SMIC, China's biggest chipmaker, kicked off a major 46.28 billion yuan ($6.6 billion) share sale on Tuesday.
requires foreign manufacturers using U.S. chipmaking equipment to get a license before being able to sell semiconductors to Huawei. The Chinese firm relies on Taiwan's TSMC for the majority of its chips but has moved a small amount of lower-end chip production to SMIC. However, given that SMIC's technology is behind that of TSMC, it isSMIC's Shanghai listing values the company at 109.25 times its 2019 earnings, according to a stock market filing from the company.
That valuation has raised some eyebrows given SMIC's technological gap with competitors. But one analyst said investors are betting on the future growth of the company and China's semiconductor industry, backed by government policy. "When you look at this so-called gap you can perceive these things from two angles. First of all, they are lagging behind but the second angle is that they have further room for future growth," Ronald Wan, non-executive chairman at Partners Financial Holdings, told CNBC's "Squawk Box Asia" on Tuesday.
"What investors have been speculating right now is that SMIC ... has a lot of potential ... we need to look at future, we need to look into what will happen in five years or ten years time and so that is the reality of the situation that has been driving investors crazy about pouring money into the stock."
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