FUJITSU Process
     Technology provided by FUJITSU (hereinafter called "FUJITSU DRAM Cell
     Design").
1.6  FUJITSU Technology shall mean the FUJITSU Process Technology, FUJITSU
     Product Design and FUJITSU DRAM Cell Design.
1.7  "FUJITSU Intellectual Property Rights (IPR)" shall mean all patents, patent
     applications, maskwork rights, copyrights, trade secrets, know-how and
     other intellectual property rights in all countries of the world which are
     incorporated or embodied in FUJITSU Technology, and which are acquired by
     FUJITSU or under which FUJITSU has the right to grant a license to
     SMIC hereunder without payment of any compensation to third parties as of
     Effective Date or thereafter during the term of this Agreement.
1.8  "Net Sales" shall mean the actual sales price charged by SMIC to (1) its
     customers for Licensed Products and (2) its Foundry Customers for Foundry
     Products, but the following items may be excluded: amounts invoiced to its
     customers and/or Foundry Customers for returned goods for which a refund is
     given, normal sales discounts actually granted, insurance fees and packing
     and transportation charges, and taxes levied on lease or sale of such
     Foundry Products and actually incurred and paid by SMIC and in case of
     Foundry Products, any verified market testing costs and packaging cost to
     be confirmed by the parties and actually borne by SMIC for testing and/or
     packaging of the Foundry Products, if applicable.
1.9  "Deliverables" shall mean the documents, data, or any other form of the
     FUJITSU Technology defined in Article 1.6 above to be delivered by FUJITSU
     to SMIC hereunder. The details of the Deliverables are set forth in Exhibit
     B attached hereto.

Article 2.  Grant of License
2.1  Subject to the terms and conditions of this Agreement and the payments by
     SMIC as specified in Article 4, FUJITSU hereby grants to SMIC during the
     term of this Agreement a non-transferable, non-exclusive, worldwide and
     royalty-bearing license to use FUJITSU Process Technology. FUJITSU Product
     Design and FUJITSU IPR incorporated or embodied in FUJITSU Process
     Technology and FUJITSU Product Design, to manufacture Licensed Products at
     SMIC's own facilities and to market and sell such manufactured Licensed
     Products.
2.2  Subject to the terms and conditions of this Agreement and payment by SMIC
     under Article 4 below, FUJITSU, hereby grants to SMIC during the term of
     this Agreement a non-transferable, non-exclusive, worldwide and
     royalty-bearing license (i) to use FUJITSU Process Technology and FUJITSU
     IPR incorporated or embodied in FUJITSU Process Technology to manufacture
     the Foundry Products on behalf of the Foundry Customer at SMIC's own
     facilities and to supply such manufactured Foundry Products to the Foundry
     Customer, (ii) to use FUJITSU DRAM Cell Design and FUJITSU IPR incorporated
     or embodied therein to manufacture DRAM Cell Array incorporated in the
     Foundry Products on behalf of the Foundry Customer at SMIC's own facilities
     and to supply such manufactured DRAM Cell Array to the Foundry Customer.
2.3  Prior to engaging in any foundry arrangements with any Foundry Customer,
     SMIC shall inform FUJITSU in writing of such Foundry Customer's identity by
     filling out an application form

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     provided by FUJITSU. FUJITSU shall have the right to approve or disapprove
     within five (5) working days after the receipt of the application form
     filled out by SMIC. In the event of denial, FUJITSU shall provide a
     thorough explanation of the disapproval to SMIC. Upon delivery to SMIC of
     FUJITSU'S prior written approval, SMIC may disclose the FUJITSU DRAM Cell
     Design to the approved Foundry Customers for the sole purpose of their
     design of Foundry Products for exclusive manufacture at SMIC, provided that
     SMIC shall require such Foundry Customers prior to disclosure to enter into
     and comply with a written confidentiality agreement which FUJITSU deems
     reasonable and appropriate enough to protect and keep the confidentiality
     of the FUJITSU Technology. SMIC shall be responsible for the compliance by
     such Foundry Customers with such written confidentiality agreement.
2.4  It is confirmed and acknowledged by the parties that licenses granted under
     the Articles 2.1 and 2.2 shall not extend (i) to any design, circuit,
     specification, instruction or information of Licensed Products other than
     that incorporated in the DRAM Product Design or of Foundry Products other
     than that incorporated or embodied in DRAM Cell Array or (ii) to any
     back-end process of Licensed Products or Foundry Products.
2.5  Subject to the terms and conditions of this Agreement and payment by SMIC
     under Article 4 below, FUJITSU hereby grants to SMIC during the term of
     this Agreement a non-transferable, non-exclusive and worldwide license to
     reproduce, translate into English language and/or revise. Deliverables in
     whole or in part only as necessary for SMIC to exercise its license or
     perform its obligations under this Agreement subject to prior written
     consent of FUJITSU; provided that SMIC acknowledges that the copyright and
     any other proprietary right on such reproductions, translations and/or
     revisions shall remain proprietary to FUJITSU and further that FUJITSU
     shall not be responsible in any manner for whatever claims, liabilities,
     losses or damages arisen in connection with such reproductions,
     translations and/or revisions. SMIC shall affix the same copyright notice
     and proprietary notice as contained in the original Deliverables delivered
     to SMIC hereunder to all reproductions, translations and/or revisions made
     by SMIC.
2.6  The rights granted to SMIC hereunder shall not include any right to grant
     sublicenses to any third party or to have Licensed Products or Foundry
     Products made by any third party (except for SMIC's wholly-owned
     subsidiaries located in the People's Republic of China (or Mainland China)
     from time to time subject to prior written notice by SMIC to FUJITSU).
2.7  All rights not expressly granted under this Agreement are reserved to
     FUJITSU and, except as expressly set forth in this Agreement, no
     manufacturing, distribution or other rights are granted to SMIC with
     respect to the FUJITSU Technology, the FUJITSU IPR or any other
     technologies, products, or FUJITSU's name or trademarks. It is further
     agreed and acknowledged by the parties that no license, copyright or other
     interest is granted directly or indirectly by FUJTSU to SMIC as a result of
     conveying the technical information for reference purpose only to SMIC.
2.8  SMIC further acknowledges and agrees that nothing in this Agreement is
     intended to grant any license or right to any FUJITSU technical information
     that has been provided to SMIC by FUJITSU, including, but not limited to,
     sort test program whether in source code or object code, sort test
     specification or Product specific information under the Foundry Agreement,
     except otherwise specifically authorized by FUJITSU under this Agreement.
2.9  In the event any one of Foundry Customers brings or institute actions or
     suits against FUJITSU for FUJITSU's alleged infringement of any
     intellectual property rights of it, then all license and granted to SMIC by
     FUJITSU hereunder shall terminate upon SMIC's receipt of FUJITSU's notice
     for such particular Foundry Customer and any of its Foundry Product.

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Article 3.  Deliverables and Technical Assistance
3.1  After Effective Date, FUJITSU shall deliver to SMIC those Deliverables not
     previously delivered, including those relating to FUJITSU Product Design
     and FUJITSU DRAM Cell Design in accordance with the schedule set forth in
     Exhibit B attached hereto.
3.2  With respect to for Licensed Products, FUJITSU will provide the following
     technical assistance with respect to FUJITSU Product Design and/or Licensed
     Products.

     a.   FUJITSU will instruct its probe card vendor to allow it to sell probe
          cards for Licensed Products solely to SMIC.

     b.   It is agreed by the parties that they will separately enter into a
          certain sort test program source code agreement under which FUJITSU
          will grant license to FUJITSU sort test program to SMIC.
     c.   SMIC agree that the technical assistance to be provided by FUJITSU is
          limited to the following area.
          -    To answer questions SMIC may have with respect to Device
               Information Materials

          -    To summarize probe test results and to answer questions SMIC may
               have with respect the probe test (excluding Licensed Product
               with configuration of x 4 comparable to FUJITSU's [***]) till
               evaluation samples are produced, but no more than thirty (30)
               days after the evaluation samples are delivered to FUJITSU
          -    To summarize engineering data log for evaluation samples for only
               once and to answer questions SMIC may have with respect the
               engineering data log about evaluation samples (excluding
               Licensed Product with configuration of x 4 comparable to
               FUJITSU'S [***]) but no more than thirty (30) days after FUJITSU
               provides summary of such engineering data log.

