China’s No 2 chip maker seeks Shanghai listing to expand capacity, as Beijing continues to back self-sufficiency drive
- The size of Hua Hong’s issuance will be up to 25 per cent of the company’s inflated share base
- Hua Hong’s expansion plan comes at a time when China is doubling down on a self-sufficiency drive for chips
Hong Kong-listed Hua Hong Semiconductor, China’s second-biggest chip maker, said it will seek a secondary listing on Shanghai’s Star board to expand capacity, according to a company statement.
Hua Hong said in a statement on Monday that the company’s board had approved a plan to issue yuan-denominated new shares and list them on the Science and Technology Innovation (STAR) Board of the Shanghai Stock Exchange to fund expansion of its main chip-making operations.
The size of the issuance will be up to 25 per cent of the company’s inflated share base. Hua Hong did not specify the actual amount to be raised, but the capital raising could be worth HK$15 billion (US$2 billion), according to Hong Kong media reports.
Hua Hong’s expansion plan comes at a time when China is doubling down on a self-sufficiency drive for chips, amid rising tech tensions with the US and as America and Europe also boost their onshore semiconductor production capabilities.
China’s import volume of integrated circuits (ICs) in the first two months of 2022 fell 4.6 per cent compared with the same period last year, marking the first year-on-year drop since the beginning of 2020, according to data from the General Administration of Customs.
Established in 1996 as part of China’s national efforts to boost its IC industry, Hua Hong has developed into one of the country’s leading semiconductor makers alongside its crosstown rival Semiconductor Manufacturing International Corp (SMIC). Hua Hong’s most advanced technology can make logic chips with a mature 28-nm process and it is working on advanced 14-nm technology – an area where SMIC has already achieved scaled production.
According to its latest financial figures, the company’s revenue in the fourth quarter increased 88.6 per cent from a year ago to an all-time high of US$528.3 million while its net profit surged 212.8 per cent to US$88.2 million.
In 2021, Hua Hong’s revenue grew by 70 per cent year-on-year to US$1.63 billion, while its net profit for the year reached a record high of $US182 million.
The company’s gross margin was 29.3 per cent in the fourth quarter, or 3.5 percentage points higher than a year ago.
The government has backed more financial support for the domestic chip-making sector, including tax breaks and more access to domestic capital markets, as Chinese companies still lag peers in Taiwan and South Korea.
The Star board has accumulated 46 domestic semiconductor industry companies – covering design, manufacturing, packaging and testing, materials, equipment and others – as of December 2021.
In 2021 alone, 19 companies landed on the board, compared with 17 in 2020 and 10 in 2019, with the average first-day rise of these 19 companies standing at 61.15 per cent, according to a report by official media outlet the China Securities Journal.
