China Semiconductor IPO Boom May Give ETFs a Lift

Chinese semiconductor ETFs may get a boost next year after 2022’s market rout thanks to a flood of initial public offerings hitting the market amidst a chip shortage.  

Chinese semiconductor companies are receiving record amounts of capital from fresh IPOs, following government pressure to develop the nation’s chip industry. The boom follows years of global ship shortages, a trend which has been exacerbated by supply chain issues. For example, the year’s biggest Chinese semiconductor IPO, Hygon Information Technology Co., raised $1.5 billion in August, Nikkei Asia reported.  

On Thursday, the first semiconductor ETFs tracking large chipmakers in China and South Korea debuted on the Shanghai Stock Exchange.  

Companies involved in manufacturing or production of chips brought in a nearly $12 billion haul in the first half of December through domestic initial public, according to Dealogic data cited by the Wall Street Journal. That number is almost three times what the industry raised the year prior. An additional $17 billion worth of IPOs have been filed in mainland China.  

Chinese semiconductor ETFs have largely been on a downswing in 2022, with the KraneShares CICC China 5G & Semiconductor Index ETF (KFVG), the Global X MSCI China Information Technology ETF (CHIK) and the Invesco China Technology ETF (CQQ) dipping 42%, 40% and 31% respectively year to date, according to ETF.com data.  

Still, in the past three months, CHIK and CQQ have gained nearly 4% and 12% in gains, respectively. 

In the U.S., semiconductors saw a similar short-term boost earlier this month after President Joe Biden announced sweeping sanctions on China’s tech industry. The sanctions, which include a ban on the export to China of specialist chips and a $50 billion investment into the US semiconductor industry, are some of the harshest from the Biden administration.  

The VanEck Semiconductor ETF (SMH) posted nearly an 8.1% in the week following the sanctions, as investors flocked to the ETF in hopes of a lift to the domestic semiconductor industry.  

Contact Shubham Saharan at [email protected]