On Thursday, August 8, Chinese automotive chip manufacturer Black Sesame International, which relies heavily on Taiwan Semiconductor Manufacturing Company (TSMC) for chip production, made its debut on the Hong Kong Stock Exchange. The initial public offering (IPO) did not perform well, with the stock price plummeting on the first day of trading, falling below the IPO price. Following the listing ceremony, the company did not hold a press conference.
According to a report by Nikkei Asia on Thursday, Black Sesame International’s stock opened at 18.80 Hong Kong dollars, a 33% drop from the IPO price of 28 Hong Kong dollars. The stock closed at 20.45 Hong Kong dollars, down nearly 27% from the offering price.
Black Sesame International is the first automotive chip company to list in Hong Kong and Asia. It was founded in 2016 by Chairman and CEO Shan Jizhang and President Liu Weihong. Shan Jizhang is a veteran in the chip industry, having worked at OmniVision Technologies for nearly two decades as Vice President of Software Engineering. Liu Weihong has previous experience working at General Motors and German automotive parts manufacturer Bosch.
The company provides system-on-chip (SoC) solutions that enable autonomous driving and algorithm-based solutions. Data from consulting firm Frost & Sullivan shows that in the automotive-grade high-computing SoC market, Black Sesame was the third-largest supplier globally last year.
Despite its significant presence in the market, the company has been struggling financially, with a 76% increase in net losses in 2023, reaching 4.855 billion yuan (677 million dollars). Nonetheless, it is still considered a strategic player for China in building and enhancing its domestic chip industry.
Ahead of its IPO, Black Sesame secured investments from 10 funding rounds, with Xiaomi and Geely being its major shareholders. Despite continuous losses, as of the end of March, Black Sesame had cash, cash equivalents, and liquid financial assets exceeding 1 billion yuan. Additionally, it raised approximately 950 million Hong Kong dollars (121.94 million dollars) through the IPO.
During its IPO on the Hong Kong Stock Exchange, the company attracted investments from two major corporations, namely Gardex Development, a wholly-owned Hong Kong investment company of the state-owned enterprise Guangzhou Automobile Group, and Joyson Electronic USA, a subsidiary of Shanghai-listed automotive parts manufacturer Ningbo Joyson Electronics with 100% ownership established in Silicon Valley.
According to the prospectus, all of the company’s chips are manufactured by TSMC. The document states, “We currently engage TSMC to manufacture all SoCs. We procure raw materials and services from TSMC.” While being a client of TSMC is seen as a selling point for investors, the company has listed its full dependence on TSMC as one of its main risks.
Since 2022, the U.S. has implemented new controls on semiconductor exports, limiting China’s access to the latest technology chips. The Biden administration has banned U.S. companies from selling advanced chips and chipmaking equipment to China without special licenses, persuading allies such as Japan and the Netherlands to introduce their own restrictions. This has also prevented foreign chip manufacturers using U.S. technology, like TSMC, from producing advanced chips for Chinese companies.
At the listing ceremony on Thursday, a representative of TSMC informed Nikkei Asia that the chips provided to Black Sesame are 7-nanometer chips produced in Taiwan. Furthermore, due to restrictions by the Taiwanese authorities, TSMC’s plant in Nanjing, China, is only able to produce chips with a node size of 14 nanometers or larger.