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Chinese chip maker SMIC’s US$3 billion Shanghai listing is a hedge to reduce company’s reliance on US technology

  • SMIC plans to float as many as 1.69 million new shares on Shanghai’s Star market
  • The plan could help SMIC raise more than US$3 billion

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A picture of the production facility at Semiconductor Manufacturing International Corporation (SMIC) on June 8, 2014. Photo: SMIC
Bloomberg
Semiconductor Manufacturing International Corp. (SMIC) is planning a Shanghai share sale that could fetch billions of dollars for a Chinese chip maker Beijing’s counting on to help reduce reliance on US technology.

The Hong Kong-listed company known as SMIC surged 11 per cent, the most in more than two years, after its board approved plans to float as many as 1.69 billion new shares on a Shanghai market created to host fast-growing enterprises. It could end up raising more than US$3 billion based on its closing value of more than US$11 billion.

SMIC is one of several chip companies that embody Beijing’s hope of creating a self-reliant and world-class semiconductor industry. It plans to use the proceeds to develop next-generation chipmaking to try and compete with Intel and Taiwan Semiconductor Manufacturing Co. (TSMC). That effort comes at a time the Trump administration may tighten restrictions on the sale of technology to China, threatening to deny domestic companies like SMIC or Huawei Technologies access to crucial components and circuitry.
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“Strategically, we believe SMIC is gradually severing ties to the US capital markets, as the tension between the US and China escalates because of Covid-19 and another round of trade war is brewing,” Bernstein analysts wrote in a note.

SMIC’s decision moves the tech giant closer to its roots, following its voluntary delisting of American depositary shares from New York last year. Its envisioned listing is a boost for the Sci-Tech Innovation Board – better known as the STAR market – which has struggled to attract major technology companies since its launch last year. The offering could raise some US$3.2 billion and add to an existing cash pile of about US$2.2 billion, according to Sanford C. Bernstein analysts Mark Li, Wang Hanxu and Edward Hou.
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It aims to pour new funds into research and deepen its capability in 12-inch wafers, helping it better compete with far larger rival TSMC, especially as Washington considers constraints against the Taiwanese company as well.

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