Chinese chip giant CXMT with record IPO

With a market value of 3.3 trillion yuan (around 427 billion euros) CXMT suddenly became the most valuable company in mainland China, ahead of the Industrial and Commercial Bank of China (ICBC), which fell back to second place. Only the Internet company Tencent, listed in Hong Kong, is worth more, weighing the equivalent of around 440 billion euros.

AI memory

CXMT, which was founded as ChangXin Memory Technologies ten years ago in Hefei, East China’s Anhui Province, specializes in the manufacture of DRAM memory specialized. The chips are used in computers and smartphones as temporary data storage and are also in development Artificial Intelligence (AI) of central importance.

Due to the high demand for AI, the company, which is hardly known outside of China, was able to increase its sales more than sevenfold in the first quarter of the current financial year to the equivalent of around 6.6 billion euros. Last year it became the fourth largest DRAM manufacturer in the world after the South Korean companies Samsung and SK Hynix and the US manufacturer Micron with a market share of 7.7 percent.

Bearers of hope

The company is seen as a beacon of hope for the Chinese government, which is committed to reducing its dependence on foreign semiconductors and the associated technology. Since the USA tightened export controls for chips and production equipment, this has become even more urgent. CXMT received massive support from the state. Before the IPO, government funds held more than 36 percent of the shares. The US Department of Defense recently even classified CXMT as a “Chinese military company.”

The IPO brought the company the equivalent of more than 7.5 billion euros a. According to the prospectus, the manufacturer wants to use the money to expand its production and advance research and development of its chips. That might also be necessary. Because technologically, the manufacturer lags behind the competition from South Korea and the USA. The backlog is particularly large when it comes to memory chips for AI applications.

Brisk trade

The largest IPO in Asia this year also triggered enormous trading on the Shanghai Stock Exchange. In total, CMXT shares worth 141.1 billion yuan (18.3 billion euros) were traded on the first day. It was the first time that a single stock in one day 100 billion yuan limit in trading turnover.

“Investor appetite stems primarily from the fact that Chinese investors now have an important opportunity to participate in the current super cycle for memory chips,” said equity analyst Jing Jie Yu from the analysis house Morningstar. But also worries about one Blistering were heard. “The stock is too expensive and smells like speculation,” said hedge fund manager Yuan Yuwei from asset manager Trinity Synergy.