          -    To give consulting about process integration till evaluation
               samples are produced
3.3  With respect to Foundry Products, FUJITSU will provide the following
     technical assistance. SMIC agrees to minimize the technical assistance to
     be provided by FUJITSU with respect to FUJITSU DRAM Cell Design. It is
     expected that the technical assistance to be provided by FUJITSU to SMIC
     will be mainly through tele-conferences, facsimile or e-mails within thirty
     (30) days after the delivery of each Deliverables for FUJITSU DRAM Cell
     Design.
3.4  At SMIC's written request and FUJITSU'S written consent, FUJITSU may
     additionally provide other technical information which is not included in
     the Deliverables, but which FUJITSU and SMIC agree is necessary for SMIC
     for the purpose of this Agreement. Such additional technical information to
     be provided by FUJITSU shall be deemed FUJITSU Technology.
3.5  SMIC agrees to minimize the technical assistance to be provided by FUJITSU
     with respect to any possible additional technical information mentioned
     above in Article 3.4. It is expected that the technical assistance to be
     provided by FUJITSU to SMIC will be mainly through tele-conferences,
     facsimile or e-mails within thirty (30) days after the delivery of each
     additional technical information. Beyond the abovementioned thirty (30)
     days period of time, if deemed necessary by FUJITSU for SMIC to carry out
     the licenses granted hereunder, FUJITSU may provide such technical
     assistance in good faith upon SMIC's request. FUJITSU will support any
     reasonable requests from SMIC. No other FUJITSU technical support, such as
     failure analysis, mask making, test programs, except otherwise mutually
     agreed upon the parties, will be provided to SMIC with respect to Foundry
     Customers designs or products or Licensed Products.

Article 4.  License Fee
4.1  In consideration of the rights and licenses granted in Article 2, SMIC
     shall pay FUJITSU the

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     following running royalty corresponding to the following three business
     arrangement:

     (1)  [***]of Net Sales of all Licensed Products to its customers, and/or
     (2)  [***]of Net Sales of all Foundry Products to Foundry Customers who
          used to be the customers of other similarly situated FUJITSU's
          licensee of FUJITSU Process Technology and FUJITSU DRAM Cell Design,
          and/or
     (3)  [***]of Net Sales of all Foundry Products to any new Foundry Customers
          who have never be the customers of other similarly situated FUJITSU's
          licensee of FUJITSU Process Technology and Fujitsu DRAM Cell Design up
          to an accumulated royalty amount of [***], thereafter, [***] of Net
          Sales of all Foundry Products to such new Foundry Customers.
4.2  Within thirty (30) days after June 30 and December 31 of each year during
     the term of this Agreement, SMIC shall furnish to FUJITSU a sales statement
     which FUJITSU will keep in strict confidence certified by an officer or
     authorized representative of SMIC specifying the number of units and the
     total amount of sales of Licensed Products to third parties and the number
     of units and the total amount of sales of Foundry Products per Foundry
     Customer sold to its Foundry Customers by SMIC during the preceding
     calendar half-year and the total amounts of the running royalty for
     Licensed Products and Foundry Products payable to FUJITSU hereunder for
     such calendar half year.
4.3  Within sixty (60) days after June 30 and December 31, SMIC shall make
     payments of the running royalty in U.S. dollar calculated in accordance
     with Article 4.2 above to FUJITSU.
4.4  SMIC shall keep true and accurate records and books of accounts relating to
     the sales and manufacture of the Licensed Products and Foundry Products
     with accounting principles appropriate enough for FUJITSU to verify the
     sales and other statement provided by SMIC for any particular half-year
     period as set for the in Article 4.2 above for three (3) years after the
     end of such half-year period ("Auditing Period"). FUJITSU shall have the
     right, through a certificate independent public accountant designated by
     FUJITSU and acceptable to SMIC, provided that SMIC shall not unreasonably
     withhold its acceptance, to make an examination and audit at most once per
     year. If such an examination reveals an underpayment of running royalty
     which is more than three percent (3%) of the total running royalty reported
     for each applicable reporting period. SMIC shall be responsible for the
     costs of such an examination. In case of such underpayment, SMIC shall pay
     the cost of such auditing and the deficiency plus the interest calculated
     at the rate set forth in Section 4.6 below.
4.5  Payments hereunder shall be made without deductions of taxes, assessments,
     or other charges of any kind which may be imposed on FUJITSU with respect
     to any amounts due to FUJITSU pursuant to this Agreement, and such taxes,
     assessments or other charges shall be paid by SMIC. However, income taxes
     or taxes of similar nature imposed on FUJITSU on account of the fixed fee
     payment and the running royalty payment hereunder by the Government of the
     Cayman Islands and/or the People's Republic of China or any political
     subdivision thereof and paid by SMIC for the account of FUJITSU shall be
     deductible from the fixed fee payment and the running royalty payment due
     to FUJITSU. To assist FUJITSU in obtaining such credit, SMIC shall furnish
     FUJITSU with such evidence as may be required by taxing authorities of the
     Government of Japan to establish that any such taxes have been paid.
4.6  SMIC shall be liable for interest on any overdue payments, at the rate of
     [***] per annum, or the highest rate allowed by law, whichever is less,
     commencing on the date such payments are due until paid.

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Article 5.  Warranties and Limitation of Liability
5.1  Nothing contained in this Agreement shall be construed as :
a)   a warranty or representation by FUJITSU as to the validity or scope of any
     FUJITSU IPR or FUJITSU Technology;
b)   conferring upon SMIC any license, right or privilege under any intellectual
     property rights or other technical information of FUJITSU except the
     licenses, rights and privileges expressly granted hereunder;
c)   a warranty or representation that any acts licensed hereunder will be free
     from infringement of patent, copyrights, maskwork rights or any other
     intellectual property rights;
d)   an agreement to bring or institute actions or suits against third parties
     for infringement or conferring any right to bring or institute actions or
     suits against third parties for infringement;
e)   conferring upon SMIC any right to use in advertizing, publicity, or
     otherwise any trademark, trade name or names or any contraction,
     abbreviation or simulation thereof, of FUJITSU; or
f)   an obligation of FUJITSU to furnish any technical information or know-how
     except the obligation expressly provided in this Agreement
5.2  Notwithstanding the foregoing, in the event any claim, action, lawsuit or
     proceeding is threatened, made or brought by a third party against SMIC
     based on alleged infringement by Licensed Products manufactured by SMIC
     arising directly from SMIC's use in accordance with and within die scope of
     this Agreement of FUJITSU Technology, Deliverables and/or FUJITSU IPR
     provided and/or licensed to SMIC hereunder, of any intellectual property
     rights owned by any third party, FUJITSU will, at SMIC's written request
     and cost, use its commercially reasonable efforts to provide SMIC with
     technical assistance in connection with the defense and settlement of such
     claim or action, including but not limited to providing the technical
     information, provided that SMIC promptly advises FUJITSU in writing of any
     such claim or action. Notwithstanding the foregoing, in no event shall
     FUJITSU be required to provide any assistance for any intellectual property
     right infringement claim or action by third parties arising from the
     combination of the FUJITSU Technology, Deliverables and/or FUJITSU IPR
     provided and/or licensed to SMIC hereunder with other technology, designs,
     instructions, specification or any other information not provided by
     FUJITSU where such alleged infringement would not have occurred but for
     such combination.
5.3  FURTHERMORE, EXCEPT AS SPECIFIDED IN THIS AGREEMENT, FUJITSU DOES NOT MAKE
     ANY WARRANTIES, WHETHER EXPRESS OR OTHERWISE, CONCERNING FUJITSU IPR OR
     FUJITSU TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
     MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES OF
     FREEDOM FROM ERRORS OF DEFECTS OR NON-INFRINGEMENT.
5.4  IN NO EVENT SHALL FUJITSU BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL,
     INDIRECT, OR INCIDENTAL DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY
     AND WHETHER OR NOT FUJITSU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
     DAMAGES, ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE FUJITSU TECHNOLOGY
     OR LICENSED PRODUCTS OR FOUNDRY PRODUCTS OR OTHERWISE PROVIDED PURSUANT TO
     THIS AGREEMENT. IN NO EVENT SHALL FUJITSU'S LIABILITY HEREUNDER EXCEED THE
     AMOUNT OF FEES ACTUALLY PAID TO FUJITSU HEREUNDER.

