The chip maker who only seconds SMIC in China is potentially launching the largest IPO in China’s STAR Market in 2022.
Hua Hong Semiconductor has gotten the green light from regulators to launch its IPO, which seeks 18 billion yuan ($2.5 billion), according to news released by the Shanghai Stock Exchange. Hua Hong intends to use the funds for its Hua Hong Manufacturing project based in Wuxi, factory optimization, project upgrade, R&D for special process technology, etc.
The chip maker is already listed in Hong Kong. Hua Hong went public in 2014 at 11.25 HKD per share and raised US$320.2 million at the time of its IPO. On November 4, Hua Hong closed at 19.68 HKD, with a total market value of 25.712 billion HKD. Its shares jumped to the 23HKD level days after the news was released.
Huahong’s Shanghai IPO, if launched successfully, would become the third-largest IPO in STAR Market, following that of its industry peer SMIC and biotech company BeiGene.
According to its prospectus, from 2019 to the first quarter of 2022, Hua Hong Semiconductor's revenue was 6.522 billion yuan, 6.737 billion yuan, 10.63 billion yuan and 3.807 billion yuan, respectively, with a compound growth rate of 27.95% in the last three years, and net profits of 1.04 billion yuan, 505 million yuan, 1.66 billion yuan and 642 million yuan in the same period, respectively.
The growth of revenue and net profit comes from the continuous expansion of domestic industrial production scale and the rapid growth of demand for remote technology as the world adapts to a post-COVID era. In addition, demands are also increasing due to sectors such as new energy vehicles, smart manufacturing, mobile communication, and IoT rising in China.
According to IC Insights, from 2016 to 2021, the size of the silicon chip wafers market in mainland China grew from $4.6 billion to $9.4 billion, with a CAGR of 15.12%. The country’s semiconductor market landscape has changed drastically over the past few years, and local chip makers have benefited greatly from the change since geopolitical conflicts prevented competition from overseas providers.