Chinese Chip Manufacturer Secures Approval for $2.5B IPO in Hong Kong

Hua Hong will use the funds to start a new fabrication plant will be in the eastern city of Wuxi, and the construction of the same will start in 2023.

As per the regulatory filing published last Friday on the Hong Kong stock exchange, Chinese chip manufacturer Hua Hong secured regulatory approval for conducting a $2.5 billion initial public offering (IPO).

This development comes as the Chinese chip industry is facing major heat from the United States. Amid the turbulence and geopolitical tensions with the US, Chinese chip companies are gearing up for steeper competition ahead.

As per the filing prospectus, Hua Hong will use the raise funds and invest in a new fabrication plant. This new fabrication plant will be in the eastern city of Wuxi, and the construction of the same will start in 2023. This plan will have a production capacity of 83,000 wafers per month.

As per the details, the country has four fabrication plants as of date. Three of these are 8-inch fabs in Shanghai and one of them is a 12-inch fab in Wuxi and shall expand to 95,000 wafers per month. The prospectus notes that the proceeds of the IPO shall also towards upgrading the latter fab.

Two years back in 2020, China’s Semiconductor Manufacturing International (SMIC) went public on Shanghai’s tech-centric STAR market. The company too went for listing in the market a few years ago in Hong Kong. Hua Hong’s Shanghai IPO is the next big IPO by a chipmaker going for a listing on the Shanghai exchange.

Back then, chip maker SMIC’s raised 6.6 billion yuan becoming the largest-ever IPO in China since 2010.

China’s Chip Market Takes Emergency Measures

The sweeping chip restrictions implemented by the Biden administration last month have forced China’s top technology sector to initiate a series of emergency measures.

China’s Ministry of Industry and Information Technology (MIIT) has been conducting closed-door meetings with executives from companies like Yangtze Memory Technologies Co. and supercomputer specialist Dawning Information Industry Co.

The sweeping chip curbs by the Biden administration have left MIIT officials uncertain regarding what shall be the way forward. However, some people familiar with the matter believe that the domestic IT market will provide sufficient demand for affected companies to keep operating.

Ahead of the chip curbs, China’s AI chipmaker Biren was also eyeing a $2.7 billion valuation. To produce the chips, Biren has contracted with Taiwan Semiconductor Manufacturing Co. But as per the Biden regulations, TSMC will have to stop working with Biren. Currently, no other company in China has the capacity to replace it, reports Bloomberg.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.