Why China Is Throwing Its Support Behind This Chipmaker
The ‘national team’ has stepped into the markets to stem the slide in A shares, propping up stocks ahead of a memory-chip maker’s listing.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
China’s beleaguered tech stocks are getting a significant boost Tuesday as it becomes clear that the “national team” of government-backed funds is throwing its weight behind mainland markets, which have suffered a punishing selloff.
The support comes at a time that China’s largest memory-chip maker is prepping its initial public offering (IPO), likely to be the largest-ever listing by a Chinese chipmaker and the largest listing on any Asian exchange so far this year.
CXMT Preps IPO
ChangXin Memory Technologies – better known as CXMT – is due to list on the STAR Market in Shanghai on July 27. It has set the offer price at C¥8.66 per share, which should see it raise C¥66.6 billion ($9.8 billion) if its overallotment is fully exercised. That’s likely given that the company says the offer is significantly oversubscribed.
This would be the largest listing in mainland China since 2010, when Agricultural Bank of China (ACGBY) (HK:1288) (SH:601288) raised $10 billion in Shanghai as part of a $22.1 billion IPO that also included a simultaneous listing in Hong Kong. AgBank is still the largest-ever IPO in mainland China.
CXMT was founded 10 years ago by Zhu Yiming, who already found great success by setting up the fabless chip designer GigaDevice Semiconductor (SH:603986) (HK:3986) in 2005. Zhu had initial backing from the regional Hefei government, then won the support of the “Big Fund” – officially the China Integrated Circuit Industry Investment Fund – that helped the company become a “critical national priority.”
CXMT has rapidly built itself into the fourth-largest maker of Dynamic Random Access Memory or DRAM chips, behind Samsung Electronics (KR:005930), Micron Technology (MU) and SK Hynix (SKHY) (KR:000660). DRAM chips are critical components that power cloud computing, data centers and graphics cards, and provide the working memory for Artificial Intelligence (AI).
Rapidly Rising Sales and Market Share
CXMT captured 8% of the DRAM market as of Q1, according to Counterpoint Research, up from 3% the same quarter last year. The sector is seeing dramatic growth, with overall sales of DRAM chips rose 260% year on year for Q1 this year. That helped CXMT’s Q1 sales leap 719%, with H1 sales likely to come in around C¥115 billion ($17 billion), double last year’s full-year total of C¥61.8 billion.
The Chinese company, based in Hefei in northeast China, plans to use the IPO proceeds to expand capacity. Although its DRAM market share is growing fast, it remains well behind the likes of Hynix in making the top-flight High Bandwidth Memory (HBM) chips that power the AI accelerators made by the likes of Nvidia (NVDA).
The IPO would give the company a market value of around $85 billion. The institutional portion of the offer was oversubscribed to the tune of 570 times, with the company saying institutions pledged for a total of 1.24 trillion shares versus the 2.17 billion shares on offer to them. The retail portion was 244 times oversubscribed.
National Team Tackling Market Stress
The ChiNext index, tracking the Nasdaq-like ChiNext subsidiary of the tech-heavy Shenzhen Stock Exchange, shot up 7.1% Tuesday. The broad-market CSI 300 index of the largest listings in Shanghai and Shenzhen moved ahead 3.1%.
At times of market stress, the Chinese government may take coordinated action via the so-called “national team” of state-backed asset managers, insurers and sovereign wealth funds to alleviate market stress in the markets.
We got confirmation late on Sunday that funds backed by the central government had bought almost C¥60 billion ($8.9 billion) in stocks, after a brutal selloff on Friday that saw the CSI 300 benchmark correct 3.6%, its worst day since U.S. President Donald Trump unveiled his misguided, illegal “Liberation Day” tariffs in April 2025.
Regulator Holds ‘Symposium’ to Advise Institutions
China Reform Holdings disclose that it had bought C¥50 billion in equities “to maintain market stability,” while China Chengtong Holdings bought almost C¥10 billion in stock using similar language, to “maintain the stable operation of the capital market.” Both fund managers are part of the “national team,” and concentrated their purchases in state-owned enterprises.
China’s stock watchdog, the China Securities Regulatory Commission or CSRC, then held an “investor symposium” on Monday, to encourage market stability. That’s something it has done at previous times of market stress. This time, CSRC chair Wu Qing met face-to-face with representatives from eight major institutional investors, with insurer Taiping Asset Management (CTIHY) (HK:0966) and sovereign wealth fund Central Huijin Investment also pledging equity backing.
