At the opening ceremony of the 2024 Lujiazui Forum, the chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, announced in advance that eight measures to deepen the reform of the Science and Technology Innovation Board (STAR Market) would be released. This statement instantly became the focus of attention.
In the afternoon of the same day, the CSRC issued the "Eight Measures for Deepening the Reform of the Science and Technology Innovation Board to Serve the Development of Scientific and Technological Innovation and New Quality Productive Forces" (hereinafter referred to as the "Science Eight Measures"). In the view of experts, this also means that the reform of the Science and Technology Innovation Board and the registration system has entered the "deep water area." The release of the "Science Eight Measures" helps the development of science and technology innovation companies, optimizes the financing system, supports mergers and acquisitions, and the semiconductor "hard technology" sector companies may benefit.
The "Science Eight Measures" mainly include:
1. Strengthen the "hard technology" positioning of the Science and Technology Innovation Board. Strictly control the entry, and give priority to supporting "hard technology" enterprises that break through key core technologies in new industries, new business forms, and new technology fields to go public on the Science and Technology Innovation Board. Further improve the precise identification mechanism for technology companies. Support high-quality unprofitable technology companies to go public on the Science and Technology Innovation Board.
2. Carry out pilot projects for deepening the issuance and underwriting system. Optimize the new share issuance pricing mechanism, pilot adjustments to the high-priced exclusion ratio applicable to new share pricing. Improve the new share allocation arrangements of the Science and Technology Innovation Board, and increase the allocation ratio of offline investors with a long-term holding intention. Strengthen the supervision of inquiry and quotation behavior.
3. Optimize the equity and debt financing system for listed companies on the Science and Technology Innovation Board. Establish a "green channel" for equity and debt financing, and mergers and acquisitions of "hard technology" enterprises that undertake key core technology research. Explore the establishment of "light assets, high R&D investment" recognition standards. Promote the pilot case of shelf issuance of additional financing to be the first to land on the Science and Technology Innovation Board.
4. Support mergers and acquisitions with greater intensity. Support listed companies on the Science and Technology Innovation Board to carry out mergers and integrations of the upstream and downstream of the industry chain. Improve the inclusiveness of merger and acquisition valuation, and support listed companies on the Science and Technology Innovation Board to acquire high-quality unprofitable "hard technology" enterprises. Enrich the payment tools for mergers and acquisitions, and carry out research on installment payments for share consideration. Support listed companies on the Science and Technology Innovation Board to focus on optimizing and strengthening their main business through absorption mergers.
5. Improve the equity incentive system. Improve the precision of equity incentives and better achieve interest binding with investors. Improve the implementation procedures for equity incentives of listed companies on the Science and Technology Innovation Board, optimize the application of short-line trading, window period and other regulations, and study the optimization of the arrangement for equity incentives reserved rights and interests.
6. Improve the trading mechanism and prevent market risks. Strengthen trading supervision, and study the optimization of the Science and Technology Innovation Board's market-making mechanism and after-hours trading mechanism. Enrich the types of Science and Technology Innovation Board indices, ETF categories, and ETF option products.Seven is to strengthen the whole chain supervision of listed companies on the Science and Technology Innovation Board (Sci-Tech board). We will strictly crack down on market chaos such as fraud in the issuance of Sci-Tech board and financial fraud, and more effectively protect the legitimate rights and interests of small and medium investors. Guide the founding team, core technical backbone, etc., to voluntarily extend the lock-up period of shares. Optimize the "reverse linkage" system for the exit of private equity venture capital funds. Strictly implement the delisting system.
Eight is to actively create a good market ecology. Promote the optimization of the judicial security system and mechanism of the Sci-Tech board. Strengthen cooperation with local governments and relevant ministries and commissions, carry out regular visits to listed companies on the Sci-Tech board, and jointly promote the improvement of the quality of listed companies. Deeply implement the "improve quality and efficiency, focus on returns" action, and strengthen investor education services.
01
How does the market interpret the "hard technology" in the first place?
For more than five years, the Sci-Tech board has adhered to the "hard technology" positioning, starting from scratch and continuously growing and strengthening, and the role of the reform system "experimental field" and the effectiveness of serving scientific and technological innovation are continuously emerging. As of May 31, 2024, there are 572 listed companies on the Sci-Tech board, with a total market value of 5.17 trillion yuan, and a total amount of IPO financing of 909.1 billion yuan, becoming the preferred place for "hard technology" companies to go public. Strengthening the "hard technology" positioning of the Sci-Tech board is placed at the forefront of the eight measures, and it is mentioned to give priority to supporting "hard technology" companies that have made breakthroughs in key core technologies in new industries, new business forms, and new technology fields to go public on the Sci-Tech board; support high-quality unprofitable technology companies with key core technologies, large market potential, and prominent scientific and technological attributes to go public on the Sci-Tech board.
