Nexchip Semiconductor, China’s third-largest pure-play chip foundry behind SMIC and Hua Hong, is turning to the Hong Kong Stock Exchange to fuel its expansion into more advanced manufacturing nodes. The company has officially filed to raise up to HK$6.98 billion (approximately $890.3 million) in a highly anticipated initial public offering, capitalizing on a resurgence in the Hong Kong capital markets and strong investor appetite for domestic semiconductor assets.
The IPO, which launched alongside four other Chinese technology and advanced manufacturing listings on June 30, represents a critical step in Nexchip’s strategic roadmap. According to reports, the company plans to allocate approximately 53.6 percent of the IPO proceeds directly toward research and development and the capitalization of its massive new fabrication facility in Hefei.
Funding the 40/28nm Transition
Founded in 2015 as a joint venture between the Hefei municipal government and Taiwan’s Powerchip, Nexchip initially built its business by dominating the market for display driver integrated circuits (ICs) using mature 150nm and 55nm processes. The company successfully completed an A-share listing on the Shanghai Stock Exchange’s STAR Market in 2023, using those proceeds to establish its initial automotive chip and CMOS image sensor production lines.
However, as China pushes aggressively for semiconductor self-sufficiency across all sectors, Nexchip is now moving up the value chain. The centerpiece of this expansion is a new $5.1 billion fabrication plant in Hefei, designed specifically for 40nm and 28nm process technologies. Construction on the facility was completed in March 2026, and the company expects to begin rolling in manufacturing equipment in the fourth quarter of this year. Once fully operational, the new fab will boast a capacity of 55,000 wafers per month (wpm), representing a massive increase in the company’s overall production capacity.
This capacity expansion is crucial for Nexchip’s diversification strategy. The 40/28nm nodes are the industry workhorses for automotive microcontrollers, image sensors, and power management chips, sectors where domestic Chinese demand is skyrocketing due to the rapid growth of the electric vehicle (EV) industry and the increasing integration of AI-powered driver assistance systems. Underscoring this strategic alignment, Chery Automotive, one of China’s largest state-owned automakers, has signed on as a cornerstone investor for the Hong Kong IPO.
Financial Performance and Market Context
Nexchip approaches the Hong Kong market from a position of relative financial strength, though it faces near-term profitability headwinds associated with its aggressive expansion. The company reported revenue of $1.58 billion last year, maintaining a healthy 32 percent profit margin. However, management has cautioned investors that the massive depreciation costs associated with bringing the new $5.1 billion Hefei fab online will likely reduce overall profit margins in the current fiscal year as the facility ramps up.
The decision to pursue a dual listing in Hong Kong provides Nexchip with access to a broader pool of international capital while also aligning with Beijing’s recent push to encourage leading mainland technology firms to list on the Hong Kong exchange. The timing of the listing is highly strategic, coinciding with a historic surge in Hong Kong IPO activity driven by Chinese AI and semiconductor companies.
The Nexchip offering is part of a broader wave of Chinese technology listings hitting Hong Kong simultaneously. As EastFrontier has reported, Baidu’s chip unit Kunlunxin is also targeting a major Hong Kong IPO, reflecting the broader trend of Chinese semiconductor companies turning to HKEX for capital. On June 30 alone, five Chinese tech and advanced manufacturing companies launched offerings, seeking to raise up to $5.6 billion. This includes a massive HK$7.16 billion listing by Luxshare, a major Apple supplier, which currently stands as the largest Hong Kong IPO of 2026.
China’s Foundry Ambitions
Nexchip’s IPO is a direct expression of China’s broader ambition to build a fully indigenous semiconductor supply chain. While SMIC and Hua Hong dominate the domestic foundry landscape, the rapid growth in chip demand across the automotive, AI, and consumer electronics sectors has created significant room for a third major player to scale.
The 40/28nm nodes that Nexchip is targeting are particularly strategic because they sit in the “sweet spot” of the semiconductor market—advanced enough to handle complex AI inference and automotive control tasks, but not so cutting-edge as to require the extreme ultraviolet (EUV) lithography equipment that is currently subject to strict U.S. and Dutch export controls. This means Nexchip can build out its new Hefei fab using equipment it can actually procure, making the expansion plan commercially viable in the current geopolitical environment.
As Nexchip secures the capital needed to equip its new facility, the company is positioning itself as a critical pillar in China’s domestic semiconductor supply chain. By securing cornerstone backing from major automotive players like Chery, Nexchip is ensuring that its new capacity will have a ready and waiting domestic market, further insulating China’s critical industries from the volatility of global semiconductor trade restrictions.