Chinese Chip Designer NationalChip to Go Public

NationalChip issued a letter of intent for an IPO on Thursday, planning to go public on the Shanghai Sci-Tech Innovation Board (STAR Market). A total of 603 million yuan ($95 million) will be raised through the share issuance.

NationalChip is one of the leading chip design companies in China that focuses on the development and industrialization of self-developed embedded CPU technology. It provides key technological support for the localization of chip replacement in three major application areas: information security, automotive electronics and industrial control, edge computing and network communications.

Today, UK-headquartered ARM is a leading provider of semiconductor intellectual property and holds the leading position in embedded CPU IP licensing. Its official website indicates that global shipments of ARM-licensed chips in 2018 totalled about 22.9 billion. The number of ARM-licensed chips shipped in China that same year was only 10 billion, and 95% of SoC chips designed in China are based on ARM’s CPU technology.

As a newcomer to the embedded CPU industry in China, NationalChip focuses on customers in the fields of national demand and market demand for self-developed alternatives. However, in the short term, it will be difficult for the company to further challenge ARM in the industry.

Still, NationalChip has some advantages going for it. Since its establishment, the company has adopted fabless production, which means it is engaged in chip design and sales, but not in production. It focuses on the design, R&D, and sales of integrated circuits, and entrusts wafer manufacturing, packaging testing and other links to other manufacturers in related fields.

In this way, NationalChip is able to concentrate its resources on product research, and is free from the massive cost of fixed assets.

In terms of revenue composition, in the first half of 2021, its independent chip and module products earned 90 million yuan, accounting for 66.37% of the company’s total revenue. But chip customization services only accounted for 14.75% of all earnings, significantly lower than that of the previous year, which was just over 40%.

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Zheng Fu, the actual controller of the company, was a professor at Southeast University from 1985 to 1998. At present, Zheng Fu, Xiao Zuonan and Kuang Qi, directly hold 14.58% of NationalChip’s equity, and indirectly control 13.79% of the company’s corporate equity through NewMargin Ventures, Xisheng Investment, Xifeng Investment, Xixin Investment and Xusheng Kechuang, which, in total, holds 28.37% of the company’s equity.

Upon IPO, the actual controllers of NationalChip will hold a lower proportion of the overall equity, which will be reduced to 21.28%, and Zheng’s wealth will total about 128 million yuan.