Since the fifth set of standards of the Sci-Tech board was suspended last year, it has become almost impossible for unprofitable companies to go public on the A-share market. Many securities firms, investment banks, and investors in the primary market have stopped including unprofitable companies in project reserves or investment scope. For those with particularly prominent potential, they are only "temporarily observed, and profits will be discussed later". In the view of some industry insiders, this will inevitably lead to side effects: unicorns are difficult to reappear, and some "hard technology" companies that require high R&D investment are difficult to survive until the day of "debut".
The "Eight Measures" issued by the China Securities Regulatory Commission (CSRC) has brought good news to some "hard technology" companies with strong potential and not yet profitable. In terms of IPO, it adapts to the characteristics of new quality production enterprises with large investment, long cycle, high uncertainty of R&D and commercialization, and supports high-quality unprofitable technology companies with key core technologies, large market potential, and prominent scientific and technological attributes to go public on the Sci-Tech board, enhancing the inclusiveness of the system.
Regarding the impact on the semiconductor industry, many companies have also expressed their views.
Tianfeng Securities pointed out that the issuance of the "Eight Measures" for the Sci-Tech board has a positive significance for promoting the high-quality development of technology companies. Among them, optimizing the financing system to support mergers and acquisitions is conducive to the strong alliance of enterprises within the industry chain, and then cultivating large technology companies with international competitiveness, especially the semiconductor "hard technology" segment companies are expected to benefit from this. Under the current background, as the first debate of the US election approaches, the domestic substitution space in the "neck-grabbing" technology field is becoming increasingly prominent, and the advanced process industry chain is particularly worth paying attention to. Given the historical background of Sino-US trade conflicts, it is expected that the competition in the fields of semiconductors, artificial intelligence and other technology fields will become an important focus in the coming period. From the perspective of the industry pattern, the demand for AI servers and advanced process industry chains is strong, but the domestic share is relatively low, and its expansion is constrained by international trade uncertainty, so the demand for domestic substitution is particularly urgent. This may prompt relevant domestic equipment and material manufacturers to accelerate product verification and replacement processes, bringing significant opportunities for industry chain investment.
CITIC Construction Investment said that the eight policies of the Sci-Tech board will significantly strengthen the support for mergers and acquisitions, covering measures such as improving the "hard technology" enterprise stock and bond financing for core key technology research and development, the "green channel" mechanism for mergers and acquisitions, moderately relaxing the inclusiveness of the valuation of mergers and acquisitions of listed companies on the Sci-Tech board, and enriching payment tools.Western Securities regards "Sci-Tech Valuation" as the core driving force for the development of new quality productive forces. Faced with the market's undervaluation of strategic scarce industries and the value of high-quality enterprises, the introduction of the "Eight Policies of Science and Technology" is expected to effectively promote the improvement of the new national system, further unblock the virtuous cycle mechanism of "Science and Technology - Industry - Finance," and thus accelerate the transformation process of scientific and technological achievements into real productive forces. The selection of "Sci-Tech Valuation" enterprises should meet multiple strict conditions, including but not limited to: significant strategic scarcity, high degree of innovation, good fundamentals but relatively low valuation, and having international competitiveness. It is particularly worth noting that in the key areas of "bottleneck" such as high-end equipment, precision manufacturing, and new materials, industries with disruptive technologies and future industrial potential, such as semiconductors, industrial software, and domestic computing power, all belong to the key scope of "Sci-Tech Valuation" enterprises.
Minsheng Securities believes that the "Eight Policies of Science and Technology" clearly propose greater support for mergers and acquisitions. Looking at the history of the development of global technology companies, mergers and acquisitions are an important way for global technology companies to grow and become stronger. According to the rules of industry mergers and acquisitions, three directions can be followed to find investment opportunities: industry leaders with high absolute cash on hand; specialized and innovative small giants with high relative cash on hand and strong merger and acquisition attributes in the industry; leading enterprises in cutting-edge tracks with valuation premium advantages.
02
The semiconductor plate "rose", which tracks "lit up"
On June 20th, influenced by the "Eight Policies of Science and Technology," the SCI 50 index rose against the trend by 0.46%, with a total transaction volume of 2.691 billion shares for the day, a transaction amount of 73.311 billion yuan, and a weighted average turnover rate of 1.92%. Among the tradable stocks on the Science and Technology Innovation Board on the 20th, 377 stocks closed up, with 14 stocks rising by more than 10%, of which 8 stocks hit the daily limit, 23 stocks with a rise of 5% to 10%, and 192 stocks closed down.
