(Yicai Global) Nov. 16 -- BYD’s shares fell after the Chinese electric carmaker abandoned a plan to spin off and list its semiconductor unit on Shenzhen’s ChiNext startup board, citing the need to invest heavily to quickly expand the unit’s wafer production capacity.

BYD [SHE: 002594] ended 2.2 percent lower at CNY261.08 (USD36.91) in Shenzhen today, while its Hong Kong-listed stock [HKG: 1211] finished down 1.9 percent at HKD191.80 (USD24.52).

BYD’s board agreed to cancel the spin-off and proposed initial public offering of BYD Semiconductor as big investments are needed to expand capacity due to the chip shortage caused by the rapid growth of the new energy vehicle industry and domestic supply bottleneck, the Shenzhen-based carmaker announced late yesterday.

BYD set out plans to list its semiconductor arm in May last year. BYD Semiconductor filed for an IPO on June 29, but the process was suspended four times due to the expiration of financial documents and a regulatory probe of the law firm advising it.

Termination of the IPO will not have a significant adverse impact on the company’s operation, BYD noted, adding that it is uncertain whether the spin-off and listing will be restarted in the future.

Founded in 2004, BYD Semiconductor makes chips for motor drive control systems, thermal management systems, car-body control systems, battery management, in-car video, and lighting systems. Some of its products are also used in household appliances, consumer electronics, and the industrial sector.

By sales, BYD Semiconductor was the largest Chinese manufacturer of insulated gate bipolar transistor modules used in the motor drive controllers of China’s new energy passenger cars in 2019, with a market share of 19 percent, according to statistics from Omdia. Worldwide, it was second only to German chip giant Infineon Technologies.

The unit counts carmaker Dongfeng Xiaokang, electric bus manufacturer Yutong, and BAIC Group’s unit BAIC Foton Motor among its clients.

Sales of new energy passenger cars in China more than doubled to 3.9 million in the first three quarters from a year earlier, data from the China Passenger Car Association showed. NEV sales are expected to reach 6.5 million this year.

Editor: Futura Costaglione