Chips have become a crucial front in the tech conflict, with the US restricting China’s access to both semiconductor chips and the machinery needed to produce them.
Beijing is stepping up efforts to develop its semiconductor industry amid increased tech rivalry with the US and is seeking to raise US$1.4 billion in one of the largest initial public offerings globally so far this year through contract chip maker SMIC, which is backed by China’s top foundry.
According to a filing, Semiconductor Manufacturing Electronics Shaoxing (SMES) will list 1.69 billion shares at a price of 5.69 yuan each on Shanghai’s Star Market, which is modelled after the Nasdaq. Subscriptions will open on Wednesday.
According to Refinitiv data, if the company raises 9.6 billion yuan (US$1.4 billion), it will be the second-largest IPO in Asia-Pacific this year, trailing only Nexchip Semiconductor’s US$1.67 billion fundraising on the Star Market on April 18.
The world’s largest IPO this year, ADNOC Gas’ US$2.48 billion offering in Abu Dhabi in March, is still ahead of both IPOs.
The IPO occurs at a time when the Chinese government has increased support for the semiconductor industry in the midst of a tech war with the US that is getting more intense, including easier access to the domestic capital market.
Chips have become a crucial front in the tech conflict, with the US restricting China’s access to both semiconductor chips and the machinery needed to produce them. The transaction will also help the Star market recover from a last-minute postponement of Syngenta Group’s mega listing earlier this month.
The state-controlled powerhouse in seeds and agrochemicals had planned to raise up to US$9.5 billion, which might have been the largest IPO deal of the year.
According to the filing, the company will have a market value of 38.5 billion yuan following SMES’ listing. The offering’s underwriters include Haitong Securities, Huatai United Securities, and Industrial Securities.
SMES is a joint venture between the Shaoxing government and Semiconductor Manufacturing International Corporation (SMIC), which was established in 2018 with a registered capital of 5.07 billion yuan. The business specialises in producing sensors, power semiconductors, and analogue chip packaging.
A Shaoxing government-backed investment fund holds a slightly larger stake in the joint venture (22.7%) than the Chip Maker SMIC holding company, which owns 19.6% of SMES.
The prospectus reveals that while SMES’ operating income nearly doubled to 4.6 billion yuan year on year in 2022, the chip manufacturer has experienced losses of more than 1 billion yuan for three consecutive years. a weekly compilation of social, political, and economic news from China and its effects on the rest of the world.
The company plans to use the money to increase working capital and improve chip manufacturing and packaging technology. According to the filing, the company will have a price to sales ratio of 8.4 times, higher than the 5.36 average among competitors like Huahong Semiconductors.