In the rise of the semiconductor sector, analog chips seem to be particularly eye-catching. The "Eight Policies of Science and Technology" point out that in terms of mergers and acquisitions, it is appropriate to increase the inclusiveness of the valuation of mergers and acquisitions of listed companies on the Science and Technology Innovation Board, and support the listed companies on the Science and Technology Innovation Board to focus on enhancing their sustainable operating ability and to acquire high-quality unprofitable "hard technology" enterprises. On June 24th, the chip sector once surged in the early morning, with Naxiny Micro and Minxin Shares once surging by more than 10% during the trading day. Naxiny Micro, an analog chip company, announced on the 23rd that it intends to acquire a total of 79.31% of the shares of Shanghai Mage Microelectronics in cash.
The analog chip field is seen as the main beneficiary of this new policy, and mergers and integrations in the analog chip industry are common ways of industry development. It is expected that China's analog chip industry will gradually move towards a centralized and integrated development path. Currently, there are about 34 analog chip companies listed in the market, of which 26 are on the Science and Technology Innovation Board, and there are still a large number of unlisted analog companies in China as potential merger and acquisition targets. Some companies have been actively laying out the acquisition of related businesses, and the "Eight Policies of Science and Technology" will help optimize the industry pattern and promote leading companies to improve scale and collaborative operating capabilities. In addition, after the sharp price reduction and inventory reduction in the previous two years, the analog industry is now approaching the end of inventory reduction. With the recovery of demand in the industrial field, the industry is expected to rebound.
In addition to the analog track, the third-generation semiconductor industry also shows a positive trend. It is reported that Xinglian Integrated, a wafer company, officially released a refinancing plan on June 21st, planning to fully acquire the remaining 72.33% of the equity of its controlling subsidiary Xinglian Yuezhou Integrated Circuit Manufacturing (Shaoxing) Co., Ltd. (referred to as "Xinglian Yuezhou") through a combination of issuing shares and paying cash. This move aims to achieve full ownership and make Xinglian Yuezhou a wholly-owned subsidiary.
Xinglian Yuezhou is the main body of the second phase of Xinglian Integrated, with a silicon-based production capacity of about 70,000 pieces per month. In addition to the main layout of silicon-based power device production capacity, Xinglian Yuezhou has also made a forward-looking layout of higher technology platforms and more scarce production capabilities, such as SiC MOSFET, VCSEL (GaAs), and power driving (high-voltage analog IC). At present, the production capacity of Xinglian Yuezhou's silicon-based IGBT and silicon-based MOSFET is 70,000 pieces per month, and the production capacity of SiC MOSFET is 5,000 pieces per month. Among them, the SiC MOSFET products have reached a shipment of 5,000 pieces per month by the end of 2023, and it is expected to reach a production capacity of 10,000 pieces per month in 2024.
03Semiconductor Industry Welcomes a Series of Favorable Policies
If the "Science and Technology Eight Articles" are not considered a policy directly aimed at the semiconductor industry, then the establishment of the National Integrated Circuit Industry Investment Fund Phase III Co., Ltd. (hereinafter referred to as "Big Fund Phase III") in May 2024 is a favorable policy focused on semiconductors. Big Fund Phase III has diversified its investment areas, which not only include traditional equity investment and asset management but also extend further to venture capital fund management services. As the main contributors, banks will adopt a more prudent investment style.
In addition, various local governments have also introduced a series of policies aimed at promoting the vigorous development of the local semiconductor industry. For example, Chengdu has issued the "Chengdu High-tech Industrial Development Zone's Several Policies on Supporting the High-quality Development of the Integrated Circuit Industry," and Shanghai has formulated the "Shanghai Municipal Interim Measures for the Management of Disruptive Technology Innovation Projects."
Just as the rise of Silicon Valley is inseparable from the active promotion of the U.S. government, a country must maintain its innovative advantages and industrial competitiveness, which requires not only continuous innovation and development at the enterprise level but also continuous adjustment and optimization at the policy level to ensure that enterprises can always maintain a leading position.
The role of the government in industrial innovation and competition is indispensable and not a one-time effort. International technology and industrial competition is a continuously evolving process, and current innovation leaders may also become followers in the future. Therefore, the government should continue to play a key role in industrial innovation and competition to promote the continuous progress and development of the industry.
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