Beijing-based Vimicro Corp has mandated Morgan Stanley for a roughly $200 million IPO that should surface in early autumn. The company is hoping to follow in the footsteps of Solomon System, which became China's first fabless IC design house to list overseas in early April, raising $135 million.
The JPMorgan-led deal is still trading just above its HK$1.75 issue price and closed Tuesday at HK$1.80. Over the last two weeks it has bounced back from a low of HK$1.16.
Solomon Systech designs chips for LCD drivers, while Vimicro designs digital imaging chips used in mobile phones, digital cameras and PDAs. Both companies are much larger in scale than most of the 400 odd fabless design houses in China's nascent IC industry clustered in Zhongguancun, the country's Silicon Valley.
Since it was founded in 1999 by the Ministry of Information Industry (MII), Ministry of Science & Technology and the State Development and Reform Commission, the company has grown to over 100 employees and most of its top management are Chinese-born, but Silicon Valley experienced.
Unlike most Chinese fabless houses, which focus on low end chips, Vimicro focuses on the high end of the market and has gained the distinction of becoming one of the few Chinese companies to design a chip, which has become a global industry standard. At the end of 2003, it is said to have cornered nearly 90% of the domestic market for digital imaging chips and 45% of global signal processing chips in PC cameras.
Its VXP product line of digital multimedia processors use SoC (System-on-a-chip) technology that enables producers of mobile phones, PDA's and computers to add imaging functions (usually attachable or embedded cameras) to their products.
China has made the development of a domestic IC industry one of its top strategic priorities. The government is particularly keen to lose the tag "made in China" for "innovated by China," and wants to develop its own technological standards, breaking the dominance of foreign-designed chips.
Vimicro has been one of its earliest and most succesful pioneers. Earlier this year, it became the first Chinese company to be asked to collaborate on the development of a global technology standard for the mobile phone industry by MIPI (Mobile Industry Processing Interface) Alliance.
The appointment of Morgan Stanley is also not likely to come as much of a surprise given that Vimicro's CFO used to work at the investment bank.