Chipmaker SMIC Eyes China’s Biggest Share Sale in a Decade
Semiconductor Manufacturing International Corp. is preparing to raise as much as $7.5 billion via mainland China’s largest stock sale in a decade, a big cash infusion for a chipmaker Beijing’s counting on to reduce reliance on American technology…China’s biggest contract manufacturer of chipsets represents a major piece of Beijing’s vision to create a self-reliant and world-class semiconductor industry, particularly as Washington tightens restrictions on sales of silicon and software to the nation. SMIC plans to use the stock-sale proceeds to develop next-generation chipmaking to try and compete with Intel Corp. and Taiwan Semiconductor Manufacturing Co.
(Bloomberg News, July 5)
Key takeaways:
- SMIC is clearly benefiting from trade war fallout and China’s push for self-reliance is a long term growth driver.
- The main risk is R&D costs, which continues to rise in China and is expected to be “the biggest drag” on profit growth.
- Huawei currently contracts with SMIC to manufacture the 710A for the Honor Play 4T, but the chipmaker is years away from being able to compete directly with the likes of TSMC or Intel.
- Nevertheless, growing the domestic ecosystem will remain a government priority and the capital raising has already received a nod from the market – the initial institutional offer for the shares were 165 times oversubscribed.
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Jul 14, 2020
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