ST invests in Innoscience IPO to boost GaN semiconductor market

Innoscience, a semiconductor company specializing in gallium nitride technology, has signed an investment agreement as part of its planned initial public offering (IPO) on the Main Board of the Hong Kong Stock Exchange. This link indicates that Innoscience plans to list on the Hong Kong Stock Exchange on Dec. 30, 2024.

Despite Innoscience and its partners not releasing any official statements, according to this document, Innoscience claims, “We have entered into cornerstone investment agreements with the cornerstone investors, namely STMicroelectronics Limited, Jiangsu State-Owned Enterprise Mixed Ownership Reform Fund, Jiangsu Suzhou High-end Equipment Industry Special Mother Fund, and Suzhou Dongfang Chuanglian Investment Management Co.” A summary of the timeline is indicated in the IPO document.

The agreement formally organizes strategic alliances with key investors and joint sponsors, laying the groundwork for a major worldwide offering. STMicroelectronics, acting as the cornerstone investor, has committed to subscribing to a significant portion of Innoscience’s H shares. The joint sponsors, China International Capital Corporation Hong Kong Securities Limited and CMB International Capital Limited, serve as overall coordinators and capital market intermediaries.

The agreement adheres to the regulatory framework set by the China Securities Regulatory Commission, the Hong Kong Stock Exchange, and other relevant authorities, ensuring transparency and investor protection.

According to the prospectus, the IPO subscription (stock code: 2577) period for Innoscience’s H shares is from Dec. 18 to Dec. 23, 2024. The company has set the IPO price range between HKD 30.86 and HKD 33.66 per share. The company plans to globally issue 45,364 million H shares, with about 4 million shares offered in Hong Kong and about 45 million shares internationally, along with a 15% over-allotment option.

The investment from STMicroelectronics underscores a strong endorsement of Innoscience’s potential in the global semiconductor market. The collaboration highlights the increasing importance of GaN technologies in power electronics, driven by demands for greater efficiency in automotive, consumer electronics, and industrial applications.

A billion-dollar golden track with great potential

GaN stands out with its superior performance over traditional semiconductor materials. Apart from a larger bandgap, GaN boasts low on-resistance, great electron mobility, and low switching frequency. These benefits strongly encourage its implementation in several domains. Furthermore, GaN’s broad bandgap lets it run stably at higher voltages; Its great electron mobility greatly increases current drive capability and response speed, lowering heat loss and raising general power efficiency.

GaN power semiconductor products rapidly embrace fast charging for smart devices, automotive-grade charging applications, and data centers due to their high frequency, low loss, and cost-effectiveness. This has ushered in an exponential development period for the GaN sector.

Driven by a 98.5% CAGR from 2024 to 2028, Frost & Sullivan estimates that the market is expected to surpass $6.8 billion by 2028 as the adoption of diverse people applications rises across many spheres. By then, GaN power semiconductors should therefore account for 10.1% of the worldwide power semiconductor industry.

The two main forces behind development are electric cars and consumer electronics. We expect the rising use of GaN in fast chargers and adapters, with a 71.1% CAGR, to propel the market to $2.9 billion in consumer electronics by 2028. Reflecting an extraordinary 216.4% CAGR, increased penetration and value per car in the EV sector will help the GaN market reach $3.4 billion by 2028.

Global leadership and Chinese manufacturing

Although GaN semiconductor products have a wide range of applications, breaking into this field takes time and effort.

The top five worldwide power semiconductor businesses typically adopt the IDM paradigm, overseeing the entire process from design to manufacture and testing. This approach, however, also has strict technical criteria, hefty upfront expenses, and strong industry entrance barriers.

Aiming to develop a GaN production base combining design, R&D, manufacturing, and sales, Innoscience chose the IDM model from its beginning in this context. The company’s two 8-inch silicon-based GaN production bases are in Suzhou and Zhuhai, China. The monthly manufacturing capacity rose from 10,000 wafers at the end of 2023 to 12,500 wafers as of June 30, The monthly manufacturing capacity rose from 10,000 wafers at the end of 2023 to 12,500 wafers as of June 30, 2024, strengthening its position as the top GaN device producer worldwide.

With the agreement, Innoscience is prepared to initiate its IPO, utilizing the acquired funds to boost manufacturing capacity, accelerate research and development in GaN semiconductors, and enhance its global presence. This strategic alliance places Innoscience as a major participant in the fast-changing semiconductor scene. For the future, it will also be important to consider the ongoing disputes with EPC and Infineon. An analysis of these disputes is included in the document.