On March 11, the SFC responded in the early morning to the SEC's determination that five U.S.-listed companies in the United States were "relevant issuers" at risk of delisting under the Foreign Companies Accountability Act.
Affected by the provisional list of the Foreign Company Accountability Law, on March 10, local time, Chinese stocks fell, of which the five companies included in the list, BeiGene, Yum China, Zaiding Pharmaceutical, Shengmei Semiconductor, and Huang Pharmaceutical, fell 5.87%, 10.9%, 9.02%, 22.05% and 6.53% respectively.
Affected by the overnight plunge in Chinese stocks, the Hong Kong Stock Hang Seng Index oscillated lower after opening low, and the Hang Seng Technology Index fell more than 6% at one point, and then the decline narrowed. As of the end of the afternoon session, the Hang Seng Index was down 3.2% at 20222.79 points, with the lowest point in the session to 20079.15 points; the Hang Seng Technology Index was at 4101.5 points, down 7.55%.
"This is a normal step for U.S. regulators to enforce the Foreign Companies Accountability Act and related implementation rules," the SFC said. We have made our position on the implementation of the Foreign Companies Accountability Act on many occasions before. We respect the supervision of relevant accounting firms by foreign regulatory authorities in order to improve the quality of financial information of listed companies, but we resolutely oppose the erroneous practices of some forces to politicize securities supervision. We have always adhered to the spirit of openness and cooperation, and are willing to solve the problem of inspection and investigation of relevant firms by US regulatory authorities through regulatory cooperation, which is also in line with international practice. ”
Zhou Weiran, PwC's global technology, media and communications industry leader, told First Financial Reporter: "The passage of the final amendment to the Foreign Company Accountability Act has increased the difficulty and uncertainty of Chinese companies going public in the United States.
Domestic semiconductor cleaning equipment giants are listed
The SEC has recently added five Chinese companies to the provisional list of the Foreign Companies Accountability Act (HFCAA), including BeiGene, Yum China, Zaiding Pharmaceutical, Shengmei Semiconductor, and Huang Pharmaceutical. The five companies will need to provide evidence to the SEC by March 29 that they are not eligible for delisting. If it cannot be proved, it will be included in the "confirmed delisting list".
Among them, BeiGene is listed in the U.S., Hong Kong stocks and A shares, And Huang Pharmaceutical, Yum China, Zaiding Pharmaceutical are only listed in the U.S. stocks and Hong Kong stocks, and Sime Semiconductor is listed in the U.S. stocks and A shares (A shares are "Sheng Mei Shanghai").
As the first semiconductor equipment company listed in the United States, Shengmei Semiconductor is on a par with North Huachuang and Zhongwei Company, and its customers include the international large manufacturerSK Hynix, the domestic Yangtze River Storage, Huahong Group, SMIC, Hefei Changxin, Silan Micro, Jita Semiconductor, Xinen, Guangdong Core, Jinghe, Zhuosheng Micro, Geke Micro, Changdian Technology, Tongfu Micro, Shenghe Jingwei, Liang Micro, Shanghai Hejing, Shanghai Silicon Industry and other well-known semiconductor enterprises.
Although the size of the cleaning equipment market is not high in the total wafer manufacturing equipment volume, the cleaning equipment market is extremely critical and indispensable in the entire manufacturing process.
The current chip manufacturing process in the lithography, etching, deposition and other repetitive processes are set up after the cleaning process, the number of cleaning steps accounted for more than 30% of all chip manufacturing process steps, is the largest proportion of all chip manufacturing process steps, and with the progress of technology nodes, the number and importance of cleaning processes will continue to rise rapidly, the proportion of equipment volume will continue to increase.
According to the China Industry Information Network, the cleaning equipment market space will reach 3.5 billion to 4 billion US dollars in 2020. With the upgrading of process nodes and the improvement of yield requirements, the demand for cleaning equipment will continue to increase, and the market demand for cleaning equipment will continue to grow.
The world's cleaning equipment is basically controlled by foreign giants such as Screen (54%), TEL (23%), KLA (10%), and at present, domestic cleaning equipment manufacturers have leading technology in addition to North Huachuang, which is Shengmei Semiconductor.
In the third quarter of 2021, Shengmei Semiconductor's first edge bevel wet etching equipment with independent intellectual property rights for front-channel mass production has been delivered to Logic Manufacturers in China, achieving a breakthrough from 0 to 1. At present, Shengmei Semiconductor has been able to cover more than 80% of the cleaning equipment market.
