Chinese Chipmaker Hua Hong’s Shares Surge on Market Debut, but Quickly Retreat
Introduction
Chinese chipmaker Hua Hong experienced a 13% surge in its shares during its market debut on the Shanghai Stock Exchange’s Star Market. However, the gains were short-lived as the stock quickly retreated.
Background
Hua Hong is the second-largest chip foundry in China, following Semiconductor Manufacturing International Corp (SMIC).
Market Performance
The chipmaker’s shares opened at 58.88 Chinese yuan on the Nasdaq-style Star Market, which marked a 13.2% increase from its offer price of 52 Chinese yuan ($7.23). However, the shares later dipped and were trading at 53.99 Chinese yuan in the afternoon.
Initial Public Offering (IPO)
Hua Hong raised 21.2 billion yuan ($2.95 billion) through its IPO on the Shanghai Stock Exchange. This IPO is the largest in mainland China so far this year.
Business Operations
Hua Hong specializes in producing semiconductors using advanced wafer process technologies. Its chips are utilized in various industries, including consumer electronics, communications, computing, industrial, and automotive sectors.
Market Impact
Following its market debut, Hua Hong’s shares listed on the Hong Kong exchange experienced a decline of 7.4% on Monday.
Expert Analysis
Phelix Lee, an equity analyst at Morningstar Asia, believes that the size of Hua Hong’s IPO is not significant compared to SMIC’s IPO a few years ago. Lee suggests that the trend of encouraging local chipmakers and related companies to list domestically remains intact, and more semiconductor IPOs are expected in the future.
Comparison with SMIC
During its IPO in 2020, SMIC raised 46.28 billion yuan ($6.62 billion).
Market Context
Hua Hong’s listing comes at a time when Chinese companies are aiming to raise capital to enhance their advanced chip technology capabilities. This move is driven by China’s pursuit of self-reliance in the face of Washington’s efforts to limit its access to advanced chip technology.
