SMIC Spikes 228% in IPO Debut on China’s Hyped Star Market
... with its market cap adding an extra CNY 421.67 billion in just a few minutes after the trading started in Shanghai on July 16.
On July 16, China’s largest foundry Semiconductor Manufacturing International Corporation (SMIC, 00981:HKEX, 688981:SH) went public, raising CNY 46.29 billion. The stock price flew up to CNY 90.00 soon after the open-market transactions kicked off.
The IPO is China’s largest in 10 years. But the scale is not the only one in the list of reasons for following this story. SMIC is the only mainland-based foundry capable of 14nm processing, it accounted for 4.80% of the global market in the second quarter of 2020, while Taiwanese TSMC ranked the first with 51.50% market share.
Owing to high R&D expenditure requirements and the fast speed of hardware generation upgrades, most semiconductor companies are fabless. To better fit demands from the high performance of terminal devices, TSMC has invested a lot in R&D, possessing the most advanced 7nm node processing techniques and will, almost certainly, be the first to realize the volume production of 5nm this year.
Manufacturing at 7nm and 5nm process nodes is essential for 5G equipment and edge devices. The Huawei saga is one of the core narratives here, as the Shenzhen tech giant was TSMC’s second-largest client in 2019, accounting for 14% of its revenue.
SMIC, which is planning to become China’s chipmaker-in-chief, still lacks behind TSMC in many respects. One is CapEx. The Star Market listing is projected to partly resolve the issue.