China Chip Highflier CXMT Begins Widely Watched Mega IPO

Amid the recent slump in global tech shares, including Samsung Electronics and SK Hynix, and concerns that the AI-related boom may have hit a plateau, the initial public offering of chipmaker ChangXin Memory Technologies (CXMT) in Shanghai is attracting widespread attention on bets it will benefit from China policies sheltering its tech sector from setbacks outside its borders.

On July 16, CXMT will begin taking subscriptions for a listing on Shanghai's Nasdaq-style STAR Market, aiming to raise 29.5 billion yuan (US$4.4 billion) in what would be the largest Chinese mainland IPO since the listing of Chinese oil and gas company Cnooc in 2022 and the largest IPO in Asia since the Hong Kong listing of Contemporary Ampere Technology (CATL) in 2025. CXMT shares are scheduled to begin trading either at the end of this month or in early August.

Hefei-based CXMT was relatively unknown outside China until it burst on the scene this year as the world's fourth-largest maker of dynamic random-access memory (DRAM) chips used for real-time data processing in AI models. The company was founded in 2016 by Zhu Yiming, who has degrees in physics and electrical engineering, and worked in the Silicon Valley before returning to China. The company's technology initially was based on patents it acquired from German DRAM maker Qimonda, which went bankrupt in 2009 during the global financial crisis. CXMT currently has three 12-inch DRAM wafer plants in Hefei and Beijing.

CMXT's book-building this week comes on the heels of recent steep declines in the shares of larger rivals Samsung and SK Hynix. Samsung has tumbled 20 percent in the past five trading days, despite reporting a 19-fold increase in second-quarter profit, while SK Hynix, which completed the biggest-ever foreign IPO in New York last Friday, saw its shares at home dive 21 percent in five days.

CMXT comes to market with a different corporate story to tell, based on China's chipmaking prowess amid a highly integrated domestic supply chain. The company is rapidly closing the gap with global rivals as it adopts a strategy that relies on domestic demand to power its overall performance.

In the first quarter, CXMT's global market share surged to approximately 8 percent from 3 percent last year. It has a strong and steady client base, spanning Chinese technology leaders that include Alibaba Cloud, Lenovo, Xiaomi, Oppo, Vivo, Transsion and Honor, covering sectors from data centers to personal computers and smartphones. Alibaba is a major stakeholder, while Tencent and Meituan hold indirect stakes.

Crucially, CXMT's entire supply chain – stretching from integrated circuit materials and wafers to assembly and testing – is deeply rooted in the "made-in-China" ecosystem. That supply chain includes more than 30 suppliers listed on Chinese mainland exchanges. Last year, the company purchased raw materials valued at 11.5 billion yuan, including chemicals, photoresist, silicon wafers and special electronic gas.

The chipmaker is entering the public market at an exceptionally lucrative moment. A global memory shortage, fueled by skyrocketing demand for AI computing, has sent prices for semiconductor soaring. In the first quarter, CXMT's revenue jumped 719 percent, with the company swinging to net profit of 33 billion yuan from a year-earlier loss of 2.8 billion yuan.

According to market research firm TrendForce, this momentum shows no signs of slowing. Following a 53 percent price hike in the second quarter, server DRAM prices are projected to climb another 13-18 percent in the third quarter.

IPhone maker Apple, faced with the global shortage of chips used its products, has reportedly asked White House officials for approval to source chips from CXMT despite the company's presence on a Pentagon blacklist – a request that shows growing recognition of CXMT's technology.

Chinese tech companies have been able to access investment from venture capital firms, state-backed private equity funds and major domestic technology giants; a market listing will add to its competition war chest.

"The current share selloff in some foreign tech companies does not mean investors have doubts in the sustainability of AI growth, but they do wonder whether capital markets can support the huge demand of money needed by tech companies to further expand," said Zhang Xucheng, an analyst with Great Wall Securities. "But for Chinese companies, the capital market is simply one of many sources for funds."

The biggest supporter of Chinese technology is the central government. During the recent National Science and Technology Award Conference, Beijing again emphasized its priority focus on tech-driven growth and national self-sufficiency, calling for quicker integration of sci-tech innovation with industrial applications.

The government's support includes policies bridging the gap between lab and factory, reforming the education system to fast-track young research talent, federal-local cost sharing for major tech projects and restructuring financial markets to provide more capital access for innovative tech companies. None of these policies is new, but there is an obvious effort afoot to accelerate implementation.

Domestic capital markets are responding quickly to providing a financing channel. In the first half of this year, China's Class A-share stock markets welcomed 81 IPOs, a 60 percent surge from a year earlier that centered on tech-related companies. Funds raised doubled to 105.7 billion yuan. The market regulator has adopted rules allowing companies with hot prospects but no profits to show yet to list.

"This demonstrates that the capital market is efficiently allocating resources to sectors boasting the strongest technologies and growth potential," noted Felix Fei, managing partner of EY China's Shanghai branch.

Following its listing, CXMT is poised to become the most profitable firm on both the STAR Market and the tech-focused ChiNext board in Shenzhen.

In the first quarter, CXMT's net profit attributable to shareholders reached 24.8 billion yuan, or a 17-fold increase, surpassing the 20.7 billion yuan posted by listed battery giant CATL. For the first half of the year, CXMT's profit is projected to hit up to 57 billion yuan, a 22-fold surge from the same period last year.