Article 6.  Confidential Information
6.1  SMIC shall keep all and any technique, know-how, and other information,
     including FUJITSU Technology, furnished or disclosed to SMIC by FUJITSU
     hereunder, which are marked as

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     confidential or proprietary in case such information is disclosed in
     documentary or other tangible form or which are first identified as
     confidential at the time of disclosure by FUJITSU in case of intangible
     disclosures, such as verbal or machine readable, and are summarized in
     writing for confirmation and sent to SMIC within thirty (30) days after
     such disclosure and designated as confidential or proprietary (hereinafter
     collectively called "FUJITSU Confidential Information") in strict
     confidence and use FUJITSU Confidential Information only for the purpose
     permitted under this Agreement. It is agreed and acknowledged by the
     parties that the confidential information disclosed between the partied
     under the NON-DISCLOSURE AGREEMENT of January 12th, 2001 by FUJITSU and
     SMIC and/or the Foundry Agreement shall be deemed Confidential Information
     under this Agreement.
6.2  SMIC shall not disclose any FUJITSU Confidential Information to any party
     except for its officers or employees who have a need-to-know to exercise
     the license or perform its obligations under this Agreement or except as
     necessary for SMIC to exercise its license or perform its obligations under
     this Agreement; provided that (a) SMIC shall require such its officers or
     employees and any third party to whom disclosure of FUJITSU Confidential
     Information is necessary to agree prior to disclosure in writing to comply
     with the confidentiality obligations which FUJITSU deems reasonable and
     appropriate enough to protect the FUJITSU Confidential Information under
     this Agreement; a copy of which must be provided to FUJITSU by SMIC prior
     to their access to FUJITSU Confidential Information, (b) SMIC shall
     exercise the same degree of care to safeguard the confidentiality of such
     FUJITSU Confidential Information as it would exercise in protecting the
     confidentiality of similar property of its own (but in no event less than a
     reasonable degree of care ); and (c) agrees to use its diligent efforts to
     prevent inadvertent or unauthorized disclosure, publication or
     dissemination of any FUJITSU Confidential Information.
6.3  SMIC further ensures and warrants to FUJITSU that it maintains reasonable
     security and safety practices and controls in its premises sufficient to
     prevent any unauthorized disclosure or use of the FUJITSU Confidential
     Information or unauthorized use or misappropriation with respect to the
     FUJITSU Confidential Information or direct products thereof. Such practices
     shall include, but not limited to, to cause any visitor to sign in and out
     each time it visits SMIC's premises, or to inspect its employees to check
     if they do not bring any FUJITSU Confidential Information, direct products
     including Licensed Products and/or Foundry Products with them when they
     leave from SMIC's premises, or to maintain in its premises a secure
     location in which any FUJITSU Confidential Information shall be stored and
     which is accessible only by SMIC's employees who have a absolute need to
     know the same for the performance of this Agreement
6.4  Each party hereto shall keep the existence and terms of this Agreement in
     strict confidence, and shall not, directly or indirectly, disclose any of
     the existence and terms of this Agreement to any third party.
6.5  Nothing in this Agreement shall prohibit SMIC from disclosing the FUJITSU
     Confidential Information or the existence and terms and conditions of this
     Agreement if legally required to do so by judicial or governmental order or
     deposition, interrogatory, request for documents subpoena, civil
     investigative demand or similar process in judicial or governmental
     proceeding ("Required Disclosure"): provided that SMIC shall (i) give
     FUJITSU prompt notice of such Required Disclosure prior to disclosure, (ii)
     cooperative with FUJITSU in the event that it elects to contest such
     disclosure or seek a protective order with respect thereto and/or (iii) in
     any event only disclose the exact the FUJITSU Confidential Information or
     the terms and conditions of this Agreement, or portion thereof,
     specifically required by the Required Disclosure.
6.6  SMIC acknowledges that unauthorized disclosure of FUJITSU Confidential
     Information would

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     subject to irreparable injury and that FUJITSU shall be entitled, without
     waiving any other rights or remedies to such injunctive or equitable relief
     as may be deemed proper by a court of competent jurisdiction.
6.7  SMIC shall keep true and accurate books and records relating to the
     disclosure of FUJITSU Confidential Information to the extent authorized
     hereunder, manufacture and supply of Licensed Products and/or Foundry
     Products sufficient and appropriate enough for FUJITSU to verify SMIC's
     compliance with the terms and conditions of this Agreement FUJITSU has the
     right, with a reasonable prior notice and during normal business hours and
     SMIC's approval thereof which shall not be unreasonably withheld, to visit
     the SMIC premises and conduct an audit for the purpose of verifying SMIC's
     compliance with the terms and conditions, including but not limited to
     confidentiality obligations, hereunder, provided that SMIC shall hot be
     required, in connection with such audit, to violate its confidentiality
     obligations with any third party. If any such audit should disclose
     improper conduct by SMIC of the terms and condition of this Agreement, SMIC
     shall immediately bring itself into compliance with this Agreement and
     FUJITSU has the right to enforce SMIC and its employees the terms and
     conditions of this Agreement
6.8  Notwithstanding the foregoing provision of this Article 6, the following
     information shall not be deemed FUJITSU Confidential Information:
     a)   information that is in the public domain at the time of FUJITSU'S
          release thereof to SMIC;
     b)   information that falls into the public domain through no act or
          failure of act on the part of SMIC subsequent to the time of FUJITSU'S
          release thereof to SMIC;
     c)   information that is already in the possession of SMIC at the time of
          FUJITSU'S release thereof to SMIC;
     d)   information that is independently developed by SMIC without having an
          access to FUJITSU Confidential Information on or after FUJITSU'S
          release thereof to SMIC; or
     e)   information that is rightfully received by SMIC from any third party
          and not under obligation of confidentiality on or after FUJITSU'S
          release thereof to SMIC
6.9  The confidentiality obligation under this Article shall continue during the
     term of this Agreement and for five (5) years after the cancellation or
     termination of this Agreement.

Article 7.  Term
7.1  This Agreement shall come into force and effect on Effective Date and shall
     continue to be effective for five (5) years after Effective Date.
7.2  Subsequent to the five (5) years set forth in Article 7.1 above, the term
     of this Agreement shall be extended on an annual basis, subject to the
     governmental authorizations required for the extension, unless either party
     hereto gives to the other party a notice to terminate this Agreement in
     writing at least six (6) months prior to the end of the then current
     five-year or one-year term of this Agreement
7.3  Both parties hereto may terminate this Agreement at any time for the
     purpose of mutual benefit upon the mutual agreement

Article 8.  Cancellation of this Agreement
8.1  Notwithstanding Article 7 above, FUJITSU may cancel this Agreement
     forthwith by giving a written notice to SMIC in the event of one or more of
     the following :
     a)   the filing by SMIC of a petition in bankruptcy or insolvency ;
     b)   the filing by any third party of a petition in bankruptcy or
          insolvency against SMIC, unless such filing is set aside, dismissed or
          withdrawn or ceased to be in effect within thirty (30) days

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Fujitsu/SMIC Confidential

          from the date of such filing; -
     c)   the filing by SMIC of any legal action or document seeking
          reorganization, readjustment or arrangement of SMIC's business under
          any law relating to bankruptcy or insolvency;
     d)   the appointment of a receiver or bankruptcy trustee for all or
          substantially all of the property of SMIC;
     e)   the making by SMIC of any assignment for the benefit of creditors;
     f)   the institution of any proceedings for the liquidation or winding up
          of SMIC's business or for the termination of its corporate charter; or
     g)   failure to correct or cure any material breach by SMIC of any covenant
          or obligation under this Agreement within thirty (30) days after
          receipt by such other party of a written notice from FUJITSU
          specifying such breach.
8.2  In addition to Article 8.1 above, in the event that:
     a)   SMIC consolidates with or mergers with or into another corporation,
          partnership, or other entity, whether or not SMIC is the surviving
          entity of such transaction;
     b)   SMIC sells, assigns or otherwise transfers all or substantially all of
          SMIC's assets or semiconductor business to a third party; or
     c)   any substantial change takes place in controlling the ownership or
          management of SMIC which affects the decision-making of SMIC's
          management or operations;
     and such event(s) is judged by FUJITSU after careful consideration to be
     detrimental to FUJITSU, FUJITSU may cancel this Agreement upon thirty (30)
     days' advance written notice to SMIC.

