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UMC subsidiary files Shanghai IPO application

2019/03/23 16:41:13

Taipei, March 23 (CNA) A China-based subsidiary of United Microelectronics Corp. (UMC), the second largest contract chipmaker in Taiwan, has submitted an application to launch an initial public offering (IPO) on the Shanghai Stock Exchange (SSE).

In a statement Friday, UMC said Hejian Technology (Suzhou) Co. plans to list its shares as a Chinese yuan-denominated A share on the exchange's science and technology innovation board, and Changjiang Securities will be the sponsor and lead underwriter of the listing.

Shanghai's technology board, a Nasdaq-like trading platform, was announced by President Xi Jinping (習近平) in November and is expected to draw large investment in Chinese tech firms to counter U.S. curbs on China's technology investments.

According to Chinese news media reports, the technology board's registration-based listing procedure aims to reduce regulatory red tape to streamline the IPO process.

The reports said the SSE review process is expected to take about three months, meaning the first batch of applicants could make their debut on the technology board as early as mid-June.

On its website, the SSE said Friday it has received nine applications from potential tech firms eyeing a listing on the board, including Hejian, since it began accepting applications on March 18.

The nine firms are expected to raise about 10.98 billion Chinese yuan (US$1.64 billion), and Hejian has the highest target of 2.5 billion yuan, Chinese news media reports indicated.

According to the SSE, Hejian is the only company among the nine applicants to have posted losses three years in a row.

Unlike the main exchange, the new trading platform will allow firms which remain in the red to list their shares.

Hejian's prospectus shows the company posting net losses of 158 million yuan (US$23.58 million), 2.96 million yuan and 146 million yuan in 2016, 2017 and 2018, respectively.

Hejian said the losses came largely because subsidiary United Semiconductor (Xiamen) Co. faced huge depreciation and amortization costs from its fixed assets, which pushed its gross margin into negative territory.

UMC said Hejian is planning to issue up to 400 million shares in the listing, which will account for no more than 10 percent of the company's total shares, and the funds raised from the IPO will be used to expand capacity and as working capital.

After the IPO, UMC will reduce its stake in Hejian to 87.24 percent from the current 98.14 percent.

According to UMC, Hejian's core business is production of eight-inch wafers by using 0.11. 0.13, 0.18, 0.25, 0.35 and 0.5 micrometer processes. United Semiconductor (Xiamen) focuses on 12-inch wafer production based on the 40 and 90 nanometer technologies.

In 2018, Hejian had NT$3.57 billion yuan in sales, with eight-inch wafers and 12-inch wafers taking 62.21 percent and 36.85 percent of the total, respectively.

(By Chang Chien-chung, Chang Shu-ling and Frances Huang)