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National Silicon Industry Group Ends First Day of Trading Up 180%
COVID-19 and China
Image credit: Jason Leung/Unsplash

NSIG is among young state-backed projects in the field.
► It is unlikely to win big on a global scale, as the wafer market is highly commoditized.

The National Silicon Industry Group (NSIG, 688126:SH), one of the largest silicon wafer manufacturers in China, jumped by more than 180% in its Star Market trading debut on April 20 after obtaining CNY 2.41 billion (USD 341 million) in an initial public offering.

The newly listed shares, which were originally priced at CNY 3.89 apiece, closed the afternoon session at CNY 10.91, giving the Shanghai-based company a market value of CNY 27.1 billion (over USD 3.8 billion).

This surge made NSIG one of the biggest industry representatives on the Shanghai exchange’s sci-tech board. It is now trailing only memory interface developer Montage Technology (688008:SH), microelectronic equipment maker AMEC (688012:SH) and CR Micro (688396:SH), China Resources’ semiconductor arm that went public in late February – right in the middle of the coronavirus outbreak in the country.

Founded in 2015, NSIG has evolved into a crucial cog in the core mechanism of China’s fledgling semiconductor industry. Backed by the National Integrated Circuit Industry Investment Fund, known as the ‘Big Fund,’ it has been shipping wafers to a litany of domestic and foreign chipmakers, including Wuhan-based memory upstart YTMC, transistor producer Jilin Sino‑Microelectronic (600360:SH), French corporation Soitec and American wireless hardware developer Qorvo (QRVO:NASDAQ), to name a few. 

As its operating income has been growing at a steady pace since 2016, the wafer maker has also been scaling up in terms of personnel headcount. In September 2019, the number of the company’s employees hit 1,339. At the same time, those directly involved in research in development became an over-400-strong team. It is noteworthy that most of these ‘engines of progress’ were hired in 2019: according to NSIG’s reports, the number was just 182 at the end of 2018.

On the flip side, the Shanghai firm is barely competitive on a global scale. With a minuscule 2.18% share of the global silicon wafer market, it is attempting to take on giants in the segment – Japanese corporations Shin-Etsu and SUMCO, German company Siltronic, Taiwan-based GlobalWafers and Korean SK Siltron. The five accounted for approximately 93% of the industry, which was worth around USD 10 billion in 2018.

Meanwhile, the mainland’s chipmakers are going flat out, trying to emerge from the COVID-19-triggered global economic downturn as winners. Some might even succeed, benefiting from the supply chain localization process.

ANALYST
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