Article 9.  Effect of Termination or Cancellation
9.1  All licenses and rights granted to SMIC under Article 2 hereof shall cease
     on the date of termination or cancellation of this Agreement. (The ceasing,
     under this Article 9.1, of the licenses and rights granted to SMIC under
     Article 2 hereof is hereinafter called License Ceasing.)
9.2  In case of License Ceasing, SMIC shall, in accordance with the instruction
     of FUJITSU, return to FUJITSU all FUJITSU Confidential Information
     including Deliverables received from FUJITSU under this Agreement including
     all copies, or extractions or translations thereof. The confidentiality
     obligation of SMIC under Article 6 shall survive cancellation or
     termination of this Agreement.
9.3  No termination or cancellation of this Agreement shall disturb or revoke
     any rights or licenses with respect to any Licensed Products and/or Foundry
     Products which has been manufactured or whose manufacture is completed of
     the date of termination or cancellation, provided such manufactured
     Licensed Products and/or Foundry Products shall be sold in accordance with
     the terms and conditions of this Agreement within six (6) months after the
     date of termination or cancellation of this Agreement. Sales of such
     manufactured Licensed Products and/or Foundry Products shall be subject to
     the running royalty payments as set forth in Article 4. Such final payment
     shall be made by SMIC within thirty (30) days after the last day of such
     six (6) months.
9.4  No termination or cancellation of this Agreement shall release either party
     from any liability which at the time of termination or cancellation has
     already accrued, or shall in any way affect the survival of any right, duty
     or obligation of either party which is contemplated to be performed as of
     the date of or after such termination or cancellation.

Article 10. Export/Import License
SMIC hereto shall not export or re-export, directly or indirectly, any technical
information disclosed hereunder or direct product thereof to any destination
prohibited or restricted by the export control

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Fujitsu/SMIC Confidential

regulations of Japan, People's Republic of China, the United States and any
other relevant governments, including the U.S. Export Administration
Regulations, without the prior authorization from the appropriate governmental
authorities SMIC hereby certifies that SMIC will not use technical information
supplied by FUJITSU hereunder for any purpose to develop or manufacture nuclear,
chemical, biological weapons or missiles (hereinafter "weapon of mass
destruction"). SMIC further certifies that it will not sell any products
manufactured using FUJITSU'S technical information supplied hereunder to any
third party if it knows or has reason to know that the end-user of the products
will use them for the development and/or manufacture of the weapons of mass
destruction.

Article 11. Assignment
Neither party hereto shall, operation of law or otherwise, in whole or in part,
assign or otherwise transfer this Agreement or any of rights oc obligations
created thereunder without the prior written consent of the other party. Any
attempted or purported assignment or delegation by either party without such
consent shall be void and deemed a material breach of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties'
permitted successors or assignees.

Article 12. Governing Law
The validity, construction, performance and enforceability of this Agreement
shall be governed in all respects by the laws of the State of California, USA.

Article 13. Arbitration
The parties hereto shall use their best endeavors to settle by mutual agreement
any disputes, controversies which may arise from, under, out of or in connection
with this Agreement. If any such disputes, controversies or differences cannot
be settled between the parties hereto, they shall be finally settled by
confidential arbitration and such arbitration shall be held in San Jose,
California, U.S.A. in accordance with the Rules of Arbitration of the
International Chamber of Commerce, except that either party may bring an action
seeking injunctive relief in a court of competent jurisdiction with respect to
breach of confidentiality obligations as set forth in Section 6. The award
rendered by the arbitrators shall be final and binding upon the parties.
Judgment upon the award may be entered in any court having jurisdiction thereof.
The prevailing party shall be entitled to recover from the losing party and all
costs (including reasonable attorney's fee) incurred in conducting the
arbitration. Unless and until the panel of arbitrators rules to the contrary,
all of the rights and obligations of each party shall continue in force and
effect during the pendency of any dispute or arbitration.

Article 14. Notice
All notices, requests, demands and other communications which shall or may be
given under this Agreement shall be made in writing by airmail or by facsimile
to the address-specified below or to such changed address as may have been
previously specified in writing by the addressed party:

          TO FUJITSU:   Fujitsu Limited
                        50 Fuchigami, Akiruno, Tokyo 197-0833, Japan
                        Attention: General Manager,
                                   System Memory Division
                                   Electronic Devices Group
                        Facsimile: 42-532-2445

          TO SMIC:      Semiconductor Manufacturing International Corporation

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Fujitsu/SMIC Confidential

                        18 ZhangJiang Road, PuDong New Area, Shanghai,
                        People's Republic of China
                        Attention:   T. Y. Chiu, Vice President
                        Facsimile:86-21-5080-3303

Unless otherwise proven, each such notice given by either party hereto shall be
deemed to have been received by the other party on the fifth (5th) business day
following the mailing date or on the second (2nd) business day following the
facsimile date.

Article 15. Severability
If any term, clause or provision of this Agreement is judged to be ineffective,
unenforceable or illegal by a court or executive body with judicial powers
having jurisdiction over this Agreement or either party hereto, such
ineffective, unenforceable or illegal term, clause or provision shall be deemed
deleted from this Agreement, and the validity of any other term, clause or
provision of this Agreement shall not be affected; provided that both parties
shall negotiate in good faith and agree to mutually satisfactory term, clause or
provision which shall replace the ineffective, unforeseeable or illegal term,
clause or provision.

Article 16. Waiver
Any failure of either party to enforce, at any time or for any period of time,
any of the provisions of this Agreement shall not be construed as waiver of such
provisions or of the right of such party thereafter to enforce such provisions.

Article 17. Headings
The headings of Articles used in this Agreement are inserted for convenience of
the reference only, and shall not be deemed to be a part of this Agreement or to
affect the meaning or interpretation of this Agreement.

Article 18. Language
This Agreement and Exhibits hereto are in English language, which language shall
be controlling in all respects.

Article 19. Entire Agreements
This Agreement constitutes the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and merges all prior
discussions between the parties hereto, and there are no other understandings,
representations or warranties of any kind except as expressly set forth herein.
Any amendment to this Agreement shall be ineffective, unless reduced to writing
signed by duly authorized representatives of both parties hereto.

Article 20. Relationship of Parties
Neither party shall have, or shall represent that it has, any power, right or
authority to bind the other party on behalf of the other party or in the other
party's name, or to assume or create any obligation or responsibility, express
or implied, on behalf of the other party or in the other party's name.

Article 21. Counterparts
This Agreement shall be executed in two counterparts, each of which shall be
deemed an original, and both of which shall be deemed to constitute one and
the same instrument.

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Fujitsu/SMIC Confidential

IN WITHNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives on the day and
year first above written.

Fujitsu Limited                          Semiconductor Manufacturing
                                         International Corporation

/s/ Masao Taguchi                        /s/ Tzu Yin Chiu     /s/ Anne Chen
--------------------------------------   ---------------------------------------
Signature                                Signature

Masao Taguchi                            Tzu Yin Chiu        Anne Chen
--------------------------------------   ---------------------------------------
Printed Name                             Printed Name

General Manager                          VP,OP II            Corporate Secretary
--------------------------------------   ---------------------------------------
Title  System Memory Div.                Title

August 5, 2002                           Aug. 14, 2002         Aug. 14, 2002
--------------------------------------   ---------------------------------------
Date                                     Date

                                         Semiconductor Manufacturing
                                         International (Shanghai) Corporation

                                         /s/ Tzu Yin Chiu
                                         ---------------------------------------
                                         Signature

                                         Tzu Yin Chiu
                                         ---------------------------------------
                                         Printed Name

                                         VP, OP II, SHIC
                                         ---------------------------------------
                                         Title

                                         Aug. 14, 2002
                                         ---------------------------------------
                                         Date

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Fujitsu/SMIC Confidential

                          Exhibit A: Licensed Products

Licensed Products

64Mbit SDRAM in configuration of [***], and on the [***], which are equivalent
to FUJITSU's SDRAM specified in the below
-64Mbit [***]

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Fujitsu/SMIC Confidential

                             Exhibit B: Deliverables

[                 ***

                                                                        ]

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Fujitsu/SMIC Confidential

[       ***

                                                                        ]

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                                                                    Exhibit 10.8

              SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION
                             2004 STOCK OPTION PLAN

     SMIC hereby establishes this Plan to be known as the "SMIC 2004 Stock
Option Plan" as a component of its Global Equity Program. The Plan shall become
effective on the date it is approved by the shareholders of SMIC, following its
approval by the Board in accordance with Section 4 hereof. Capitalized terms
that are not otherwise defined in the text of this Plan are defined in Section 2
below.

