Galaxy Semiconductor Holdings, one of the largest mainland semiconductor producers, said it plans to raise HK$70 million (US$9 million) to HK$100 million (US$12.8 million) through an initial public offering (IPO) in Hong Kong next month.

 

Yang Senmao, the firm's chairman, said the capital raised will be used to extend production lines in order to cope with increasing demand for semiconductors.

 

Established in 1994, Galaxy has about 85 percent of the mainland semiconductor market, serving most of the big mainland TV makers such as TCL, Konka and Hisense.

 

Last year, Galaxy's production capacity of diode increased 30 percent to 4.5 billion units. The company posted a 21 percent increase in revenue in 2005 to reach 40 million yuan (US$5 million), with a profit margin of 26 percent.

 

"In the past few years, the production of semiconductors on the mainland grew at a double-digit rate," said Yang, adding it will continue to rise in the future.

 

Galaxy plans to spend 90 percent of the proceeds from the IPO to purchase 25,000 square meters of land in East China's Jiangsu Province to build a new factory. The remaining cash will be used as operating capital.

 

To attract investors, Galaxy has preliminarily set the dividend payout ratio at 20 percent of net profit, said Yang.

 

Galaxy also has big ambitions overseas. "So far we already have 75 clients across 20 countries and regions such as South Korea, Thailand, Hong Kong, the United States, Taiwan, Spain and Italy," said Yang.

 

"We have seen that overseas markets have a strong appetite for semiconductor products. For example, the sales of one particular kind of diode in 2005 amounted to HK$20 billion globally," said Yang.

 

"That is very encouraging and we want to take an even bigger slice of the market."

 

Overseas markets account for 15 percent of the company's total turnover.

 

(China Daily May 16, 2006)