Hua Hong Semiconductor Said to Gauge Demand for $300 Million IPO

Hua Hong Semiconductor Ltd., China’s first custom chipmaker, has started gauging demand for a Hong Kong initial public offering that may raise about $300 million, people familiar with the matter said.

The company, controlled by the Shanghai government, aims to start trading in October, said the people, who asked not to be identified as the information is private. Proceeds will be used to fund capacity expansion, according to pre-listing documents filed with the Hong Kong exchange June 18.

Hua Hong’s offering would add to the $1.8 billion that Chinese semiconductor firms have raised selling shares this year, data compiled by Bloomberg show. President Xi Jinping has pledged financial support to the country’s chip industry as he seeks to reduce reliance on foreign companies for key technologies.

Customers of Hua Hong include U.S. chipmakers Cypress Semiconductor Corp. and ON Semiconductor Corp., according to the pre-listing documents. It has three factories in Shanghai making chips on older 8-inch wafers.

The company specializes in memory chips used for mobile phone SIM cards and credit cards. It plans to boost its monthly production capacity by 32 percent to 164,000 8-inch wafers by the end of 2016, according to the pre-listing documents.

Intel Corp. said today it will spend as much as 9 billion yuan ($1.5 billion) buying a stake in Tsinghua Unigroup Ltd., the owner of two Chinese chip designers, as it seeks to speed up its access to the world’s largest mobile market. Chinese companies have been involved in $5 billion of acquisitions in the semiconductor industry this year, according to data compiled by Bloomberg.

Goldman Sachs Group Inc. is the sole sponsor of Hua Hong’s share sale, according to the June filing. An external spokeswoman for Hua Hong declined to comment on the IPO plan.