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2019

05/29

With the relaxation of the system of science and technology innovation board, will Zhongxin International and Ziguang Zhanrui be able to dye their fingers?

Semiconductor enterprises often need a large amount of capital investment in the early stage, and the relaxation of profit requirements in the institutional arrangement of science and Technology Innovation Board will provide further impetus for the development of such enterprises.


On May 24, Zhongxin International (0981.HK, SMI.NY) announced its application for voluntary delisting of its American Advanced Securities Share (ADS) from the New York Stock Exchange, which aroused speculation among the market about whether Zhongxin International is preparing to dye its finger-dyeing board. Almost at the same time, Beijing Ziguang Zhanrui Technology Co., the third largest mobile chip design company in the world (hereinafter referred to as Ziguang Zhanrui) also announced the launch of the branch. Preparations for listing of wound board.


Up to May 27, 111 queuing companies listed on the board of Science and Technology have been accepted, and the number of quasi-IPO companies related to the semiconductor industry has been no less than 10.


In the view of industry insiders, semiconductor enterprises often need a large amount of capital investment in the early stage, and the relaxation of profit requirements in the SCM system arrangement will further help the development of such enterprises; but some analysts point out that the semiconductor enterprises in the SCM queuing enterprises are more distributed in packaging, materials and other links, while the enterprises in the core IC design and manufacturing links are still in the process. But relatively scarce.


The Conjecture of 01 Centroid


SMIC announced on May 24 that it applied for voluntary delisting of its ADS from the New York Stock Exchange. Since then, SMIC's securities transactions will be conducted only on the Stock Exchange.


For the reasons of delisting, Zhongxin International said that the main reason was the low volume of ADS transactions and the high cost of maintaining its listing. A core international said that the delisting was not a complete departure from the U.S. stock market, but a return to the OTC market, where investors could choose to continue holding and trading in the OTC market.


"The purpose of listing is to enhance liquidity and obtain the corresponding capital premium and financing. If the transaction volume of ADS is relatively low, but also bear the corresponding intermediary, information disclosure and other costs, it is obviously not cost-effective." On May 27, an American equity banker explained.


However, some market participants speculate that while the US stock market is delisting, Zhongxin International has the possibility to research and promote the listing on the Sci-Tech board.


"The market pays more attention to the preparation of STEM, and the oversubscribed situation of the initial funds releases the signal that STEM may have a larger valuation premium. Considering the differences in valuation and financing ability, we can not exclude the possibility that some chip companies listed abroad, including Zhongxin International, will return to STEM." On May 27, an investment banker in Shanghai said.

This conjecture has not been accepted by Zhongxin International. "This delisting is not a sudden decision, but a mature decision made through long-term research within the company. It has nothing to do with trade warfare and innovation board. At present, there are no plans, arrangements or timetables for listing on the mainland. All of these are based on public information." A core international person expressed the above speculation.




An investment banker close to Zhongxin International pointed out that Zhongxin International belongs to a special structure enterprise registered in Cayman, and its choice to satisfy the landing company's creation may only be in three ways: privatization, splitting up the domestic main body for listing or issuing CDR.



"If we choose to return to privatization, it will inevitably mean higher costs. Splitting will inevitably face problems such as competition between parent and subsidiary companies and listing conditions. The most likely way is to return through CDR." According to the investment banker.



"However, Zhongxin International has been listed for many years, and the financing path is smooth. Whether it is necessary for it to re-list in Sci-Tech needs to be further explored." The investment banker said.



"Chip manufacturing requires a long-term and large amount of capital investment, such as tens of billions of dollars for a chip manufacturing machine. In order to improve the production diversity and quality rate, we also need to increase the attraction of talents. So it is not to say that some chip manufacturing enterprises have gone public for a long time without money." An analyst in the electronics industry of a securities firm in Shanghai said.


However, the market seems to be voting with its feet on CIMC, which rose by 9.86% on May 27. According to its annual report, Zhongxin International's revenue in the first quarter of 2018 and 2019 was 23.184 billion yuan and 4.710 billion yuan respectively, and its net profit was 920 million yuan and 0.830 billion yuan respectively.


02 Semiconductor Market

The speculation that CIMC will withdraw from the NYSE has not yet subsided, while other semiconductor companies are already doing so.


On May 24, Ziguang Zhanrui, a mobile chip design company of Ziguang Group, announced that it had started the preparatory work for the listing of Kechuang board, planned to complete the financing and overall restructuring of Pre IPO round in 2019, and planned to declare its listing in 2020.


Ziguang Zhanrui said that the listing of Kechuang board will help the company to operate and manage more transparently and standardized, and better respond to market and customer needs, and improve product quality.


Data show that Ziguang Zhanrui's main business layout is in the chip design of mobile phones, TV, Bluetooth speakers, headphones and other products. In addition to Ziguang Group, shareholders also include Intel China, which invested in July 2015.


At present, as of May 27, there are as many as 15 semiconductor-related companies in 111 companies that have declared the listing of KEGEM, covering semiconductor design, manufacturing, equipment, raw materials, packaging, testing and other links.


However, some insiders pointed out that the core area of semiconductor industry is still the design link represented by Ziguang Zhanrui and the manufacturing link represented by Zhongxin International, but there are still fewer quasi-technological Innovation Board queuing enterprises in this field.


"Semiconductor is divided into design, manufacturing and packaging in sequence. Design is a brain-intensive and talent-intensive industry, manufacturing is a capital-intensive industry, while the technical barriers to packaging are relatively low. Domestic technology has been relatively mature." On May 27, a senior executive of a semiconductor manufacturing enterprise in East China said, "However, at present, there are still a few semiconductor enterprises in the core links which are listed on the Shengke Creative Board."


At present, there are only four declaration enterprises in chip design, namely Juchen, Jingchen, Jingfengmingyuan and Lanqi Science and Technology, while the declaration enterprises in manufacturing are only one with warship chips. The remaining semiconductor companies in queue are more subordinate to material supply, testing, equipment and other fields.



"Companies in all sectors of the semiconductor industry can obtain listing financing, which will further promote the rapid development of the entire industry, catch up with developed countries and reduce import dependence." "But in terms of subdivision, design and manufacturing are still the two sectors with the highest demand for capital," said the electronics industry analyst.