1.   Purposes

     The purposes of the Plan are to attract, retain and motivate employees and
directors of, and other service providers to, the Company; to provide a means on
and after the Public Offering of compensating them through the grant of Stock
Options for their contributions to the growth and profits of the Company; and to
allow such employees, directors and service providers to participate in such
growth and profitability.

2.   Definitions

     For purposes of the Plan, the following terms shall be defined as follows:

          "Administrator" means the individual or individuals to whom the
     Committee delegates authority under the Plan in accordance with Section
     3(d).

          "ADS" means an SMIC American Depositary Share, each of which
     represents fifty (50) Common Shares.

          "Annual Meeting" means an annual general meeting of the SMIC
     shareholders.

          "Award Document" means a written document approved in accordance with
     Section 7 hereof which sets forth the terms and conditions of a grant of a
     Stock Option to a Participant. An Award Document may be in the form of (i)
     an agreement between the Company and a Participant which is executed by an
     officer on behalf of the Company and is signed by the Participant or (ii) a
     certificate issued by the Company which is executed by an officer on behalf
     of the Company but does not require the signature of the Participant. An
     Award Document may be in written, electronic or other form that the
     Committee determines is sufficient to memorialize the terms and conditions
     of the applicable Stock Option.

          "Board" means the Board of Directors of SMIC.

          "Business Day" means a day on which the applicable exchange is open
     for trading of securities.

<PAGE>

          "Cause" means the termination of a Participant's employment with the
     Company as a consequence of "cause," as such term or any similar term is
     defined in any employment agreement between the Company and the Participant
     or, if there is no such employment agreement in effect at the time of the
     Participant's termination of employment:

               (i)   the failure or refusal of the Participant to substantially
          perform the duties required of him or her as an employee of, or
          service provider to, the Company;

               (ii)  any material violation by the Participant of any law or
          regulation applicable to any business of the Company, or the
          Participant's conviction of, or a plea of nolo contendere to, a
          felony, or any perpetration by the Participant of a common law fraud
          against the Company; or

               (iii) any other misconduct by the Participant that is materially
          injurious to the financial condition, business or reputation of the
          Company.

          "Change in Control" shall mean, with respect to any period on or after
     a Public Offering, any of the following:

               (i)   the acquisition by any Person of beneficial ownership
          (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
          of 35% or more of the then outstanding shares of SMIC entitled to vote
          in the election of the directors of the Board, but shall not include
          any such acquisition by any employee benefit plan of the Company, or
          any Person organized, appointed or established by the Company for or
          pursuant to the terms of any such employee benefit plan;

               (ii)  consummation after approval by the shareholders of either
          (A) a plan of complete liquidation or dissolution of SMIC or (B) a
          merger, amalgamation or consolidation of SMIC with any other
          corporation, the issuance of voting securities of SMIC in connection
          with a merger, amalgamation or consolidation of SMIC or sale or other
          disposition of all or substantially all of the assets of SMIC or the
          acquisition of assets of another corporation (each, a "Business
          Combination"), unless, in each case of a Business Combination,
          immediately following such Business Combination, all or substantially
          all of the individuals and entities who were the beneficial owners of
          the Common Shares outstanding immediately prior to such Business
          Combination beneficially own, directly or indirectly, more than 50% of
          the then outstanding Common Shares and 50% of the combined voting
          power of the then outstanding voting securities entitled to vote
          generally in the election of directors, as the case may be, of the
          entity resulting from such Business Combination (including, without
          limitation, an entity which as a result of such

                                        2

<PAGE>

          transaction owns the Company or all or substantially all of SMIC's
          assets either directly or through one or more subsidiaries) in
          substantially the same proportions as their ownership, immediately
          prior to such Business Combination, of the Common Shares; or

               (iii) the individuals who, as of the effective date of the Plan,
          constitute the Board, and subsequently elected directors of the Board
          whose election is approved or recommended by at least a majority of
          such current members or their successors whose election was so
          approved or recommended (other than any subsequently elected members
          whose initial assumption of office occurs as a result of an actual or
          threatened election contest with respect to the election or removal of
          directors or other actual or threatened solicitation of proxies or
          consents by or on behalf of a Person other than the Board), cease for
          any reason to constitute at least a majority of such Board.

          "Code" means the U.S. Internal Revenue Code of 1986, as amended, and
     the applicable rulings and regulations thereunder.

          "Committee" means the Compensation Committee of the Board, any
     successor committee thereto or any other committee appointed from time to
     time by the Board to administer the Plan.

          "Common Shares" means ordinary shares in the capital of SMIC, par
     value $0.0004.

          "Company" means, individually and collectively, SMIC and its
     Subsidiaries.

          "Director Option" means a Non-Qualified Stock Option granted to a
     Non-Employee Director.

          "Eligible Individuals" means the individuals described in Section 6
     who are eligible for Stock Options under the Plan.

          "ESPP" means the Semiconductor Manufacturing International Corporation
     2004 Employee Stock Purchase Plan.

          "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
     amended, and the applicable rulings and regulations thereunder.

          "Fair Market Value" of (i) a Common Share means the higher of (A) the
     closing price of the Common Shares on the Hong Kong Exchange (as stated in
     its daily quotations sheet) on the applicable date of grant (which must be
     a Business Day) and (B) the average closing price of the Common Shares on
     the Hong Kong Exchange (as stated in the relevant daily quotations sheets
     of the Hong Kong

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     Exchange) for the five Business Days immediately preceding the date of
     grant and (ii) an ADS means the higher of (A) the closing price of the ADSs
     on the NYSE on the applicable date of grant and (B) the average closing
     price of the ADSs on the NYSE for the five Business Days immediately
     preceding the date of grant. Notwithstanding the foregoing, the Fair Market
     Value of Plan Shares for purposes of grants of Incentive Stock Options
     shall be determined in compliance with applicable provisions of the Code.

          "Global Equity Program" means collectively this Plan, the SMIC Equity
     Incentive Plan and the SMIC Employee Stock Purchase Plan.

          "HK Listing Rules" means the Rules Governing the Listing of Securities
     on The Stock Exchange of Hong Kong Limited.

          "Hong Kong Exchange" means The Stock Exchange of Hong Kong Limited.

          "Incentive Stock Option" means a Stock Option that is an "incentive
     stock option" within the meaning of Section 422 of the Code and designated
     by the Committee as an Incentive Stock Option in an Award Document.

          "Non-Employee Director" means a member of the Board who is not then an
     officer or employee of the Company.

          "Non-Qualified Stock Option" means a Stock Option that is not an
     Incentive Stock Option.

          "NYSE" means the New York Stock Exchange, Inc.

          "Participant" means an Eligible Individual to whom a Stock Option has
     been granted under the Plan.

          "Person" means any person, entity or "group" within the meaning of
     Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such
     term shall not include (i) SMIC or any Subsidiary thereof; (ii) a trustee
     or other fiduciary holding securities under an employee benefit plan of the
     Company; (iii) an underwriter temporarily holding securities pursuant to an
     offering of such securities; or (iv) an entity owned, directly or
     indirectly, by the shareholders in substantially the same proportions as
     their ownership of stock of SMIC.

          "Plan" means this SMIC 2004 Stock Option Plan.

          "Plan Shares" means, as applicable, the Common Shares or ADSs.

          "Public Offering" means a public offering of the Common Shares
     pursuant to an effective registration statement under the Securities Act.

                                        4

<PAGE>

          "Public Offering Date" means the effective date of the Public
     Offering.

          "Purchase Right" has the same meaning given to it under the ESPP.

          "Securities Act" means the U.S. Securities Act of 1933, as amended,
     and the applicable rulings and regulations thereunder.

          "SMIC" means Semiconductor Manufacturing International Corporation, a
     limited liability company incorporated under the laws of the Cayman
     Islands, and any successor thereto.

          "SMIC Employee Stock Purchase Plan" means the Semiconductor
     Manufacturing International Corporation 2004 Employee Stock Purchase Plan.

