SMIC-backed Chinese contract chip maker seeks $1.4 bn in Shanghai IPO
A contract chip maker backed by China’s top foundry is seeking to raise US$1.4 billion in one of the world’s biggest initial public offerings so far this year, as Beijing doubles down on efforts to develop its semiconductor industry amid heightened tech rivalry with the US.
Semiconductor Manufacturing Electronics Shaoxing (SMES) is offering 1.69 billion shares at 5.69 yuan apiece on Shanghai’s Nasdaq-style Star Market, with subscriptions starting on Wednesday, according to a filing.
If the company successfully raises 9.6 billion yuan (US$1.4 billion), it will be the year’s second-biggest IPO in Asia-Pacific after Nexchip Semiconductor’s US$1.67 billion fundraising on the Star Market on April 18, according to Refinitiv data.
Both IPOs, however, still fall short of ADNOC Gas’ US$2.48 billion IPO in Abu Dhabi in March, the world’s largest this year.
The IPO comes at a time when the Chinese government has been ramping up support for the semiconductor sector amid an intensifying tech war with the US, including easier access to the domestic capital market. Chips have emerged as a key battleground in the tech war, with the US choking China’s access to both semiconductor chips and the equipment to manufacture them.
The deal will also provide a boost to the Star market after a last-minute delay to Syngenta Group’s mega listing last month. The state-controlled seeds and agrichemicals powerhouse was planning to raise as much as US$9.5 billion, which could have been the year’s biggest IPO deal.
SMES’ listing will give the company a market value of 38.5 billion yuan, according to the filing. Haitong Securities, Huatai United Securities and Industrial Securities are underwriters of the offering.
SMES, founded in 2018 with a registered capital of 5.07 billion yuan, is a joint venture between Semiconductor Manufacturing International Corporation (SMIC) and the Shaoxing government. The company specialises in making power semiconductors and sensors, as well as packaging of analogue chips.
A SMIC holding company owns a 19.6 per cent stake in SMES, while a Shaoxing government-backed investment fund has a slightly larger stake at 22.7 per cent stake in the joint venture.
While SMES’ operating income almost doubled to 4.6 billion yuan year on year in 2022, the chip maker has made losses is excess of more than 1 billion yuan for three straight years, the prospectus shows.
The company intends to use the proceeds to help upgrade its chip making and packaging technology, and supplement working capital.
The company will have a price to sales ratio of 8.4 times, higher than the average of 5.36 among peers like Huahong Semiconductors, according to the filing. South China Morning Post
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