Biren Raises HK$4 Billion in Share Placing to Fund Production of Its Next AI Chip

Shanghai Biren Technology, a Chinese maker of AI processors, is raising about HK$4 billion from a share placing to buy production capacity and components for its next-generation chip, betting that supply will be the deciding factor in China's market for domestic AI hardware.

The placing closed on Oct. 12, Biren said in a filing to the Hong Kong stock exchange. All 130 million new H shares were placed with at least six independent investors at HK$31.08 each through placing agents China International Capital Corp. Hong Kong Securities and UBS, under an agreement announced on Oct. 8. Gross proceeds were HK$4.04 billion and net proceeds about HK$4.02 billion, roughly $515 million by a Rackline calculation.

The price was a 9.76% discount to the Oct. 7 closing price of HK$34.44 and a 13.73% discount to the five-day average. The new shares equaled about 9.54% of Biren's H shares and 5% of its total share capital before closing, and about 8.71% and 4.76% of the enlarged totals. Because they were issued under a general mandate approved by shareholders in June, no further vote was required.

It is Biren's second placing under the same mandate. The company had already issued 153 million H shares in an earlier placing.

The filing is unusually direct about why the company needs more money so soon. Biren said its new-generation product "has completed bring-up and entered post-silicon validation," with development running faster than expected, and that it has drawn up "a production plan involving substantial volumes, with customer sampling and volume production expected over the coming quarters, subject to satisfactory completion of validation and qualification."

At the same time, Biren said, supply has tightened across the industry, with "substantial increases in the prices of key materials, components and production capacity" along with longer procurement times and larger advance reservations and prepayments. Its customers, including internet companies, are demanding inventory readiness and the ability to fill large orders on schedule, and more of them want complete rack-scale systems rather than individual chips.

About 70% of the net proceeds, or HK$2.81 billion, will go to supply-chain procurement, production readiness and commercialization of the new product, including capacity reservations and inventory buffers, to be spent by the end of 2027. About 20% will fund research and the company's software platform through 2029, and 10% will go to working capital.

Biren said it expects to spend the remaining proceeds from the earlier placing set aside for next-generation production, about HK$3.41 billion, by around the end of 2026, a year ahead of its original timetable.

Export controls shape all of it. The U.S. Commerce Department added Biren and several affiliates to its Entity List in October 2023, requiring a license for exports of all items subject to U.S. export regulations, under a presumption of denial. The designation also reaches certain foreign-made items, which limits Biren's access to advanced manufacturing outside China.

The markers to watch are the timing of customer samples and volume production of the new chip, and how quickly Biren draws down the capacity reservations the money is meant to buy.