SMIC looks to raise $6.55 billion with Shanghai stock exchange offering

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SMIC Asian stock market offering.
Image: SMIC

Semiconductor Manufacturing International Corporation (SMIC) plans to raise ¥$46.29 billion ($6.5 billion) in a forthcoming share sale on the Shanghai Stock Exchange. Last month, the chipmaker reportedly sought to secure a ¥20 billion ($2.8 billion) cash infusion. However, the firm’s stock performed exceedingly well on the Hong Kong bourse recently, spiking 172.5 percent since March.

SMIC’s leadership reassessed its fundraising goals as a result and selected a new listing price of ¥27.46 ($3.89) per share.

SMIC Expanding Amid Simmering Trade Tensions

SMIC is looking to build up its war chest amid rising international trade tensions to improve its market share. The firm represents a 5 percent share of the global chip foundry market, but recent developments have created a major expansion opportunity.

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The U.S. Department of Commerce recently issued a mandate that caused the Taiwanese Semiconductor Manufacturing Company (TSMC) to end its relationship with Huawei. The Sino conglomerate then sought to establish new arrangements with suppliers that do not deal with American-made technology. The Chinese corporation has reportedly approached SMIC about producing components for its base stations and smartphones.

As Huawei pays its suppliers billions of dollars every year, securing its business would be a game-changer for SMIC.

However, the Shanghai-based corporation is facing one major obstacle to locking down Huawei’s chipset manufacturing business; it does not have 7nm production capability. Though SMIC is China’s biggest foundry, it lacks the cutting-edge fabrication expertise of companies like TSMC or Intel. If its stock sale goes well, the firm should have enough capital to acquire lots of state-of-the-art equipment.

SMIC’s Domestic Financial Support

Because of the Sino-American trade war and coronavirus pandemic, various nations have worked to bolster their domestic semiconductor industries. India and Taiwan have launched incentive programs to attract foreign chipmakers, and Washington is considering legislation that would provide $47.8 billion in component industry stimulus funding. China strived to enhance its microelectronics independence by directing money into local manufacturers like SMIC.

Beijing committed to spending $161 billion over 10 years to cultivate a robust domestic semiconductor sector.

According to Nikkei Asian Review, Beijing also initiated a program to get local chipmakers more capital by approving its listings on the Shanghai equivalent of the NASDAQ. The site notes officials approved SMIC’s share sale in just 19 days. In addition, China’s National Integrated Circuit Industry Investment Fund plans to buy ¥3.5 billion ($495.3 million) in the chipmaker’s upcoming stock offering.

With government support and ultra-lucrative contracts in the future, SMIC’s will be a significant player in the global semiconductor field sooner rather than later.

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