SMIC plans to list on the Science and Technology Innovation Board. Can its partner Canaan Creative turn the situation around?

Recently, integrated circuit manufacturing company Semiconductor Manufacturing International Corporation announced that it will seek to be listed on the Shanghai Science and Technology Innovation Board. The announcement disclosed that SMIC plans to issue no more than 1.686 billion shares, with each share priced at US$0.004 (a total of RMB 0.028).

Previously, SMIC had raised funds through listing in the United States and Hong Kong. In 2019, SMIC announced its delisting from the New York Stock Exchange and switched to over-the-counter trading. If it successfully returns to the A-share market, SMIC will become the first "A+H" stock in the domestic semiconductor sector.

According to its announcement, about 40% of the funds raised will be used for the "12-inch chip SN1 project", 20% will be used as reserve funds for advanced and mature process R&D projects, and 40% will be used to supplement working capital.

Influenced by this news, the share price of SMIC (SEHK: 00981) began to rise since May 5, from the opening price of 15.44 yuan to 17.1 yuan, an increase of more than 10%.

Currently, SMIC has wafer fabs in Shanghai, Beijing, Tianjin, Shenzhen and Jiangyin. The highest chip process it can provide is 14nm, and it is expected to start trial production of 7nm chips in the fourth quarter of this year.

Some media previously reported that the 14nm mining chip jointly developed by SMIC and Canaan Technology in April this year has completed testing and will be mass-produced and shipped in the second quarter of this year, but the two companies did not disclose the type of chip. There are reports that it may be a small currency mining machine.

According to previous reports by Chain Finance, Canaan Inc. (NASDAQ: CAN)'s stock price has been fluctuating around US$3 since March this year. Since April 13, Canaan Inc.'s stock price has gradually risen and has now risen to US$5.04.

In April this year, Canaan Technology's 2019 annual financial report disclosed that its revenue mainly relied on Bitcoin mining machines and related sales, while the AI ​​business mentioned in its prospectus was not reflected in its revenue. The financial report shows that the main reason for the decline in operating income in 2019 was the decline in the price of mining machines caused by the decline in Bitcoin prices. However, since 2018, the increase in the total computing power of mining machines sold has offset part of the impact of the decline in the price of mining machines on revenue, making Canaan Technology's operating income in the fourth quarter of 2019 in a state of growth. In addition, its mining machine manufacturer Canaan Creative has seen a decline in profit points due to factors such as inventory backlogs and sharp fluctuations in Bitcoin prices.

It is reported that Canaan Creative has reached cooperation with Samsung, TSMC, and SMIC. The mining machine based on Samsung's 8nm technology has been mass-produced and shipped in the first quarter, and the mining machine based on TSMC's 5nm technology is still under development. Some people believe that this cooperation with SMIC may be due to Canaan Creative's consideration of the cost of mining machines.

Canaan's competitors Bitmain and MicroBT launched new products at the end of 2019 and the beginning of this year to compete for market share. At the end of 2019, MicroBT released the M30 series of Shenma mining machines, with a power consumption ratio of 38J/T and a total computing power of 88 T. This series of mining machines uses 8nm chips provided by Samsung. In February this year, Bitmain launched the S19 series of mining machines. The computing power of Ant S19 reached 95T, and the computing power of Ant S19 Pro reached 110T. The S19 series uses 7nm chips provided by TSMC. In terms of mining machine performance, Canaan has fallen behind the first echelon of mining machine manufacturers.

After cooperating with SMIC, will Canaan Creative be able to turn the situation around?