Foreign media reports that Chinese companies aiming for semiconductor localization are rapidly expanding their financing scale. China is making every effort to increase its semiconductor self-sufficiency rate.
According to the Nihon Keizai Shimbun on July 7, China’s semiconductor self-sufficiency rate is just over 10%, while the high market share of smartphones and devices for the next-generation communication network 5G gives China significant international influence. If the United States attempts to curb China’s rise in high-tech fields and pushes China out of the semiconductor market, China will not only face difficulties in the production of these products but may also find itself at a disadvantage in the Sino-U.S. hegemonic struggle.
The Nihon Keizai Shimbun has compiled data on the stock financing amounts of semiconductor-related companies based on data from Chinese private databases, corporate announcements, and media reports. As of July 5, 2020, the financing amount reached 144 billion yuan, significantly exceeding the total financing amount for the entire year of 2019 (approximately 64 billion yuan) in just half a year.
The report suggests that the reason for this is the sense of crisis generated by the “chip war” initiated by the United States. Chinese telecommunications equipment company ZTE Corporation was impacted by sanctions imposed by the Trump administration in 2018. Huawei Technologies has also encountered difficulties in procuring the most advanced semiconductors and has struggled to import certain semiconductor manufacturing equipment.
According to the report, both the central and local Chinese governments have established semiconductor funds aimed at achieving semiconductor localization and have begun investing in Chinese companies.
In 2014, China established a government-backed semiconductor fund—the National Integrated Circuit Industry Investment Fund—which completed an investment of 140 billion yuan by 2019. In the fall of 2019, the second phase of the National Integrated Circuit Industry Investment Fund was established, starting investments in 2020. Shanghai and Beijing have also set up funds, with the central and local governments working together to support semiconductor localization.
A representative example is China’s large semiconductor foundry, Semiconductor Manufacturing International Corporation (SMIC). SMIC went public on the STAR Market this month, potentially raising 50 billion yuan. The company also secured financing of $2.25 billion (approximately 7.03 yuan per dollar).
American Integrated Circuit Research Company predicts that by 2024, China’s semiconductor self-sufficiency rate could exceed 20%. Their data also shows that as of December 2019, Taiwan, South Korea, and Japan ranked as the top three in semiconductor production capacity globally, with mainland China ranking fourth, surpassing the United States. Mainland China is expected to rank third in 2020 and rise to second place by 2022.
▲ Reference image: On February 18, in the Beijing Economic and Technological Development Zone, staff at SMIC are operating equipment. Photo by Xinhua News Agency
According to the American Consumer News and Business Channel on July 7, China’s major chip manufacturer SMIC has launched a stock issuance activity worth 46.28 billion yuan.
This is more than double the company’s initial financing target. As investor excitement grows ahead of SMIC’s listing in Shanghai, its stock price in Hong Kong has surged. In fact, the company’s Hong Kong stock has risen about 26% in the past five days, and has increased over 200% year-to-date.
The report states that China is ambitiously seeking to increase its chip self-sufficiency rate, with SMIC reportedly being a key participant in this initiative. This round of financing may help SMIC surpass competitors TSMC and Samsung Electronics.
SMIC plans to initially issue 1.68562 billion shares at a price of 27.46 yuan per share. If demand is high, underwriters may increase the total number of shares issued to 1.938463 billion. If the overallotment option is fully exercised, SMIC could raise 53.23 billion yuan.
The report cites data from American company Diligent, stating that this stock issuance activity is the largest in mainland China in the past decade.
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Article edited by | Zhang WeiweiWeChat editor | Tian XinWeChat review | Feng Lingyi
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