Affected by this news, SMIC Hong Kong stocks rose sharply.
SMIC is coming back.
On the evening of May 5, SMIC, a leading domestic semiconductor manufacturing company, announced that it is planning to go public on the Science and Technology Innovation Board.
As soon as the news came out, SMIC’s Hong Kong stock market opened 5.9% higher this morning. As of press time, its increase has reached 10.62%.
Returning to A-shares, wanting to invest in building a 12-inch production line
Judging from the announcement, it includes a lot of IPO details, and SMIC came prepared.
The announcement shows that on April 30, the board of directors passed a resolution to approve the proposed issuance of RMB shares, grant of special authorization and related matters, subject to and subject to market conditions, shareholders’ approval at the extraordinary general meeting and necessary regulatory approvals. The listing venue for RMB shares is the Science and Technology Innovation Board.
In other words, unlike previous rumors of a return to A-shares, SMIC’s goal is the newly created Science and Technology Innovation Board.
In terms of specific rules, the number of shares issued by SMIC for the first time will not exceed 1,685.62 million shares, accounting for no more than 25% of the total number of shares issued on December 31, 2019 and the number of RMB shares to be issued this time. . An over-allotment option of not more than 15% of the number of RMB shares initially issued may be granted. All RMB shares will be new shares and will not involve the conversion of existing shares.
SMIC proposed to issue a face value of US$0.004 per share, the same as that of Hong Kong stocks. Assuming that the over-allotment option in respect of the RMB shares is not exercised, the shareholding of the Hong Kong shares held by core connected persons will be diluted from 32.14% to 24.22%, and the public float will be diluted from 67.86% to 51.14%.
Among them, about 40% of the funds raised by the Science and Technology Innovation Board are used to invest in the “12-inch chip SN1 project”, about 20% are used as reserve funds for advanced and mature technology research and development projects, and about 40% are used to supplement working capital .
It is understood that the “12-inch SN1 project” is SMIC’s southern factory focusing on advanced processes of 14nm and below. The total investment of the SMIC South project is 10.24 billion US dollars, and SMIC indirectly holds 50.1% of its equity.
SMIC, who came prepared, why is it returning now?
As early as 2004, SMIC achieved dual listings in the United States and Hong Kong. However, on May 24, 2019, SMIC announced to the public that due to some considerations, the company chose to delist from the New York Stock Exchange and only allowed over-the-counter transactions. Since that moment, there has been speculation that SMIC will be listed on the A-share market.
A year has passed, and SMIC is finally taking this step officially.
Why return to A shares?
An industry insider pointed out that the annual capital expenditure of the “IST Big Three” (Intel, Samsung, TSMC) exceeds 10 billion US dollars, and with the help of the more tolerant financing environment of A-shares, SMIC will be less constrained in fundraising and capital will be fed back. Industry is very beneficial to the accelerated catch-up of asset-heavy high-tech companies.
However, choosing to go public at this moment is closely related to the revision of relevant policies from the point of view of time.
On April 30, the China Securities Regulatory Commission issued the “Announcement on the Relevant Arrangements for the Domestic Listing of Innovative Pilot Red Chip Enterprises”, which lowered the threshold for the return of listed red chip enterprises to A shares. On the same day, the board of directors of SMIC reviewed and approved the domestic listing proposal.
It can be said that SMIC has been waiting for such an opportunity.
Prior to the domestic listing of red chip companies, the “Several Opinions on Launching the Pilot Program of Domestic Issuance of Stocks or Depositary Receipts by Innovative Enterprises” issued by the China Securities Regulatory Commission set a higher threshold in terms of selection criteria, requiring the market value of overseas listed red chip companies. Not less than 200 billion yuan. According to this standard, SMIC with a total market value of less than HK$80 billion has never had a chance.
According to the latest regulations, in addition to the above criteria, the market value of overseas-listed red-chip companies is over RMB 20 billion, and they have independent research and development, international leading technologies, strong technological innovation capabilities, and are in a comparatively advantageous position in the competition in the same industry. Domestic listing.
According to this standard, there will be almost no suspense for SMIC to list on the Science and Technology Innovation Board.
China has become the main area for foundry growth, and SMIC and the Science and Technology Innovation Board are mutually beneficial
From the perspective of future development, SMIC’s choice for an IPO on the Science and Technology Innovation Board is a mutually beneficial move.
First of all, the Science and Technology Innovation Board has a threshold, and there are many companies in the semiconductor industry chain, such as the leading semiconductor equipment manufacturer North Huachuang, the leading manufacturer of etching machine equipment, etc. In the domestic substitution environment, the trends of each company are relatively stable. Therefore, the overall financing environment is also more friendly to it.
In addition, affected by the overall environment of foundry and the development of its own technology, SMIC’s development momentum is constantly improving.
According to the latest analysis and forecast report on the integrated circuit industry released by IC Insights, in the past 10 years, with the rise of Chinese Fabless (fabless) companies (such as HiSilicon), China’s demand for foundry services has also risen. Statistics for 2019 show that the Chinese market was the only major region with pure-play foundry sales growth last year, while the pure-play foundry markets in Europe and Japan both experienced double-digit declines in 2019.
Especially recently, Huawei began to hand over some 14nm orders to SMIC for foundry. For this local giant, the external environment is very favorable, and future revenue will continue to rise.
At the same time, the more advanced the process, the higher the profit. Judging from the announcement released by the company, the investment in the “12-inch chip SN1 project” reveals SMIC’s determination in high-end process, especially considering Liang Mengsong’s leadership, its It is only a matter of time before moving to a high-end manufacturing process, and in the same way, rising revenue in the future is also an inevitable trend.
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