          "SMIC Equity Incentive Plan" means the Semiconductor Manufacturing
     International Corporation 2004 Equity Incentive Plan.

          "Stock Option" means a right granted to an Eligible Individual
     pursuant to this Plan to purchase Plan Shares, which Stock Option may be an
     Incentive Stock Option, a Non-Qualified Stock Option or a Director Option.

          "Subsidiary" means (i) a corporation or other entity with respect to
     which SMIC, directly or indirectly, has the power, whether through the
     ownership of voting securities, by contract or otherwise, to elect at least
     a majority of the members of such corporation's board of directors or
     analogous governing body, (ii) any other corporation or other entity in
     which SMIC, directly or indirectly, has an equity or similar interest and
     which the Committee designates as a Subsidiary for purposes of the Plan and
     (iii) any successor to any such entity that satisfies the requirements of
     clause (i) or (ii) hereof; provided, however, that for purposes of any
     grant of Incentive Stock Options, a Subsidiary shall be defined in
     accordance with the applicable provisions of the Code.

3.   Administration of the Plan

          (a)    Power and Authority of the Committee. The Plan shall be
administered by the Committee, which shall have full power and authority,
subject to the express provisions hereof:

          (i)    to select Participants from the Eligible Individuals;

          (ii)   to grant Stock Options in accordance with the Plan and to issue
          Plan Shares;

          (iii)  to determine the number of Plan Shares subject to each Stock
          Option;

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<PAGE>

          (iv)   to determine the terms and conditions of each Stock Option,
     other than the terms and conditions that are expressly required by the
     Plan;

          (v)    to specify and approve the provisions of the Award Document;

          (vi)   to construe and interpret any Award Document;

          (vii)  to prescribe, amend and rescind rules and procedures relating
     to the Plan;

          (viii) to vary the terms of Stock Options to take account of tax,
     securities law and other regulatory requirements of the various
     jurisdictions applicable to Participants;

          (ix)   to employ such legal counsel, independent auditors and
     consultants as it deems desirable for the administration of the Plan and to
     rely upon any opinion or computation received therefrom; and

          (x)    to make all other determinations and to formulate such
     procedures as may be necessary or advisable for the administration of the
     Plan.

          (b)    Plan Construction and Interpretation. The Committee shall have
full power and authority, subject to the express provisions hereof, to construe
and interpret the Plan. Except as expressly provided herein, in the event of any
conflict or inconsistency between the Plan and any Award Document, the Plan
shall govern, and the Award Document shall be interpreted to minimize or
eliminate any such conflict or inconsistency.

          (c)    Determinations of Committee Final and Binding. All
determinations by the Committee in carrying out and administering the Plan and
in construing and interpreting the Plan shall be final, binding and conclusive
for all purposes and upon all persons interested herein.

          (d)    Delegation of Authority. The Committee may, but need not, from
time to time delegate some or all of its authority under the Plan to an
Administrator consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however, that the Committee may not
delegate its authority (i) to grant Stock Options to Eligible Individuals who
are executive officers of the Company or who are delegated authority by the
Committee hereunder or (ii) under Sections 3(b) and 9(a), (e) and (f) of the
Plan. Any delegation hereunder shall be subject to the restrictions and limits
that the Committee specifies at the time of such delegation or thereafter.
Nothing in the Plan shall be construed as obligating the Committee to delegate
authority to an Administrator, and the Committee may at any time rescind the
authority delegated to an Administrator appointed hereunder or appoint a new
Administrator. At all times, the Administrator appointed under this Section 3(d)
shall serve in such capacity at the pleasure of the Committee. Any action
undertaken by the Administrator in accordance with the Committee's delegation of
authority shall have the same force and effect as if undertaken

                                        6

<PAGE>

directly by the Committee, and any reference in the Plan to the Committee shall,
to the extent consistent with the terms and limitations of such delegation, be
deemed to include a reference to the Administrator.

          (e)    Limitation on Liability of the Committee. No member of the
Committee shall be liable for any action or determination made in good faith,
and the members of the Committee shall be entitled to indemnification and
reimbursement in the manner provided in SMIC's Articles of Association as they
may be amended from time to time. In the performance of its responsibilities
with respect to the Plan, the Committee shall be entitled to rely upon
information and advice furnished by the Company's officers, the Company's
accountants, the Company's counsel and any other party the Committee deems
necessary, and no member of the Committee shall be liable for any action taken
or not taken in reliance upon any such advice. The provisions of this Section
3(e) shall apply to the Committee and to each Administrator designated by the
Committee.

          (f)    Action by the Board. Anything in the Plan to the contrary
     notwithstanding:

          (i)    The Board shall exercise all authority and responsibility with
     respect to Director Options unless otherwise required by HK Listing Rules.

          (ii)   Any authority or responsibility that, under the terms of the
     Plan, may be exercised by the Committee, may alternatively be exercised by
     the Board, unless such exercise of authority by the Board would contravene
     applicable law or the rules of the principal exchange on which the Common
     Shares or ADS, as applicable, are then listed for trading.

4.   Effective Date and Term

          The Plan shall become effective when approved by the shareholders of
SMIC, following its approval by the Board; provided, however, that no grants of
Stock Options shall be made under the Plan with a grant date prior to the Public
Offering Date. In no event shall any Stock Options be granted under the Plan
after the tenth anniversary of the date of shareholder approval.

5.   Common Shares Subject to the Plan

          (a)    Global Limit. The number of Common Shares that may be issued
pursuant to this Plan and the ESPP (the "Global Limit") shall be 1,317,000,000.
If Stock Options and Purchase Rights granted respectively under the SMIC Stock
Option Plan and this Plan exceed this limit, the Company may seek shareholders'
approval in order to refresh such limit, subject to the thirty percent (30%)
limit described herein. In no event may the number of Common Shares that may be
issued pursuant to any outstanding Stock Option granted under this Plan or other
stock option plan of the Company or any outstanding Purchase Right

                                        7

<PAGE>

granted under the ESPP or any other employee stock purchase plan of the Company
exceed, in the aggregate, thirty percent (30%) of the issued and outstanding
Common Shares in issuance from time to time.

          (b)    Application to ADSs. For purposes of calculating the number of
Common Shares issued under the Global Limit (and for purposes of calculating any
other limit set forth herein), the issuance of an ADS shall be deemed to be
equal to a number of Common Shares determined by multiplying (i) the number of
ADSs issued under the Global Limit by (ii) the ADS Multiplier. For purposes of
the previous sentence, "ADS Multiplier" means the number of Common Shares
corresponding to one (1) ADS.

          (c)    Individual Limit. The total number of Common Shares underlying
Stock Options granted by the Company pursuant to this Plan or any other stock
option plan of the Company to, and the total number of Common Shares that may be
purchased under one or more Purchase Rights granted under the ESPP or any other
employee stock purchase plan of the Company by, a Participant (including both
exercised and outstanding Stock Options) in any twelve-month period may not
exceed at any time one percent (1%) (or 0.1% in the case of an "independent
non-executive director" (as that term is used in the HK Listing Rules) of the
then issued and outstanding Common Shares unless otherwise allowed under the HK
Listing Rules.

6.   Eligible Individuals

     Stock Options may be granted by the Committee to Eligible Individuals who
are employees, officers or other service providers of the Company located in
China, the United States or elsewhere, or to a trust established in connection
with any employee benefit plan of the Company (including the Plan) for the
benefit of any of the foregoing; provided, however, that Incentive Stock Options
may be granted only to employees of the Company. An individual's status as an
Administrator will not affect his or her eligibility to participate in the Plan.
Director Options shall also be granted to Non-Employee Directors in accordance
with Section 8 below.

7.   Terms of Stock Options Generally

          (a)    Grant. A Stock Option shall entitle the Participant to whom the
Stock Option was granted to purchase a specified number of Plan Shares during a
specified period at a price that is determined in accordance with Section 7(c)
below. The terms and provisions of Stock Options shall be set forth in a written
Award Document approved by the Committee and delivered or made available to the
Participant as soon as practicable following the date of grant. The terms of
Stock Options may vary among Participants, and the Plan does not impose upon the
Committee any requirement to grant Stock Options subject to uniform terms.
Accordingly, the terms of individual Award Documents may vary between and among
Participants.