China Life Insurance (HK:2628) says it has bought C¥10 billion in stocks and funds, with further commitments from Ping An Insurance Group (PNGAY) (HK:2318) and The People’s Insurance Co. (PINXY) (HK:1339).
Beijing is leery about leaning too heavily on the national team, for fear of provoking a bubble in stocks. But through Friday’s close, mainland equity investors were staring at losses for the year so far, with the CSI 300 index down 2.2%.
Sharp Correction in STAR Market
The correction was even sharper for Chinese tech stocks. The STAR 50 tech index fell 15.3% from the open last Wednesday through its Monday low, before word that state support is backing the equity market.
The STAR Market – full name the Shanghai Stock Exchange Science and Technology Innovation Board – is to Shanghai what ChiNext is to Shenzhen, an attempt to build out a home-grown equity-market spinoff designed with rules to attract domestic tech companies that previously went abroad, mainly to Wall Street, to raise capital.
It’s noteworthy that the ChinaAMC STAR 50 ETF (SH:588000), the largest ETF tracking the chip-heavy STAR 50 index, drew a record C¥13.8 billion in inflows on Friday. The ETF then shot up 11.1% Tuesday. It’s not clear where the inflows came from, but “national team” buying is the likely source. Other funds favoured by state-backed investors including the Huatai-PineBridge CSI 300 ETF (SH:510300) saw significant inflows, too.
It is both a coup and a necessity for CXMT to list at home. We have seen semiconductor stocks such as chip foundry Semiconductor Manufacturing International (SMIC) (HK:0981) de-list from Wall Street in favor of Shanghai and an offshore listing in Hong Kong. The CXMT listing would eclipse SMIC’s July 2020 IPO, which raised $6.6 billion on the STAR Market, as the largest listing by a Chinese chipmaker.
Beijing now requires Chinese companies to seek approval from Chinese regulators even for an overseas listing. They are unlikely to grant permission for companies in sensitive technological fields such as chipmaking at a time it wants to improve its semiconductor self-sufficiency. The likes of CXMT and SMIC will be key in that process.
AI and DRAM Selloff
The shares of DRAM memory makers have sold off hard since hitting all-time highs a month ago. Their coordinated moves despite good news on earnings projections from the likes of Samsung indicate that investors are concerned valuations have overextended themselves. Critics also contend that the hyperscalers have yet to demonstrate sustained profitability from AI, at least to match the $1 trillion in capital expenditures they have laid out in the sector, and now face competition from cheaper Chinese AI models.
Beijing-based Moonshot AI delivered a shot across the hyperscaler’s bows on Friday, unveiling its open-source Kimi K3 model that it says performs as well as competing models from the likes of OpenAI and Anthropic. It echoed the “DeepSeek moment” back in January 2025 when that company released a large-language model it claimed to have spent $5.6 million to train, causing a correction that shaved $600 million off Nvidia shares alone.
There’s been some respite from the selling today. Hynix arrested its slide with a 4.1% rise on Tuesday, but is nevertheless down 37.1% since setting an all-time closing high on June 22. Samsung is down 28.6% since its all-time high water close on June 18, moving up 6.2% today.
That’s been good news for the Roundhill Memory ETF (DRAM), which I’ve been buying into when it’s under $60. The downturn of the last month has created an opportunity to pick up the ETF below $54, although that leaves my overall average buying price just below that $60 mark. It is up around 9.0% in early trading to $57.84.
Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330), the world’s largest maker of physical chips, is giving the sector reason to smile. It plans to raise prices by 5-10% from 2027 onward to offset rising raw-material costs, according to the Nikkei business daily. That helped TSMC shares rise 3.9% Tuesday in Taiwan trade. It is concluding negotiations with customers this month ahead of the price changes kicking in next year.
The Taiex index in Taiwan actually outperformed its largest component, slightly, to end the day up 4.2%. Fabless chip designer MediaTek (TW:2454) shot up 9.9% to bump against the 10% daily limit in Taiwan, while contract electronics manufacturer Hon Hai Precision Industry (TW:2317), better known as Foxconn, added 4.9%.
At the time of publication, McMillan was long TSMC and DRAM.
