SMIC: Still Tethered to the State 中芯国际：仍然依赖国家
China’s largest chip maker SMIC (HKEx: 981; NYSE: SMI) seems firmly dependent on support from the Chinese government despite its best efforts to show it can compete in the lucrative but also highly competitive market for these high-tech products that lie at the heart of most electronic gadgets. The latest evidence of SMIC’s inability to stand on its own comes in the company’s latest announcement that it has secured a $600 million loan to help it upgrade its state-of-the-art factory in Beijing. (company announcement) Within the announcement, SMIC’s CEO Tzu-Yin Chiu points out that the participation of commercial banks in the loan validates the company’s strong prospects, implying that commercial banks would only lend money to a company with strong future potential. But a closer look at the list of banks participating in the loan reveals that it’s all Chinese policy banks and state-run commercial lenders, all of which take their orders from the government. The list includes policy banks China Development Bank and Export Import Bank of China, and commercial lenders China Construction Bank (HKEx: 939; Shanghai: 601939), Bank of Beijing and Bank of Shanghai. No one should be surprised that SMIC’s 2 biggest bases are in Shanghai and Beijing, which explains why 2 of the top regional banks in these cities were among the commercial lenders on the deal, no doubt instructed by local government officials to participate. I’m not saying that there’s anything inherently wrong with accepting money from government-controlled banks, but it’s certainly not very strong evidence to convince investors of your strong long-term prospects. Indeed, investors seemed unimpressed and and perhaps even worried by the loan announcement, with the company’s New York-traded shares falling nearly 5 percent after the news came out. SMIC’s Hong Kong-listed shares have languished since last summer, when an internal management battle broke out after its chairman suddenly died and its well-respected CEO was forced to resign. (previous post) A period of instability followed before the instigator of the internal battle himself was pushed out and Tzu was brought in as new CEO to return some stability. SMIC’s shares fell from as high as HK$0.90 before the battle, when the previous CEO was showing clear signs of turning around the underperforming company, to their current position where they are now stuck in the HK$0.40 to HK$0.50 range. This latest loan announcement just underscores that any progress made under the previous CEO has been dismantled as the highly cyclical global chip sector heads for its next downturn, and any return to profits for this once-promising but consistently troubled company probably won’t come until late next year at the earliest.
Bottom line: SMIC’s continued dependence on state support for its financing reflects a company stuck firmly in the red, with no near-term prospects for return to profitability.
Related postings 相关文章:
◙ SMIC Puts Turmoil Behind It — Again 中芯国际又走出内讧
◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
◙ SMIC: Under Fire From All Directions 中芯国际亏损显示其内外交困
