Semiconductor Manufacturing International Corp (SMIC, 中芯), China’s biggest chipmaker, plans to sell a stake in less than six months at a “much better” price than the stock’s market value, chief executive officer Richard Chang (張汝京) said.
The chipmaker’s financial adviser valued the company at a price range that the potential buyer regards as “reasonable,” Chang said in an interview yesterday. The Shanghai-based company has narrowed its search to a single Chinese investor, he said, declining to name the adviser or the potential investor.
SMIC, which has shareholder approval to sell as much as a 20 percent stake, would use the proceeds from a sale to pay off debt, Chang said. After posting four quarters of losses, SMIC is abandoning the unprofitable computer-memory chip business to compete against Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in producing customized chips used in game consoles and mobile phones.
“Based on the company’s operations at the moment, it would be difficult to ask an investor to pay more than a 5 percent premium on the current price,” said Nomura Securities Co analyst Rick Hsu (徐稦成), who rates the shares “sell.”
SMIC increased 1.1 percent to HK$0.46 at 2.52pm in Hong Kong trading, giving it a market value of HK$8.5 billion (US$1.1 billion). The benchmark Hang Seng Index dropped 2 percent. The stock is down 45 percent this year.
SMIC told the potential buyer “we have to decouple the stake price from the current market price,” Chang said. “The current market price does not reflect our real value.”
Last year, Chang said the company was reviewing proposals from private equity funds. The chipmaker attracted buyout funds seeking to buy a 25 percent stake for US$600 million, the South China Morning Post said at the time. SMIC has since ruled out selling to a financial investor, Chang said yesterday.
The chipmaker posted a loss of US$119.1 million in the first quarter, compared with net income of US$8.8 million a year earlier. Sales fell 6.7 percent to US$362.4 million. SMIC may return to profit in the fourth quarter of this year after its plants that made memory chips begin to produce semiconductors for electronics, Chang said.
Prices of dynamic random access memory (DRAM) chips, which speed up computers by storing frequently used data, tumbled 85 percent last year because of a glut, according to prices compiled by Dramexchange Technology Inc, operator of Asia’s biggest spot market for chips. DRAM makers, led by Samsung Electronics Co, have posted losses from the product this year.
SMIC is trying to convert its DRAM plants to meet demand for so-called logic chips, Chang said. Orders for logic semiconductors exceed capacity, he said.
The company, which has eight production lines and manages two for local city governments, has a 35 percent market share in China and 7 percent globally, Chang said.
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