On the evening of September 2, national leaders stated in a video speech at the 2021 China International Fair for Trade in Services that they would continue to support the innovative development of small and medium-sized enterprises, deepen the reform of the New OTC Market, establish the Beijing Stock Exchange, and create a service-oriented innovation-oriented small and medium-sized enterprise position.  
With the Shanghai Stock Exchange, Shenzhen Stock Exchange and Hong Kong Stock Exchange already in place, the method and purpose of establishing the Beijing Stock Exchange have attracted widespread attention. Since its opening on December 19, 1990, as of August 31, 2021, there have been a total of 1,644 listed companies on the main board; the Shenzhen Stock Exchange officially opened on December 1, 1990, and as of August 31, 2021, the Shenzhen Stock Exchange (including There are a total of 2,492 companies on the GEM (including GEM and SME Board); the Hong Kong Stock Exchange has a long traceable history. As of December 31, 2020, the Hong Kong Stock Exchange has a total of 2,538 listed companies, including 2,170 on the main board and 368 on the GEM. Of course, in addition to the main board, there is also the recently popular Science and Technology Innovation Board.

How to build the Beijing Exchange?

In fact, the beginning of the article has already revealed the establishment method of the Beijing Stock Exchange, which is to rely on the New Third Board and deepen reforms on this basis to achieve the purpose of better serving innovative small and medium-sized enterprises.
 
Of course, this is a general outline, so how will it be implemented?  
 The person in charge of the China Securities Regulatory Commission answered a reporter's question on deepening the reform of the New OTC Market and establishing the Beijing Stock Exchange. He mentioned that the China Securities Regulatory Commission will thoroughly implement the new development concept, adhere to the pursuit of stability, adhere to the direction of marketization and rule of law, coordinate the development layout of the multi-level capital market, and promote and improve the capital market to serve small and medium-sized enterprises. The entire chain of institutional systems for enterprise innovation and development strives to create a professional capital market development platform that is in line with China's national conditions and effectively serves specialized and innovative small and medium-sized enterprises. It strives to build a standardized, transparent, open, dynamic and resilient capital market to better serve the high-quality development of the real economy.  
 

Source: China Securities Regulatory Commission official website
In another document, "Adhere to Dislocation Development, Highlight Characteristics and Build the Beijing Stock Exchange to Better Serve the High-Quality Development of Innovative Small and Medium-sized Enterprises," the China Securities Regulatory Commission stated that the main idea for building the Beijing Stock Exchange is to strictly abide by the Securities Law and follow the principles of step-by-step implementation and gradual progress. During the implementation process, we will focus on the following principles:

• Stick to “one positioning”. Beijing Stock Exchange firmly adheres to the market positioning of serving innovative small and medium-sized enterprises, respects the development rules and growth stages of innovative small and medium-sized enterprises, and improves the inclusiveness and accuracy of the system.

• Handle the "two relationships" well. First, the Beijing Stock Exchange, Shanghai and Shenzhen Stock Exchanges, and regional equity markets insist on coordinated development and interconnection, and play a better role in listing. Second, the existing innovation layer and basic layer of the Beijing Stock Exchange and the New OTC Market insist on overall coordination and institutional linkage to maintain the balance of the market structure.

• Achieve "three goals". The first is to build a set of basic institutional arrangements that are in line with the characteristics of innovative small and medium-sized enterprises, covering issuance and listing, trading, delisting, continuous supervision, investor suitability management, etc., to make up for the shortcomings of multi-level capital markets in developing inclusive finance. The second is to unblock the linking role of the Beijing Stock Exchange in the multi-level capital market and form a mutually complementary and mutually reinforcing direct financing growth path for small and medium-sized enterprises. The third is to cultivate a group of specialized small and medium-sized enterprises to form a healthy market ecosystem with high enthusiasm for innovation and entrepreneurship, active participation of qualified investors, and responsible intermediaries.

   

Semiconductor companies on the New OTC Market

Ushering in historic opportunities

The New Third Board originally referred to the Zhongguancun Science and Technology Park unlisted joint-stock company that entered the agency share system for transfer pilot. Because the listed companies are all high-tech enterprises and are different from the delisted companies in the original transfer system and the original STAQ and NET system listed companies, it is vividly called the "New Third Board".  
It can be said that since its inception, the New Third Board has been here to serve listed companies. It is an over-the-counter trading network and property rights market that is independent of the first board market and the second board market. It is a national equity trading platform for unlisted joint stock companies and is no longer limited to serving high-tech park enterprises in the four cities of Beijing, Shanghai, Tianjin, and Wuhan. Therefore, in terms of ownership, the New Third Board is neither listed nor Shenzhen Stock Exchange.  
Official data shows that as of now, there are 7,299 listed companies on the New Third Board, with a total share capital of 485.016 billion shares and 296.329 billion shares in circulation. Among them, there are more than 100 companies whose business content is linked to semiconductors. We will extract these companies individually and take a look at their distribution.  
According to the industry classification results of NEEQ-listed companies (updated to the end of July 2021), among the 7,299 listed companies, 167 companies belong to the semiconductor field, mainly distributed in the five major fields of integrated circuit manufacturing, electronic components and assembly manufacturing, optoelectronic devices and other electronic device manufacturing, semiconductor discrete device manufacturing and printed circuit board manufacturing.  
There are 15 companies in the form that are engaged in integrated circuit manufacturing, as shown below:
 

