Chinese regulators are asking the country’s leading chipmakers to list domestically in order to gain more control over the types of investors that can buy shares in the strategically important companies, as part of Beijing's efforts to ramp up its semiconductor industry amid a chip war with the US.
CXMT Corporation, the country’s leading maker of DRAM memory chips and parent of chipmaker Changxin Memory Technologies, had considered a Hong Kong IPO earlier this year, but started a prelisting tutorial in July with CICC and China Securities for an A-share float. The change of plan came at the suggestion of Chinese regulators, according to people with knowledge of the matter.
CXMT's tutorial filing did not disclose the listing venue, target valuation or fundraising size. But the people said it was targeting a Rmb200bn (US$28bn) valuation and was considering Shanghai's Star board as the listing venue.
At the target valuation, the company could raise about Rmb20bn as China’s listing rules require that at least 10% of the share capital be sold in an IPO.
“The regulators have concerns over a Hong Kong IPO as it’s hard to tell who the actual backers of the international investors are. They especially don’t want a significant portion of the shares falling into the hands of US investors given the chip war between China and the US,” said one of the people.
The US Department of Defense in January added CXMT to a blacklist for alleged links to China’s military. In May, the US Commerce Department was reportedly considering placing more Chinese companies, including CXMT, on its entity list, which limits access to more advanced AI chips and semiconductor equipment overseas.
“The regulators can have more control over the type of investors for an A-share IPO given foreign investors participate in A-share IPOs primarily through the QFII [Qualified Foreign Institutional Investor] programme, which is heavily regulated,” said another person.
Founded in 2016, CXMT has attracted investments from state-backed funds such as China Integrated Circuit Industry Investment Fund. It is expected to increase its share of the global DRAM market to 10% by year-end, according to TrendForce’s market research.
Faster approvals
To support the listing of high-quality tech companies and unprofitable companies, Chinese regulators in June last year established a “green channel” for faster approvals. Large chipmaker listings are expected to make use of that channel.
CXMT is planning to file a listing application as early as this year, while Moore Threads Technology sought approval on September 26 from the Shanghai Stock Exchange for an Rmb8bn Star IPO, less than three months after it filed a listing application. The Chinese graphics processing unit manufacturer filed for a Star IPO on June 30 with Citic Securities as sponsor.
“We expect more big chipmakers to list in the A-share market as the regulators are very supportive of the listings of important technology companies. The listing process for them will be very fast compared with companies from other sectors,” said a Beijing-based ECM banker.
Established in 2020, Beijing-based Moore was founded by Zhang Jianzhong, a former global vice-president of Nvidia and general manager of Nvidia China. In October last year, Moore Threads was added to the US government’s entity list.
Shanghai-based artificial intelligence chip startup MetaX has also filed for a Rmb3.9bn Star IPO.