What are the reasons for SMIC's delisting in the United States? What's the secret of delisting in the United States? On the evening of May 24, 2019, SMIC international IC Manufacturing Co., Ltd. suddenly announced that it would apply for voluntary delisting of its shares of American depository receipts from the New York Stock Exchange in accordance with the U.S. Securities and exchange law, and cancel the registration of these shares of American Depository Receipts and related general shares.
SMIC announced its voluntary delisting from the New York Stock Exchange for two reasons: first, SMIC, headquartered in Shanghai, was listed on the New York Stock Exchange on March 17, 2004 and the stock exchange of Hong Kong on March 18 of that year. Judging from the market value of the two markets, the total market value of Hong Kong stocks is much larger than that of US stocks, and the trading volume of SMIC in the New York Stock Exchange is also quite limited. Second, it is necessary to be listed on both the New York Stock Exchange and Hong Kong. The annual cost of listing on both sides is higher. From the cost point of view, delisting can save money for R & D.
Many people will ask, what does SMIC do? SMIC makes chips, which is different from Huawei in that SMIC makes chips, while Huawei designs chips. At present, domestic chip design enterprises include Hisilicon of Huawei, while chip manufacturing enterprises include SMIC international, TSMC, etc. Of course, after the completion of chip manufacturing, there is a need for packaging and testing. Therefore, chip manufacturing is in the second link of the chip industry chain, with core design in the front and chip packaging and testing in the back.
In fact, in the whole chip industry chain, China's chip design is not far behind others. Enterprises like Huawei have come to the forefront of communication technology, but there is still a significant intergenerational gap between chip production and the most advanced chip manufacturers. For example, in 2019, SMIC mass produced a 14nm process, and the highly concerned 7Nm process is still in the research and development stage. In contrast, TSMC's 7Nm process has been mass produced, while its 5nm and 3nm processes have not been mass produced. SMIC obviously has a big gap with it.
Although there is a certain gap between SMIC and the world's top chip manufacturers such as TSMC and Samsung in mass production of chips. However, SMIC represents the most advanced chip mass production technology in China. Just after the Meng Wanzhou incident in February this year, SMIC announced that it would mass produce 14nm chips in 2019, with a yield of 95%. But so far, we don't know whether it has started production. As for the high-end mobile phone chips of 10nm and 7Nm, SMIC is temporarily unable to mass produce them.
So why should SMIC choose to delist from the New York Stock Exchange at this time? On the one hand, as the United States continues to crack down on China's high-tech enterprises, the demand of China's IC industry for independence and self-reliance is growing. If SMIC wants to become a top international company, it must eliminate all interference and improve the speed of research and development regardless of everything. If it is still listed on the New York Stock Exchange, many investors of SMIC come from overseas capital, and they will try their best to vote against it to prevent SMIC from speeding up the pace of research and development.
On the other hand, if SMIC wants to develop more sophisticated chip technology, it must invest a lot of manpower and material resources regardless of cost. The starting point of overseas shareholders of SMIC is to maximize their interests, and it is impossible to sacrifice their immediate interests. Therefore, if SMIC chooses to withdraw from the New York Stock Exchange, it can be less interfered by foreign shareholders and concentrate on developing 10nm and 7Nm chips, which can help China get rid of the situation that chips are controlled by others.
SMIC international voluntarily delisted in the New York Stock Exchange, the apparent reason is: the trading volume is too small for a long time, in order to save costs. But in fact, it is difficult for SMIC to say that in the future, SMIC will shoulder the historical burden of mass production of Chinese chips, which will inevitably be obstructed by foreign investment. At the same time, overseas investors should also take their own interests into consideration, and it is impossible for SMIC to develop chip manufacturing regardless of everything. In this case, if SMIC chooses to delist, its shareholders are all its own. This can ensure that SMIC can produce high-end chips as soon as possible, and really get rid of the history that China's chip production is controlled by others.