Warren Buffett-backed BYD Withdraws Plans for Its Semiconductor Unit IPO in China

According to the IPO prospectus, BYD Ltd’s semiconductor unit was anticipated to raise approximately $281 million to fund various projects.

Berkshire Hathaway-backed BYD Co Ltd (Hong Kong: 1211) has announced that it has scrapped plans to list its semiconductor unit in the Chinese market. According to the company, plans to increase investment in components production could significantly change its market outlook. The company has indicated it expects no adverse monetary effects after withdrawing the plans. Moreover, there is a ready and expanding semiconductor market worldwide.

“BYD Semiconductor intends to seize the time window to make large-scale investment in wafer production capacity,” BYD in a filing to the Shenzhen stock exchange.

According to the IPO prospectus, BYD Ltd’s semiconductor unit was anticipated to raise approximately 2 billion yuan ($281 million) to fund various projects. However, the IPO has been withheld the second time after halting the first one in August due to a regulatory probe.

BYD Market Outlook and the Semiconductor Industry

The Chinese manufacturing company has experienced market growth challenges since the onset of the coronavirus pandemic. According to market data provided by MarketWatch, BYD shares are trading 35 percent down in the last year and another 28 percent decline YTD. Nonetheless, market strategists are extremely bullish on BYD and its stock market due to the rising demand for its products.

Notably, BYD company focuses on the production of automobiles and electronic devices. The selling products include buses, electric bicycles, trucks, forklifts, solar panels and rechargeable batteries. As such, the company is assured of a semiconductors market for its subsidiary arm.

The semiconductor market has become a golden opportunity for billionaire investors seeking a stake in big tech corporations. Berkshire Hathaway has made several investments in semiconductor companies, including a $4.1 billion position in Taiwan Semiconductor TSM.

Interestingly, the American billionaire invested while TSM stock was down over 35 percent YDT and was trending worse in the global market.

“Our goal is more modest: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” Buffett wrote in his 1986 annual letter to shareholders.

The IPO withdrawal is highly due to the cold relationship between the United States and the Chinese government over big tech companies. Furthermore, tensions have been between the United States and the Chinese governments over Taiwan territory. While the Taiwan invasion by China has subsided after met with Xi Jinping, the relationship might not be fully mended.

The semiconductor industry is expected to take center stage in the next decades as more industries evolve toward artificial intelligence (AI). Mind you, most developed countries have set a timeline for electrical vehicle adoption to curtail environmental degradation.