          (b)    Vesting. Unless otherwise specified in the applicable Award
Document, a Stock Option shall become vested upon the occurrence of applicable
vesting dates or the attainment of specified performance goals over a period of
time determined by the Committee and set forth in the applicable Award Document.
Notwithstanding the

                                        8

<PAGE>

foregoing, the Company may allow a Participant to exercise Stock Option prior to
vesting, subject to the applicable Participant's agreement to appropriate
repurchase and other rights of the Company. In addition, the Committee may
accelerate (i) the vesting of a Stock Option or (ii) the date on which any Stock
Option first becomes exercisable, and, further, may extend the period during
which a Stock Option remains exercisable (except that no Stock Options may be
exercised after the tenth anniversary of the date of grant thereof).

          (c)    Exercise Price. The exercise price per Plan Share purchasable
under a Stock Option shall be fixed by the Committee at the time of grant or,
alternatively, shall be determined by a method specified by the Committee at the
time of grant, but in no event shall be less than the Fair Market Value of a
Plan Share on the date such Stock Option is granted. Except as provided in
Section 5 above, the exercise price per Plan Share applicable to a Stock Option
may not be reduced, including by means of amendment, cancellation or the
replacement of such Stock Option with a subsequently awarded Stock Option,
unless such reduction is approved by the shareholders of SMIC in accordance with
applicable law.

          (d)    Term. The term of each Stock Option shall not exceed ten years
from the date of grant.

          (e)    Method of Exercise. In accordance with the rules and procedures
established by the Committee for this purpose, and subject to the provisions of
the applicable Award Document, the exercise price of a Stock Option may be paid
in cash or previously owned Plan Shares or a combination thereof and, if the
applicable Award Document so provides, and arrangements have been made for the
paying up in full at the par value of the Plan Shares to be issued, in whole or
in part through the withholding of Plan Shares subject to the Stock Option with
a market value equal to the aggregate exercise price of the portion of the Stock
Option subject to exercise. In accordance with the rules and procedures
established by the Committee for this purpose, the Stock Option may also be
exercised through a "cashless exercise" procedure, approved by the Committee,
involving a broker or dealer, that affords Participants the opportunity to sell
immediately some or all of the Plan Shares underlying the exercised portion of
the Stock Option in order to generate sufficient cash to pay the Stock Option
exercise price and to satisfy withholding tax obligations related to the Stock
Option.

          (f)    Termination of Employment. The Committee shall include terms in
the Award Document to govern the effect that termination of a Participant's
employment with the Company shall have on the Stock Option, subject to the
following:

          (i)    Term. In no event shall any Stock Option be exercised on or
after the end of the applicable term of the Stock Option.

          (ii)   Termination for Cause. In the event that a Participant's
employment or service with the Company is terminated for Cause, all Stock
Options, whether or not then vested, shall be immediately forfeited.

                                        9

<PAGE>

          (iii)  Divestiture of Subsidiary, Division or Operating Unit. The sale
or other divestiture of a Subsidiary, division or operating unit of the Company
shall, for all purposes of the Plan, be treated as a termination of employment
with respect to Stock Options held by the Participants employed by such
Subsidiary, division or operating unit.

          (iv)   Service Providers Other Than Employees. When a Stock Option is
granted to a service provider to the Company who is not an employee, reference
in the Plan and the Award Document to "termination of employment" or similar
terms shall be deemed to refer to termination of such service relationship as
determined by the Committee.

          (v)    Conversion of Incentive Stock Option. The Committee may permit
any Incentive Stock Option to convert into a Non-Qualified Stock Option as of a
Participant's termination of employment for purposes of providing such
Participant with the benefit of any extended exercise period applicable to
Non-Qualified Stock Options.

8.   Director Options

          (a)    Grants of Director Options.

          (i)    Discretionary Grants. Subject to Section 8(a)(ii) below, a
Director Option shall entitle the Non-Employee Director to whom the Director
Option was granted to purchase a specified number of Plan Shares during a
specified period at a price that is determined in accordance with Section 8(b)
below. The terms and provisions of Director Options shall be set forth in a
written Award Document approved by the Board and delivered or made available to
the Non-Employee Director as soon as practicable following the date of grant.
The terms of Director Options may vary among Non-Employee Directors, and the
Plan does not impose upon the Board any requirement to grant Director Options
subject to uniform terms. Accordingly, the terms of individual Award Documents
may vary between and among Non-Employee Directors.

          (ii)   Hong Kong Black-Out Period. Notwithstanding anything contained
in the Plan or in any Award Document to the contrary, if the grant of any
Director Options would be prohibited due to the laws of Hong Kong that prohibit
any dealings during the period commencing one month immediately prior to the
earlier of (a) the date of the meeting of the Board for the approval of the
Company's interim or annual results and (b) the deadline under the HK Listing
Rules to publish its interim or annual announcement, and ending on the date of
the results announcement (the "Hong Kong Black-Out Period"), the date of grant
of such Director Options shall be the first Business Day following the end of
the Hong Kong Black-Out Period.

          (b)    Terms and Conditions of Director Options

          (i)    Exercise Price. The exercise price per Plan Share subject to
each Director Option provided for in this Section 8 shall be the Fair Market
Value on the relevant date of grant.

                                       10

<PAGE>

          (ii)   Option Term. Each Director Option shall expire on the tenth
anniversary of the date of grant, subject to earlier expiration as provided
herein.

          (iii)  Vesting. Subject to the terms and conditions in Section 8(a)
(ii) above, a Director Option shall become vested upon the occurrence of
applicable vesting dates as set forth in the applicable Award Document; provided
that, the Non-Employee Director has remained in service as a director through
the vesting date. In addition, the Board may accelerate (i) the vesting of a
Director Option or (ii) the date on which any Director Option first becomes
exercisable, and, further, may extend the period during which a Director Option
remains exercisable (except that no Director Options may be exercised after the
tenth anniversary of the date of grant thereof).

          (iv)   Exercise Following Termination of Service. Following
termination of a Non-Employee Director's service on the Board, the former
Non-Employee Director (or the former Non-Employee Director's estate, personal
representative or beneficiary, as the case may be) shall have the right, subject
to the other terms and conditions hereof, to exercise all Director Options that
had vested as of the date of termination of service with the Board during the
120 day period following such termination of service. Unless the Board
determines otherwise, the unvested portion of a Director Option shall be
forfeited in full if the director's service with the Board ends for any reason
prior to the applicable vesting date.

9.   Certain Restrictions

          (a)    Transfers. Unless the Committee determines otherwise, no Stock
Option shall be transferable other than by will or by the laws of descent and
distribution or pursuant to a domestic relations order; provided, however, that
the Committee may, in its discretion and subject to such terms and conditions as
it shall specify, permit the transfer of a Stock Option for no consideration to
a Participant's family members or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such family
members (collectively, "Permitted Transferees"). Any Stock Option transferred to
a Permitted Transferee shall be further transferable only by will or the laws of
descent and distribution or, for no consideration, to another Permitted
Transferee of the Participant.

          (b)    Stock Option Exercisable Only by Participant. During the
lifetime of a Participant, Stock Option shall be exercisable only by Participant
or by a Permitted Transferee to whom such Stock Option has been transferred in
accordance with Section 9(a). The grant of a Stock Option shall impose no
obligation on a Participant to exercise or settle the Stock Option.

          (c)    Lock-up Periods. Each Participant shall agree to be bound by
the applicable terms of any lock-up agreement between the Company and any
underwriter that restricts or prohibits transactions in Plan Shares for any
period of time.

                                       11

<PAGE>

          (d)    Authority of the Company and Shareholders. The existence of the
Plan, the Award Documents and the Stock Options granted hereunder shall not
affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Shares or the rights thereof or which are convertible into or
exchangeable for Common Shares, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.

