SMIC IPO sunk by WTO, capex worries

March 18, 2004 – The highly anticipated IPO of Chinese chipmaker Semiconductor Manufacturing International Corp. (SMIC) on March 17 proved to be a disappointment.

In trading in Hong Kong and New York, SMIC shares shed more than 10% of their opening value due to concerns about future capital expenses and a growing conflict with the US over chip taxation policies. Of the estimated $1.8 billion IPO, roughly $1.06 billion will go to SMIC, with the remainder to existing shareholders.

SMIC’s IPO had been widely expected to be a big success — the IPO had an oversubscription rate of more than 200x — but two announcements this week helped sink investors’ confidence. First, SMIC revealing that contrary to recent statements from its CFO, it will need to raise more money to cover capital needs for 2005. Also, the US said it plans to petition the WTO in protest of China’s chip taxation policies, a move supported by the SIA.


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