Semiconductor Manufacturing International Corporation (SMIC), a Chinese processor manufacturer, has filed an application to issue shares on the Shanghai Stock Exchange. The volume of placement should be $ 2.8 billion. The company plans to increase production against the backdrop of China’s trade war with the United States - switching to its own processors is part of the Chinese strategy of import substitution in IT.
What happened
SMIC is already a public company, its shares are traded on the Hong Kong stock exchange. In addition, the manufacturer recently received $ 2.2 billion of investment from the state. However, the plans to expand production are so ambitious that it was decided to conduct an additional issue of shares on the Shanghai stock exchange. The placement will amount to 20 billion yuan, or $ 2.8 billion.
Previous events during the Chinese trade war with the United States made the country seriously think about import substitution in technology.
Why China needs import substitution in IT
Over the past year, the US authorities have been quite active in imposing sanctions on Chinese technology companies. One of the victims was Huawei. The corporation was included in the so-called Entity List - it includes companies that restrict access to American technology. In particular, in May, the US presidential administration introduced a rule according to which foreign manufacturers of equipment that use American technology must obtain permission to sell Huawei products.
In particular, this rule should affect the Taiwanese chip maker TSMC, which supplies Huawei with most of the processors, for example, for smartphones. If companies fail to circumvent the US ban, Huawei may switch to SMIC products, although experts say their quality is lower.
Improving product quality and increasing production volumes are the main goals that the manufacturer plans to solve with the help of large-scale investments. In the accompanying documentation for the issue of shares, SMIC separately notes that friction between China and the United States can positively affect the company's business.
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