Shanghai-listed Chinese semiconductor foundry business Nexchip is roping in external investors to inject 9.55 billion yuan ($1.36 billion) into its wholly-owned subsidiary to expand chip production facilities.
External investors, such as ABC Financial Asset Investment and Gongrong Jintou (Beijing) Emerging Industry Equity Investment Fund, will invest 5.4 billion yuan ($766.4 million) in Hefei Wanxin Integrated Circuit Limited Company (合肥皖芯集成电路有限公司) for a combined 56.25% stake, Nexchip disclosed in its latest stock exchange filing.
The parent firm, which will contribute the remaining sum of 4.15 billion yuan ($589 million), will remain Wanxin’s largest shareholder with a 43.75% stake, according to the filing.
The new investment will finance Wanxin for the construction of Nextchip’s Phase III project to build new facilities for the production of 12-inch wafers. With a planned overall investment of 21 billion yuan ($2.98 billion) into the Phase III project, the facilities are estimated to churn out about 50,000 wafers every month.
Founded in late 2022, Wanxin will undertake the Phase III project that will primarily manufacture 28 nm-55 nm display driver chips, 55nm CMOS image sensors, 90nm power management chips, 110nm microcontrollers, and 28nm logic chips. These chips are intended for applications in consumer electronics, automotive electronics, and other industrial uses.
The filing shows that Wanxin, which has yet to generate any revenue, booked a net loss of just over 34 million yuan ($4.8 million) in the first seven months of 2024.
Nexchip’s plan to double down on Wanxin comes amid its slowing revenue growth in recent years due to shifting global supply chains and weak market demand for consumer electronics. Through Wanxin, the parent firm is looking to carve out a new business line centred around auto-grade chips.
This capital injection is “in line with Wanxin’s existing operations and future development,” said Nexchip in the filing. The parent said that the funding will help strengthen the subsidiary’s capital position and further expand its portfolio of auto-grade chip technologies and related products.
Nexchip went public on Shanghai’s Nasdaq-style STAR Market in May 2023, raising nearly 9.97 billion yuan ($1.4 billion) in its oversubscribed initial public offering (IPO).
Its IPO success followed the previous years of accelerated profit growth. Its net profits rose 76.5% to surpass 3 billion yuan ($425.8 million) in 2022 from about 1.7 billion yuan ($241.3 million) in 2021. In 2020, the firm posted a net loss of almost 1.3 billion yuan ($184.5 million).
But its annual profit dived in 2023, reaching just 212 million yuan ($30.1 million).