Philips plans IPO for China chipmaker

Advanced Semiconductor Manufacturing Corp (先進半導體), a Chinese chipmaker owned by Royal Philips Electronics NV, plans to hold an initial public offering by June to help fund a US$700 million expansion of its Shanghai factory, chief financial officer Cheng Jianyu said.

The company, which supplies custom-made chips to Philips and US-based Jazz Semiconductor Inc, wants to boost capacity at the plant 10-fold to 30,000 silicon wafers a month, Cheng said in a telephone interview from the company's Shanghai headquarters.

Advanced Semiconductor's stock sale, planned for Hong Kong, would follow that of larger rival Shanghai-based Semiconductor Manufacturing International Corp (中芯國際集成電路), which aims to raise US$1.6 billion before listing next month.

Chinese suppliers of made-to- order chips are taking advantage of full capacity at Taiwanese rivals and recovering chip demand after a three-year slump.

"One has to get cautious when every chipmaker is saying it's holding an IPO," said Mandy Chan, who helps oversee US$1.1 billion at PCI Investment Management Ltd in Hong Kong.

"Is the industry up-cycle going to last long enough to support all the capacity expansion, and are they using technologies advanced enough to tap demand in Taiwan, Europe and the US?" she said.

Chip-making capacity in China will jump three-quarters to the equivalent of 2 million 8-inch silicon wafers this year after doubling last year, market researcher Gartner Inc forecasts.

Semiconductor Manufacturing, which makes computer chips as well as chips for consumer electronics, will boost capacity this year by two-thirds, and Shanghai Huahong NEC Electronics Co (上海華虹) by about half, Gartner said.

Huahong, a venture between NEC Corp and Shanghai Huahong Group, also plans this year to sell shares for the first time.

Advanced Semiconductor, founded in 1988 as Philips Semiconductor Corp, focuses on making chips used in smart cards, microwave ovens and other consumer electronics. It has two production lines that make 5- and 6-inch wafers, which have a smaller diameter and yield fewer chips per wafer.

The company has invested US$100 million in the plant. To reach maximum capacity may cost less than the US$700 million price tag if prices for second-hand equipment drop, she said.

"Our strategy is very different from" Semiconductor Manufacturing, she said.

"They do it by focusing on top-line growth. We only expand as we get more business and customers along the way. That helps us maintain profitability," she said.