Taipei, June 30 (CNA) United Microelectronics Corp. (UMC), the second-largest contract chipmaker in Taiwan, is planning to sell shares of a subsidiary based in China through an initial public offering (IPO) in Shanghai.
In a news conference held on Friday, UMC Chief Financial Officer Liu Chitung (劉啟東) said the wafer foundry subsidiary Hejian Technology (Suzhou) Co. Ltd. will integrate with two of its own units-- contract chipmaker United Semiconductor (Xiamen) Co. and integrated circuit designer UnitedDS Semiconductor (Shandong) Co. -- to issue Chinese yuan denominated A shares on the Shanghai Stock Exchange.
The Shanghai IPO plan has been approved by the board of directors of UMC, Liu said.
According to the IPO plan, Hejian will issue 400 million new shares to raise 2.5 billion yuan (US$377 million) and use the proceeds to expand its eight-inch wafer production.
The 400 million new shares are expected to account for an 11 percent diluted stake in Hejian. After the IPO, UMC is expected to retain an 87 percent stake in Hejian.
Liu said the IPO plan is expected to be completed in the second half of 2019, and will strengthen United Semiconductor (Xiamen)'s financial structure.
According to UMC, Hejian, United Semiconductor (Xiamen), and UnitedDS Semiconductor made up 11 percent of UMC's total revenue in 2017.
Hejian's IPO plan has caught much attention from investors in Taiwan after an earlier prominent IPO launched by Taiwan-based iPhone assembler Hon Hai Precision Industry Co.'s Internet-focused Foxconn Industrial Internet Co. Ltd. in Shanghai earlier this month. Hon Hai ranks as the world's largest electronics contract manufacturer.
FII's IPO has raised concerns that more and more Taiwanese tech firms will take their subsidiaries and list them in China, eyeing the relatively higher valuation in the Chinese equity market.
In response, the Taiwan Stock Exchange (TWSE), which operates the local main board, has said the Taiwan capital market will be a better choice than China's for Taiwanese firms' overseas incorporated units to raise funds as Beijing is mired in escalating trade friction with Washington.
According to the TWSE, FII's price-to-earnings ratio stood at 22.21 on June 28. That represents only a small premium over a 19.5 PE ratio commanded by foreign incorporated firms which have raised funds in Taiwan since the Shanghai Stock Exchange had fallen more than 20 percent from a high seen in January, amid fears over a possible trade war with the United States and a falling yuan.
The TWSE further pointed out that Taiwan has transparent rules in place for its capital market, and has an efficient and speedy process to review any IPO applications and secondary public offering proposals. The TWSE added the costs for companies to raise funds in Taiwan are also reasonable.
Meanwhile, UMC announced that it will spend 57.63 billion yen (US$111 million) to buy an 84.1 percent stake in a joint venture with Fujitsu Semiconductor Ltd. to fully take the company under its corporate umbrella.
The joint venture, Mie Fujitsu Semiconductor Ltd (MFS), owns a 12-inch wafer fab in Japan with a monthly production capacity of 36,000 units. UMC said the acquisition is expected to help the company boost sales and its market share.
The acquisition deal is expected to be completed in January 2019, UMC said.
(By Chang Chien-chung and Frances Huang)
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