In a highly anticipated market debut on Monday, Hua Hong, the second-largest chip foundry in China, made its presence known on the Shanghai Stock Exchange’s Star Market. The company’s initial public offering (IPO) attracted significant attention from investors, leading to a remarkable 13% jump at the open. However, as trading progressed, the shares lost some of their initial gains, trading lower at 53.99 Chinese yuan during the afternoon session.
Hua Hong’s IPO raised an impressive 21.2 billion yuan ($2.95 billion), making it the largest IPO in mainland China thus far this year. This achievement underscores the growing significance of the domestic chip industry and its pursuit of self-reliance amid geopolitical uncertainties and global efforts to cut off Beijing’s access to advanced chip technology.
Headquartered in Shanghai, Hua Hong specializes in producing semiconductors using cutting-edge wafer process technologies. The chips manufactured by the company are widely used in diverse industries, ranging from consumer electronics and communications to computing, industrial applications, and automotive sectors.
The decision to list on the Shanghai Stock Exchange reflects China’s ambition to bolster its semiconductor sector and foster local chipmakers. As a part of this broader strategy, Chinese authorities have actively encouraged semiconductor companies and other related enterprises to seek domestic listings. This move aims to channel more capital and investment into the industry, fostering technological advancement and enhancing China’s position in the global chip market.
Although the size of Hua Hong’s IPO might not be as significant as that of Semiconductor Manufacturing International Corp (SMIC) – which raised an impressive 46.28 billion yuan ($6.62 billion) during its IPO in 2020 – the positive response from investors signals a promising trend for future semiconductor IPOs in mainland China.
Phelix Lee, an equity analyst at Morningstar Asia, believes that the increasing number of local semiconductor firms opting for domestic listings is a testament to China’s commitment to developing a robust chip industry. Lee emphasizes that the current IPO trend is a part of China’s long-term strategy to achieve self-sufficiency in chip production and reduce dependence on foreign technology.
In recent years, China has substantially invested in its chip industry, pumping over 1 trillion Chinese yuan ($140 billion) into various research projects and extending government subsidies to domestic chip makers. This concerted effort aims to accelerate the development of indigenous chip technologies and strengthen China’s position as a global leader in the semiconductor space.
Hua Hong’s successful Shanghai debut adds to the growing list of Chinese semiconductor firms venturing into IPOs on the mainland. In previous months, other notable players such as Semiconductor Manufacturing Electronics (Shaoxing) Corporation and Nexchip Semiconductor have also made their debuts on the Star Market.
As the global semiconductor landscape continues to evolve, China’s strategic focus on bolstering its domestic chip industry remains unwavering. With ongoing efforts to enhance local chip manufacturing capabilities, we can expect to witness more semiconductor IPOs and further advancements in China’s pursuit of chip self-sufficiency in the near future. The success of Hua Hong’s listing serves as a promising milestone in this ambitious journey.