Chinese semiconductor IPOs are picking up pace with eight companies raising a combined Rmb29.9bn (US$4.3bn) in April, responding to the government’s strong push to develop homegrown chipmakers to sidestep Western trade sanctions.
Nexchip Semiconductor, a maker of integrated circuits, wrapped up a Rmb9.96bn (US$1.44bn) Shanghai Star IPO on April 20, the biggest A-share float so far this year. Less than a week later, SMIC-backed Semiconductor Manufacturing Electronics (Shaoxing) on April 26 also completed subscription for a Rmb9.63bn Star IPO.
Both deals drew solid support, with the Nexchip IPO being 1,160x oversubscribed while the SMES float 489x covered. Neither company has announced when its shares will start trading yet.
The two deals capped a bumper month for domestic semiconductor IPOs (See table). China’s policy of technological self-reliance amid the intensifying chip war has accelerated the listing of semiconductor companies and drawn investors’ attention to the government-supported sector.
According to a Guotai Junan report, the global semiconductor industry is nearing the end of a down cycle, but China is already on the upswing as demand for the country’s chip products has started to recover after two down years.
“The tense relationship between China and the US has made the demand for domestic substitution of semiconductor products more urgent,” a Beijing-based analyst said.
The Cyberspace Administration of China said on March 31 it would review products sold by Micron Technology, one of America’s largest memory chipmakers, after Japan joined the US and the Netherlands with bans on the export of chipmaking equipment to China.
Analysts generally believe mainland suppliers such as Yangtze Memory Technologies, the country's biggest memory chip producer, can fill part of the gap in the market.
“Although China's current quality of semiconductors is not as good as that of some foreign countries, the trend of domestic substitution will not change,” the analyst said. “No matter how difficult this road is, China must continue. The era of globalisation is over.”
Huge investment
The National Integrated Circuit Industry Investment Fund, China’s Rmb338.7bn national-level chip fund, has invested across the semiconductor supply chain and encouraged the rapid listings of companies from the sector.
However, a number of senior executives of the national fund were investigated in 2021-2022 for violations of discipline and regulations involving a number of listed semiconductor companies, casting a shadow over the fundraising efforts.
“This scandal made the country realise that relying solely on the strength of state support can easily lead to favouritism and fraud, so China will support the development of private semiconductor companies more in the future,” the analyst said.
Hong Kong-listed chip-wafer maker Hua Hong Semiconductor will join the A-share listing bandwagon with an Rmb18bn Star float as early as this year, in what could be the biggest domestic listing from the sector this year. It filed the A-share listing last November and has since completed two rounds of inquiries with the regulator.
Hua Hong is reportedly one of the chipmakers that have been selected to have access to additional government funding without having to achieve certain performance goals.
Investors are expected to welcome the listing since the recent eight semiconductor IPOs have allowed them to make quick profits. Out of the six companies that have started trading, five made stellar debuts with their first-day gains ranging from 31% to 222%.