Information source: New Third Board official website, electronics enthusiasts compiled drawings
Among them, Suzhou Huaxin Micro was established at the end of December 2000 and listed on the New Third Board in 2017. We see general-purpose MCUs in Huaxin Micro's product list, which is a resource currently in short supply in the industry. Huaxin Micro also successfully obtained approval for the "Suzhou Intelligent Algorithm MCU Engineering Technology Research Center" this year.  
There are 7 companies engaged in business related to semiconductor discrete device manufacturing, as shown below:
 

Information source: New Third Board official website, electronics enthusiasts compiled drawings
We choose Xinghai Electronics as a sample to take a look at the operating conditions of this type of enterprise. Public information shows that Changzhou Xinghai Electronics was established in November 1990. It is a provincial-level high-tech enterprise specializing in the research and development and production of various types of diodes and their components. With annual sales of approximately 10 billion diodes, it is one of the outstanding diode production bases at home and abroad. At present, on the official website of Xinghai Electronics, there are three main categories of products, namely rectifier bridges, diodes and photovoltaic bypass diodes. Among them, the diode subcategory is the most complex.  
Among the 167 semiconductor companies, 66 companies are concentrated in the manufacturing of electronic components and components, which is the category with the largest proportion. The details are as follows:
 

Information source: New Third Board official website, electronics enthusiasts compiled drawings
We randomly selected Aoxing Electronics among them. In its official introduction, it was mentioned that Aoxing Electronics is one of the large enterprise groups in Lin'an City, specializing in the production of capacitor aluminum shells, capacitor aluminum plates, foils, and capacitor aluminum sheets. At present, the total market value of Aoxing Electronics is 661 million yuan. The company's 2021 semi-annual report pointed out that in the first half of 2021, Aoxing Electronics achieved a high growth of more than 50% in terms of revenue and net profit.  
62 optoelectronic device and other electronic device manufacturing companies account for the second largest proportion on the list. At present, 5G development has entered an incremental stage. As the core of 5G network connection, optical communication technology will usher in a new round of development opportunities, driving the rapid development of optical cables, optical devices, optical equipment and other related industries. The list of these 62 optoelectronic device and other electronic device manufacturing companies is as follows:
 

Information source: New Third Board official website, electronics enthusiasts compiled drawings
Among our randomly selected samples, the net profit value of AoShiwei's 2021 interim report is 7,944,552 yuan, which is an increase from 6,230,097 yuan in 2020, and it has also enjoyed part of the industry dividends. Of course, because our sample is random, it does not represent the performance of all companies of this type on the New Third Board. For example, Yuanheng Optoelectronics, which is also in the optoelectronic device and other electronic device manufacturing camp, has a net profit of 7.6006 million yuan in the first half of 2021, a year-on-year net profit decrease of 47.37%.  
The remaining 17 companies are engaged in PCB manufacturing. In 2020, the PCB market was in a downturn due to the skyrocketing price of boards and the shortage of chips. Entering 2021, the industry is ushering in a rapid recovery, especially in the automotive PCB field. The details of these 17 companies are as follows:
 

Information source: New Third Board official website, electronics enthusiasts compiled drawings
Yongjie Technology pointed out in its financial report that the company's main product PCB, as the "motherboard" of electronic products, plays an important role in the performance of electronic products. At the same time, Yongjie Technology also stated that the company has obtained certifications from a large number of large domestic and foreign high-quality customers such as Honeywell, Osram, Philips, Siemens, TCL, and Haier. The picture below comes from Yongjie Technology's 2021 mid-year report, which shows the recovery momentum of the PCB industry.  
 

Source: Yongjie Technology 2021 Mid-Year Report
At present, the domestic semiconductor industry is a hot spot, being enthusiastically pursued by capital and retail investors. Now with the support of the "new hot spot" of the Beijing Stock Exchange, I believe that a group of semiconductor companies with good foundations will be able to enjoy dividends and increase their development speed.  
 

There are more benefits than the New OTC Market

In the relevant introduction to the listing on the New Third Board, the five major benefits of listing on the New Third Board for companies with high technological content and strong independent innovation capabilities in the early stage are mentioned:

1. It is conducive to broadening the company's financing channels.

2. Improve the company's capital structure.

3. Guide the company to operate in a standardized manner.

4. It is conducive to improving the liquidity of the company's shares and bringing positive wealth effects to the company.

5. It will help improve the possibility of the company going public.

Nowadays, as long as the innovation capabilities of enterprises are top-notch, the benefits they get from the Beijing Exchange will definitely be more than those from the New Third Board. Coupled with the original popularity of semiconductors, these 167 semiconductor companies listed on the New Third Board have a bright future.

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