Foundry IPOs are finding a cool reception in China

Mike Clendenin, EE Times
(04/10/2006 10:00 AM EDT)

Shanghai, China — In a country that can only produce about 20 percent of the chips it consumes, a foundry IPO should be a cinch. Should be, but isn't. The tepid response to the recent news of an initial public offering by China's leading analog foundry shows just how tough it is to make chip-manufacturing pay here.

Shanghai-based Advanced Semiconductor Manufacturing Corp. Ltd. (ASMC) is expected to begin trading its shares in Hong Kong this week. However, these days, retail investors favor the hum-drum, low-tech enterprises like Hunan Nonferrous Metals and Nine Dragons Paper over the glitz of modern semiconductor fabs.

This isn't how it was supposed to happen. High tech is popular in China, attracting more than 100,000 fresh graduates a year. The field also enjoys preferential policies from the government and the attention of hundreds of foreign system and chip companies. So what's happening? The answer is pretty straightforward: global competition is getting more severe for fabs in China. Whether it's bulk silicon provider Semiconductor Manufacturing International Co., or niche player ASMC, it's been tough to keep operations in the black.