Chip Foundry SMIC Skyrockets in China's Listing of the Decade

All eyes are on SMIC as China’s chipmaking abilities are put to the test.

Anna Vodopyanova
    Jul 16, 2020 12:45 PM  PT
Chip Foundry SMIC Skyrockets in China's Listing of the Decade
author: Anna Vodopyanova   

The tech war, waged by the U.S. president on Chinese companies, is slowly shifting the epicenter of progress. Voluntarily delisted a year ago from the New York Stock Exchange, SMIC lifted off with fanfare on Thursday on the STAR Market in the Mainland's listing of the decade.

China's largest chip foundry, Semiconductor Manufacturing International Corp. (HKEX: 00981; OTC: SMICY), raised $6.6 billion in the days preceding its public debut in Shanghai – more than double its initial target. If the company's underwriter, Haitong Securities, exercises the greenshoe option, the offering could reach up to $7.6 billion, according to Business Wire.

As SMIC debuted on Shanghai's high-tech Nasdaq-style STAR board, its shares, priced at 27.46 yuan, had more than tripled.

The proceeds will fund SMIC's push into next-generation chip technology. The foundry remains behind top competitor Taiwan Semiconductor Manufacturing Co. (TSMC), which said today that it plans to stop supplying China's tech giant Huawei Technologies in two months. The chipmaker is building a manufacturing base in Arizona and will have to comply with U.S. export bans.

Earlier, SMIC announced it reached a milestone by kicking off the production of the Kirin 710A for Huawei on its 14-nm chips. However, that's way behind the 5nm chip which TSMC is working to deliver to the top smartphone companies including Apple Inc. (Nasdaq: AAPL).

On the Stock Exchange of Hong Kong, SMIC saw its shares triple in recent weeks in anticipation of its secondary listing, reaching its 52-week high of HK$44.50 per share. On Thursday, however, shares in the chip giant took a 25% plunge to HK$28.75 per share. On the U.S. over-the-counter market it took a similar drop, trading 25% lower by midday, at $18.73 apiece. Operating since 2000, SMIC chose to delist from the New York Stock Exchange amid the Sino-American tech war a year ago. 

Over the recent months, the company has been raising capital to boost its 12-inch silicon wafers production for 14-nm and 17-nm chips. As the cold war with the U.S. closes doors on tech imports, SMIC has been seeing significant backing from state funds. China Integrated Circuit Industry Investor Fund, a state-backed entity, is SMIC's largest shareholder and was the largest institutional investor in today's offering, according to Reuters. 

Beijing has launched initiatives in hopes to cut the country's reliance on imports and significantly increase its domestic supply. It has said that by 2030, it hopes to produce $305 billion of semiconductors and supply 80% of the domestic market, which some experts say is an unattainable goal. 

Now, all eyes are on SMIC as China's semiconductor abilities come to the test. Reuters says, citing experts, that SMIC "lacks the intellectual property and process know-how to win top customers for at least a decade."