On the morning of the 11th, Shengmei Shanghai issued an announcement that the controlling shareholder ACMR is now actively looking for a solution, communicating, and is committed to meeting the REQUIREMENTS of the US SEC by the 2024 deadline. The matter will not affect ACMR's control over Shengmei Shanghai and will not affect the stability of the shareholding structure. There is no direct impact on the production and operation of Shengmei Shanghai.
In its official micro, Sheng Mei Shanghai said that on March 8 this year, the SEC released the first batch of "interim list of equity issuers determined by HFCAA" (hereinafter referred to as the "provisional list"). In accordance with the guidance issued by the SEC on December 2, 2021, ACMR was placed on the Provisional List after filing its 2021 annual report due to the fact that the working papers of the audit report issued by the auditing firm currently employed by ACMR cannot be subject to inspection by the U.S. Public Corporation Accounting Oversight Board ("PCAOB") under the relevant regulations in force in China.
"ACMR filed its annual report on March 1, 2022, and therefore appeared on the SEC's first interim list. The presence of ACMR on the provisional list does not mean that ACMR will soon or not be delisted at all. According to SEC guidelines, a trading ban could take effect as early as 2024, after issuers appear on the SEC Provisional List for three consecutive years (2022, 2023, and 2024). ”
In addition, ACMR is in the process of identifying and appointing a new U.S. audit firm that will be inspected by the PCAOB so that in the future ACMR will no longer appear on the SEC's provisional list and will no longer be subject to the relevant delisting guidelines. ACMR's President and Chief Executive Officer said, "ACMR is now actively looking for U.S. audit firms that have been reviewed and approved by PCAOB. As we announced on December 7, 2021, we are confident that we will meet the SEC requirements well ahead of this 2024 deadline and remain firmly committed to keeping nasdaq-listed. ”
As of press time, Shengmei Shanghai's stock price was reported at 87.91, down 10.66%.
The CSRC responds: Firmly opposed to the politicization of securities regulation
On March 11, the head of the relevant department of the CSRC answered a reporter's question on the SEC's determination of five listed companies in the United States as "relevant issuers" with delisting risks under the Foreign Companies Accountability Law.
The person in charge of the relevant department of the CSRC said, "We respect the supervision of relevant accounting firms by overseas regulators to improve the quality of financial information of listed companies, but we resolutely oppose the erroneous practices of some forces to politicize securities supervision." We have always adhered to the spirit of openness and cooperation, and are willing to solve the problem of inspection and investigation of relevant firms by US regulatory authorities through regulatory cooperation, which is also in line with international practice. ”
The CSRC said that in recent times, the CSRC and the Treasury Department have continued to engage in communication and dialogue with the U.S. Public Corporation Accounting Oversight Board (PCAOB) and have made positive progress. We believe that through joint efforts, the two sides will be able to make cooperation arrangements that meet the legal provisions and regulatory requirements of the two countries as soon as possible, jointly protect the legitimate rights and interests of global investors, and promote the healthy and stable development of the markets of the two countries.
The Foreign Companies Accountability Act, a bill passed by the U.S. Congress in 2020, requires additional disclosure requirements for foreign companies to list in the United States.
At the end of 2021, the SEC passed the amendments. According to the Foreign Companies Accountability Act, if a listed company fails to meet the inspection requirements of the U.S. Public Corporation Accounting Oversight Board (PCAOB) for three consecutive years, its securities are prohibited from trading in the United States. Under the bill, foreign companies listed in the U.S. must file documents with the SEC certifying that the company is not owned or controlled by a foreign government and require these companies to comply with PCAOB's auditing standards.
In the eyes of institutions and semiconductor industry insiders, the above bill has set a barrier for Chinese semiconductor companies to go public in the United States, and for some companies with independent technologies, the uncertainty of listing in the United States has greatly increased.
Zhou Weiran told reporters that the passage of the final amendment to the Foreign Company Accountability Act, the release of the Cyberspace Administration of China's cybersecurity review measures, and the new requirements of the U.S. Securities and Exchange Commission for the disclosure of information on the listing of Chinese companies in the United States will further slow down the pace of Chinese companies going public in the United States.
According to data released by PwC in early March, data from China's technology, media and communications industry (TMT) initial public offerings (IPOs) in the second half of 2021 showed that Hong Kong and overseas IPOs fell sharply from 82% in the first half of the year to 25% in the second half of the year, according to data released by PwC in early March.
"At present, we have also seen the response of the CSRC, and believe that the direction of the final incident will be resolved through consultation, otherwise it will bring great damage to the interests of both China and the United States." Hao Junbo, a lawyer in charge of cross-border securities class action business, told reporters that the above bill still has a buffer period in the future, which also gives relevant enterprises time to solve problems.
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(Continuous update)