Warren Buffett-backed BYD presses ahead with plans to list semiconductor unit on Shenzhen's ChiNext tech board

·3 min read

BYD, the battery and carmaker that counts Warren Buffett's Berkshire Hathaway among its investors, has proposed a plan to spin-off and list its semiconductor unit on the Shenzhen Stock Exchange.

BYD Semiconductor, owned 72.3 per cent by BYD, is fit for a separate listing on the mainland , according to the recommendation of its legal advisers, mainland law firm Zhong Lun, BYD disclosed in a filing to the Hong Kong stock exchange on Tuesday evening.

The Shenzhen-based carmaker's plan to list its semiconductor business on ChiNext, the Nasdaq-styled tech board, comes amid intense competition in the world's largest market for electric vehicles. A spin off of the chip unit would enable the company to focus on its core business of new energy vehicles and batteries and "expand into urban rail transit", according to Zhong Lun.

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The Hong Kong-listed shares of BYD rose 5 per cent to HK$149.10 in midafternoon trading, while its Shenzhen-listed shares added 4.9 per cent to 153.73 yuan.

Visitors look at BYD's electric vehicles at the carmaker's booth at the Shanghai car show last month. Source: Bloomberg alt=Visitors look at BYD's electric vehicles at the carmaker's booth at the Shanghai car show last month. Source: Bloomberg

BYD first announced the spin-off plan in December, but did not say which exchange it would seek to list the subsidiary. "The spin-off listing of BYD Semiconductor will help it further improve the ... financing capacity and brand recognition, and therefore improve the sustainable competitive strengths in the long term," BYD said in its 2020 annual report.

Raising funds for its chip unit would directly benefit BYD. BYD Semiconductor is one of only a few companies worldwide and the only Chinese company that can independently produce insulated gate bipolar transistors, which are key components for reducing power loss and improving reliability in electric vehicles, according to a Bloomberg report.

In April, China's second-largest maker of battery-powered electric cars by volume, launched two new electric car models and updated two earlier models, targeted at lower and middle-income owners. One of them, the Qin Plus sedan, is priced between 129,800 yuan (US$19,820) and 166,800 yuan after government subsidies. Premium brands like Tesla's Model 3 start at over 300,000 yuan.

BYD had a 12.9 per cent share of China's new energy vehicle market in 2020, trailing the 14.7 per cent share by SAIC-GM-Wuling and ahead of Tesla's 12.4 per cent, according to data from China Association of Automobile Manufacturers.

BYD's semiconductor unit develops, makes and sells power semiconductors, integrated circuits, intelligent sensors and optoelectronic devices. It owns an integrated industrial chain that includes chip design, wafer manufacturing, assembly, testing and downstream applications.

Before its listing plan, BYD Semiconductor had completed a couple of funding rounds from leading investors. In May 2020, it raised 1.9 billion yuan (US$265 million) from 14 investors, which gave them a combined 20.2 per cent stake in the subsidiary. The round was led by Sequoia Capital China Fund, CICC Capital and SDIC Fund.

Last year, the semiconductor unit made a net profit was 320 million yuan and had net assets of 3.19 billion yuan, according to Zhong Lun.

The spin-off and listing proposal is still awaiting approval of shareholders, Hong Kong and Shenzhen stock exchanges and the China Securities Regulatory Commission.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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