The board of United Microelectronics Corp (UMC, 聯電) yesterday approved a proposal to allow its Chinese unit, Hejian Technology (Suzhou) Co Ltd (和艦科技), to file for a 2.5 billion yuan (US$380 million) initial public offering (IPO) in China.
Hejian’s IPO, aimed at funding capacity expansion and to vie for a stronger presence in China, is the latest in a slew of local firms looking to debut the shares of their Chinese subsidiaries.
Foxconn Industrial Internet Co’s (FII, 富士康工業互聯網) IPO on the Shanghai Stock Exchange earlier this month saw its market value surpass its Taipei-listed parent company, Hon Hai Precision Industry Co (鴻海精密).
“We began taking a serious look at this IPO project prompted by some similar [IPOs] launched by local peers,” UMC chief financial officer Liu Chitung (劉啟東) told a media briefing.
The world’s third-largest contract chipmaker said the IPO would help it curb a talent drain at Hejian by allowing the firm to implement an employee stock ownership program, Liu said.
Hejian, which has an 8-inch fab in Suzhou, Jiangsu Province, suffered a high employee turnover of between 15 and 20 percent last year because of constant poaching by its Chinese rivals, Liu said.
Based on UMC’s plan, Hejian is to offer up to 400 million new shares to raise about 2.5 billion yuan and plans to use most of the proceeds to boost its capacity from 65,000 wafers per month to 75,000 wafers.
Hejian has two Chinese subsidiaries: United Semiconductor (Xiamen) Co (聯芯) and UnitedDS Semiconductor (Shandong) Co (聯璟半導體).
United Semiconductor operates a 12-inch fab and UnitedDS Semiconductor designs chips.
UMC said the Hejian IPO would not adversely affect its revenue and profit as the three units contributed a combined 11 percent of UMC’s total revenue in the first quarter this year.
After the IPO, UMC would hold about an 87 percent stake in Hejian, down from 98 percent.
“An A-share listing on the Shanghai Stock Exchange provides an ideal path for UMC to quickly capitalize on the rapid growth of China’s semiconductor market and facilitate Hejian’s long-term development,” UMC joint president Jason Wang (王石) said in a statement.
The move is expected to help expand UMC’s market share and further increase its scale of production, technical quality and overall competitiveness, he said.
The proposed IPO is subject to shareholders’ approval at an extraordinary meeting scheduled for Aug. 20.
The board also approved a plan to buy the remaining 84.1 percent of a joint venture with Fujitsu Semiconductor Ltd for ￥57.63 billion (US$521 million).
The joint venture, Mie Fujitsu Semiconductor Ltd (MFS), operates a 12-inch fab in Japan.
UMC currently owns a 15.9 percent stake in the company.
“MFS is totally complementary to UMC in terms of customer portfolios and product lineups,” Liu said. “MFS mostly makes chips used in the automotive sector and for Internet of Things apps. Its customers are largely Japanese automakers.”
MFS posted revenue of ￥70.9 billion last year and a net profit of ￥2.66 billion.
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