What's going on?
Semiconductor Manufacturing International Corporation (SMIC) wants a serious upgrade: China’s biggest microchip-maker announced plans on Tuesday to raise $2.8 billion from new investors.
What does this mean?
SMIC is already a public company – its shares are available to buy and sell on the Hong Kong Stock Exchange – but the firm now plans to list its shares on the Shanghai Stock Exchange as well. That could be a shrewd move given the rising tensions between Hong Kong and mainland China, but in the meantime, it’ll also give SMIC a much-needed cash injection as Chinese investors buy up its new shares.
SMIC’s dash for cash could prove well-timed. Chinese telecoms giant Huawei has been banned from doing business with US companies, and one of its suppliers – Taiwanese chipmaker TSMC – might get caught up in the restrictions. SMIC has no such worries, and with a beefed-up bank account, it could find its rival’s shoes are a perfect fit.
Why should I care?
For markets: You do you.
The semiconductor industry is globally connected: over 200 suppliers from 43 countries are involved in making the iPhone alone. That means their fortunes – which typically mirror those of the global economy – tend to rise and fall in sync. But between this new funding and an industry hampered by blacklists and weak demand, SMIC may be eyeing its chance to break away from its peers and forge its own path.
Zooming out: Out for the discount.
Reports suggest Apple slashed the prices of several of its iPhone models on Alibaba-owned ecommerce marketplace Tmall, possibly in a bid to woo new customers during the country’s mid-year shopping festival (tweet this). But skeptical investors might suspect Apple’s previously reported bounceback in China wasn’t as strong as hoped, and wonder if the company simply needs all the customers it can get…