          (e)    Change in Control. The Committee may specify at or after the
date of grant of a Stock Option the effect that a Change in Control will have on
such Stock Option. Such Committee discretion may include one or more of the
following: (i) shortening the period during which Stock Options are exercisable
(provided they remain exercisable for at least thirty days after the date notice
of such shortening is given to the Participants); (ii) accelerating any vesting
schedule to which a Stock Option is subject or waive, in whole or in part, any
performance conditions to such vesting; (iii) arranging to have the surviving or
successor entity or any parent entity thereof assume the Stock Options or grant
replacement Stock Options with appropriate adjustments in the option prices,
option consideration, payment terms and number and kind of securities issuable
upon exercise or payment; (iv) adjusting Stock Options or their replacements so
that such Stock Options are in respect of the shares of stock, securities or
other property (including cash) as may be issuable or payable as a result of
such transaction with respect to or in exchange for the number of Plan Shares
purchasable and receivable upon exercise or settlement of the Stock Options had
such exercise or settlement occurred in full prior to such transaction; or (v)
canceling Stock Options upon payment to the Participant in cash of an amount
that is the equivalent of the excess of the market value of the Plan Shares
deliverable in settlement of such Stock Option less any exercise or purchase
price applicable thereto. The Committee may provide for one or more of the
foregoing alternatives in any particular Award Document or reserve the
discretion to make such determination at any time prior to the occurrence of the
Change in Control. The Committee may, in contemplation of a Change in Control,
accelerate the vesting, exercisability or payment of Stock Options to a date
prior to the Change in Control, if the Committee determines that such action is
necessary or advisable to allow Participants to realize fully the value of their
Stock Options in connection with such Change in Control. Unless the Committee
determines otherwise, in the event of a Change in Control that is a complete
liquidation or dissolution of SMIC, all Stock Options outstanding at the time of
such Change in Control shall terminate without further action by any person.

          (f)    Change in Capitalization. The number and kind of Plan Shares
authorized for issuance under the various limits set forth in the Plan shall be
equitably adjusted by the Committee in the event of a capitalization issue,
rights issue, sub-division or consolidation of shares or reduction of capital

                                       12

<PAGE>

in order to preserve, but not increase, the benefits or potential benefits
intended to be made available under the Plan. In addition, upon the occurrence
of any of the foregoing events, the number of outstanding Stock Options and the
number and kind of shares subject to any outstanding Stock Option and the
purchase price per share under any outstanding Stock Option shall be equitably
adjusted (including by payment of cash to a Participant) in order to preserve
the benefits or potential benefits intended to be made available to Participants
granted Stock Options (so that Participants shall receive the same proportion of
the equity capital of SMIC to which they were previously entitled). Such
adjustments shall be made by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final. Unless
otherwise determined by the Committee, such adjusted Stock Options shall be
subject to the same vesting schedule and restrictions to which the underlying
Stock Option is subject.

10.  Amendments and Termination

          The Board may at any time and from time to time alter, amend, suspend,
terminate or amend the Plan in whole or in part; provided, however, that
alterations or amendments to the terms and conditions of the Plan which are of a
material nature, or any change to the terms of Stock Options granted must be
approved by the shareholders of the Company, unless such alteration or amendment
takes effect automatically under the terms of the Plan. Any alteration or
amendment to the Plan must be in accordance with the requirements of the HK
Listing Rules or permitted by the Hong Kong Exchange. If the Plan is terminated
by the Board prior to the tenth anniversary of the date of Board approval, no
further Stock Options may be offered but, unless otherwise stated in the Plan,
Stock Options granted before such termination shall remain outstanding and
continue to vest and become exercisable in accordance with, and subject to, the
terms of the Plan.

11.  Miscellaneous

          (a)    A Plan Share allotted upon the exercise of a Stock Option shall
not carry voting rights until completion of the registration of the Participant
as the holder thereof. If under the terms of a resolution passed or an
announcement made by SMIC a dividend is to be or is proposed to be paid to
holders of Plan Shares on the register on a date prior to the date of allotment
for any Plan Shares issued upon the effective exercise of a Stock Option, the
Plan Shares to be issued upon such exercise will not rank for such dividend.
Except as mentioned in this Section 11(a), Plan Shares allotted upon the
exercise of a Stock Option shall rank pari passu (including, but not limited to,
with respect to voting, dividend and transfer rights and rights arising upon a
liquidation) in all respects with the Plan Shares in issue on the date of such
allotment and will be subject to all the provisions of the Articles of
Association of SMIC for the time being in force.

                                       13

<PAGE>

          (b)    Subject to Section 9(e)(v), Stock Options granted but not
exercised may not be cancelled unless an offer to cancel Stock Options has been
made pursuant to Rule 13 of The Hong Kong Code on Takeovers and Mergers and the
Hong Kong Securities and Futures Commission has consented to such cancellation.

          (c)    Taxes and Other Withholding. The Company may require any
individual entitled to exercise a Stock Option to remit to the Company, prior to
such exercise, an amount in cash or in previously owned Plan Shares, or a
combination thereof, and, if the applicable Award Document so provides, in whole
or in part through the withholding of Plan Shares subject to the Stock Option
with a market value sufficient to satisfy any national, state or local tax
withholding requirements. The Company shall also have the right to deduct from
all cash payments made pursuant to or in connection with any Stock Option any
national, state or local taxes required to be withheld with respect to such
payments.

          (d)    No Right to Grants or Employment. No Eligible Individual or
Participant shall have any claim or right to receive grants of Stock Options
under the Plan. Nothing in the Plan or in any Stock Option or Award Document
shall confer upon any employee of the Company any right to continued employment
with the Company or interfere in any way with the right of the Company to
terminate the employment of any of its employees at any time, with or without
cause. Nothing in the Plan or in any Award Document shall be deemed as
conferring upon a service provider to the Company the status of employee.

          (e)    Other Compensation. Nothing in this Plan shall preclude or
limit the ability of the Company to pay any compensation to a Participant under
the Company's other compensation and benefit plans and programs.

          (f)    Other Employee Benefit Plans. Payments received by a
Participant under any Stock Option made pursuant to the Plan shall not be
included in, nor have any effect on, the determination of benefits under any
other employee benefit plan or similar arrangement provided by the Company,
unless otherwise specifically provided for under the terms of such plan or
arrangement or by the Committee.

          (g)    Unfunded Plan. The Plan is intended to constitute an unfunded
plan for incentive compensation. Prior to the payment or settlement of any Stock
Option, nothing contained herein shall give any Participant any rights that are
greater than those of a general creditor of the Company. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Plan Shares or payments in lieu thereof with
respect to awards hereunder.

          (h)    Securities Law Restrictions. The Committee may require each
Participant purchasing or acquiring Plan Shares to represent to and agree with
the Company in writing that such Eligible Individual is acquiring the Plan
Shares for investment and not with a view to the distribution thereof. All
certificates (or electronic equivalents) for Plan Shares shall be subject to
such stock-transfer orders and other

                                       14

<PAGE>

restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any exchange
upon which the Plan Shares are then listed, and any applicable securities law,
and the Committee may cause a legend or legends to be put on any such
certificates (or electronic equivalents) to make appropriate reference to such
restrictions. No Plan Shares shall be issued hereunder unless the Company shall
have determined that such issuance is in compliance with, or pursuant to an
exemption from, all applicable securities laws.

          (i)    Expenses. The costs and expenses of administering the Plan
shall be borne by the Company.

          (j)    Application of Funds. The proceeds, if any, received from the
Company from the sale of Common Shares will be used for general corporate
purposes.

          (k)    Applicable Law. Except as to matters of federal law, the Plan
and all actions taken thereunder shall be governed by and construed in
accordance with the laws of the Cayman Islands.

          (l)    Awards to Individuals Subject to Non-U.S. Jurisdictions. To the
extent that Awards under the Plan are awarded to individuals who are domiciled
or resident outside of the United States or to persons who are domiciled or
resident in the United States but who are subject to the tax laws of a
jurisdiction outside of the United States, the Committee may adjust the terms of
the Plan Shares granted hereunder to such persons (i) to comply with the laws of
such jurisdiction and (ii) to permit the grant of the Plan Shares not to be a
taxable event to the Participant. The authority granted under the previous
sentence shall include the discretion for the Committee to adopt, on behalf of
the Company, one or more sub-plans applicable to separate classes of Eligible
Individuals who are subject to the laws of jurisdictions outside of the United
States. Notwithstanding the foregoing, the adoption of any plan or sub-plan must
be in accordance with HK Listing Rules.

          (m)    Stated Periods of Time. Unless otherwise stated in the
applicable Award Document, all periods of time under this Plan and Award
Documents shall be calculated with reference to the then local time in Shanghai.
In the event that any applicable date is, or any period of days, months or years
set forth in this Plan or any Award Document ends on, a date that is Saturday,
Sunday or a public holiday in Shanghai, such applicable date or the end of such
period shall be the first Business Day following such date.

                                       15

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