Top Chinese chip maker Semiconductor Manufacturing International (SMIC) plans to raise 20 billion yuan (US$2.8 billion) on the mainland’s Nasdaq-style Star Market as the US moves to make life more difficult for its rival’s technology companies.
The Hong Kong-listed company, which withdrew its American depositary receipts (ADRs) from the New York Stock Exchange a year ago, said in a listing prospectus it would use the proceeds from what would be the Star Market’s biggest offering to date to develop its latest 12-inch SN1 chip and replenish capital.
“The Star Market is now playing its role as a strategic fundraising platform to bolster the country’s own technology companies as the US-China relationship worsens,” said Zhou Ling, a fund manager with Shanghai Shiva Investment.
Based on the volume of 1.686 billion shares SMIC aims to will float, the company is expected to offer the shares at about 11.9 yuan a piece, a roughly 30 per cent discount to its so-called H shares, traded in Hong Kong. Those shares rose 1.5 per cent to HK$18.46 (US$2.38) on Tuesday morning.
SMIC is the mainland’s dominant semiconductor foundry and a key chip maker that Beijing is looking to support as the US administration moves to curb China’s rise in the technology industry.
In mid May, the company received US$2.25 billion of investments from a clutch of Chinese state investors, that will be used to fund expansion of a facility in Shanghai.
The plant’s capacity of 6,000 14-nanometre wafers a month will be increased to 35,000, SMIC said.
The US Department of Commerce took drastic action last month to stifle China’s hopes of becoming a world-beater in the tech field.
Measures included a new law stating chip makers using semiconductor manufacturing equipment produced by American companies are barred from supplying chips to Chinese smartphone maker Huawei Technologies.
SMIC said the US rule posed a potential risk to its business as it would reduce its output and sales.
The company, established in 2003, is a rival to Taiwan Semiconductor Manufacturing Company (TSMC). It is lagging behind TSMC in terms of technological development and production capabilities.
Beijing is splurging massive amounts of capital and rolling out tax incentives to underpin the home-grown chip companies as the industry faces the growing prospect of being strangled by the US government and business community.
In July, 2019, the Shanghai Stock Exchange launched the Star Market which was ordered into existence by President Xi Jinping, creating a fundraising platform for promising technology firms in key fields such as chip making, artificial intelligence and biotechnology.
In May last year, SMIC decided to delist from the New York bourse because of thin trading volumes and Washington’s heightened restrictions on Chinese technology companies.
Its Shanghai listing plan follows China’s moves to offer tax breaks, ease stock market listing requirements and provide funding to home-grown chip producers to ensure the industry's self-sufficiency.
Get the China AI Report 2020, brought to you by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & JD.com through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A sessions). Find out more.
More from South China Morning Post:
- China’s Nasdaq-style Star Market fast losing momentum as stretched valuations, IPO pipeline weigh on investor sentiment
- Is Star Market, Xi Jinping’s pet project to boost tech fundraising, just another casino for excitable stock market punters?