RMB 52 per share! That’s the final IPO price for Hua Hong Semiconductor Limited (also known as Hua Hong Semiconductor) on the STAR Market, marking a key milestone in the company’s return to the A-share market.

On July 23, Hua Hong announced that the STAR Market offering price is set at RMB 52 per share. With a total of 407.75 million new shares to be issued, the company expects to raise RMB 21.2 billion—exceeding its original target of RMB 18 billion by RMB 3.2 billion.

According to the offering schedule, online and offline subscription will open on July 25, with the final results announcement slated for July 31. This means the countdown to Hua Hong’s A-share listing has officially begun.

Notably, the strategic placement list includes not only long-term investors like the National Integrated Circuit Industry Investment Fund (the “Big Fund”) but also a host of semiconductor supply chain companies—many of them leaders in their respective segments—highlighting deep vertical integration across the industry.

Premium of Over 2x vs. Hong Kong Listing

Founded in 1996 and affiliated with Shanghai Huahong Group, Hua Hong Semiconductor provides wafer foundry services to chip design companies. It is the second-largest wafer foundry in mainland China, trailing only SMIC.

Hua Hong listed on the Hong Kong Stock Exchange in October 2014. In November of last year, the company initiated its A-share return process. After two rounds of regulatory inquiries, its STAR Market IPO application was approved on May 17, with registration finalized on June 6.

As a mega-IPO raising over RMB 10 billion, Hua Hong’s offering details have drawn significant market attention. According to the initial prospectus, the company planned to raise RMB 18 billion for its investment projects. At the final price of RMB 52 per share and 407.75 million new shares, the total proceeds are expected to reach RMB 21.2 billion, with net proceeds of approximately RMB 20.9 billion after deducting issuance costs.

Under a market-based pricing mechanism, a higher IPO price typically signals strong market confidence in the company’s prospects. In terms of valuation, the offering price corresponds to a P/E ratio of 34.71 times (calculated using 2022 non-GAAP net profit attributable to shareholders divided by post-issuance total shares), which is higher than the average P/E of comparable listed companies but lower than the industry’s average static P/E over the past month as published by the China Securities Index Company.

Notably, as of July 21, Hua Hong’s H-share closing price was HKD 25.3 (approximately RMB 23.26). The STAR Market offering price represents a premium of more than 2x over the Hong Kong listing, and the company has warned of “the risk that future share price declines could cause losses for investors.”

However, based on historical patterns, A-H share premiums are common among STAR Market listings.

Overall, Hua Hong’s A-share fundraising ranks among the largest in the capital market, and its financial performance underscores robust profitability.

From 2020 to 2022, Hua Hong’s revenue reached RMB 6.737 billion, RMB 10.63 billion, and RMB 16.786 billion, respectively, with net profits attributable to shareholders of RMB 505 million, RMB 1.66 billion, and RMB 3.009 billion.

Financially, Hua Hong is not short on cash—at the end of Q1 2022, it held RMB 10.87 billion in monetary funds. Yet, in the capital-intensive wafer foundry industry, the company needs to broaden its financing channels to support expansion.

The company notes that it is capitalizing on market opportunities from downstream technology upgrades in new energy vehicles, the Internet of Things, and smart manufacturing. To stay competitive, it must invest heavily in process R&D, talent acquisition, and capacity expansion, which places significant pressure on its capital resources.

Supply Chain Players Join Strategic Placement

Hua Hong’s offering combines strategic placement, offline placement, and online subscription. The strategic placement accounts for 203.875 million shares, or 50.00% of the total offering.

Strategic placement is a common tool in A-share IPOs, designed to attract long-term, stable capital. Selected investors receive priority subscription rights in exchange for a lock-up period post-listing.

According to the strategic investor list, 30 investors have been allocated shares. The Big Fund Phase II leads with an allocation of 11.85% of the initial offering, investing RMB 2.5 billion. The two entities have a close relationship—in January, the Big Fund invested $1.1 billion alongside Hua Hong and three other parties to establish a joint venture for a 12-inch wafer project, which is the primary implementation vehicle for Hua Hong’s STAR Market fundraising.

Other notable investors include China State-owned Enterprise Structural Adjustment Fund Phase II (RMB 1.2 billion, 5.66% allocation), China Insurance Investment Fund, China Internet Investment Fund, and Zhejiang Manufacturing Fund, among other long-term players.

A 21st Century Business Herald reporter noted that several semiconductor supply chain companies appear on the list, including Montage Technology (688123.SH), Montage Lansi, ACM Research (Shanghai), and AMEC, each investing RMB 100 million, as well as Anji Microelectronics (688019.SH) and Shanghai Silicone Industry, each investing RMB 50 million.

One participating company told the reporter, “We value the stable upstream-downstream strategic collaboration with Hua Hong.”

Additionally, Guotai Junan Securities and Haitong Innovation Securities, acting as sponsors, are each subscribing 2% of the offering, amounting to RMB 424 million each.

More notably, SAIC Motor also appears on the strategic placement list with an investment of RMB 100 million, reflecting Hua Hong’s traction in the automotive sector.

While the semiconductor industry faces overall demand slowdown, particularly in consumer electronics, Hua Hong’s Q1 performance continued to grow, driven primarily by new energy vehicles and industrial markets.

Hua Hong’s President and Executive Director Tang Junjun has stated that despite the ongoing downturn in the chip sector and elevated inventory levels at some customers, the company is strengthening business collaboration with supply chain clients, including those in the new energy vehicle space, to better meet market demand.

In response to 21st Century Business Herald, Hua Hong said, “In recent years, with the rapid development of emerging industries such as new energy vehicles, industrial intelligence, next-generation mobile communications, and IoT, the global semiconductor market has shown an overall growth trend. Our capacity expansion aligns with business growth and downstream market prospects. Post-expansion, we will further enhance production capacity, strengthen R&D capabilities, and enrich our technology platforms to better serve market needs and elevate our market position and core competitiveness in the wafer foundry industry.”

Editor: Li Yutong, Intern: Zhao Fengling