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Chinese chipmaker Hua Hong gets approval for $2.5 billion Shanghai IPO

Chinese chipmaker Hua Hong gets approval for $2.5 billion Shanghai IPO
Chinese chipmaker Hua Hong gets approval for $2.5 billion Shanghai IPO

Hua Hong Semiconductor, the second-largest chip maker in China, has reportedly been granted regulatory approval for a $2.5 billion initial public offering in Shanghai.

The approval comes as Beijing works on becoming more self-sufficient in the semiconductor segment amid tightening US restrictions.

The chip maker, which is listed in Hong Kong, received a letter of acceptance from the Shanghai Stock Exchange for issuing yuan-denominated shares and listing them on its STAR Market, or the Science and Technology Innovation Board, as per a company filing to the HKEX.

Hua Hong is aiming to raise ¥18 billion ($2.5 billion) to funds its capacity expansion efforts in Wuxi, Shanghai, which is the semiconductor heartland of the country. It also plans to use the capital to upgrade its 8-inch wafer fabrication factories and work on new technologies.

This will be the third-largest IPO on the STAR Market, if successful, following the listing of chipmaking leader Semiconductor Manufacturing International Corp (SMIC) and biotech major BeiGene, who are also listed in Hong Kong.

Hua Hong’s most advanced technology is the 55nm process node and having a monthly production of 324,000 8-inch wafers, is the second-largest chip maker in China following SMIC.

The approval for IPO comes as China pledges more support for home-based tech firms amid rising trade restrictions imposed by the US in a bid to curb the growth of the Chinese chip sector.  

According to Shanghai Stock Exchange GM, Cai Jianchun, SSE is aiming to develop a capital market ecosystem and support innovation in technologies and will encourage and assist more hard-tech firms to become listed and issue bonds.

Hua Hong has been unwantedly involved in the US-China tech war, with Washington certifying it as a validated end-user of sensitive US technologies. This has made it difficult for the company to procure advanced chip-making equipment from US-based suppliers.

The company’s shares have declined 52% this year, with Hua Hong also acknowledging international trade frictions and changes in export policies as a risk factor, considering that a major part of its raw materials and equipment is sourced from overseas.

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