HONG KONG: Galaxy Semi-Conductor Holdings, one of the largest mainland semi-conductor producers, said it plans to raise HK$70 million (US$9 million) to HK$100 million (US$12.8 million) through an initial public offering (IPO) in Hong Kong next month.

Yang Senmao, the firm's chairman, said the capital raised will be used to extend production lines in order to cope with increasing demand for semi-conductors.

Established in 1994, Galaxy has about 85 per cent of the mainland semi-conductor market, serving most of the big mainland TV makers such as TCL, Konka and Hisense.

Last year, Galaxy's production capacity of diode increased 30 per cent to 4.5 billion units. The company posted a 21 per cent increase in revenue in 2005 to reach 40 million yuan (US$5 million), with a profit margin of 26 per cent.

"In the past few years, the production of semi-conductors on the mainland grew at a double-digit rate," said Yang, adding it will continue to rise in the future.

Galaxy plans to spend 90 per cent of the proceeds from the IPO to purchase 25,000 square metres of land in East China's Jiangsu Province to build a new factory. The remaining cash will be used as operating capital.

To attract investors, Galaxy has preliminarily set the dividend payout ratio at 20 per cent of net profit, said Yang.

Galaxy also has big ambitions overseas. "So far we already have 75 clients across 20 countries and regions such as South Korea, Thailand, Hong Kong, the United States, Taiwan, Spain and Italy," said Yang.

"We have seen that overseas markets have a strong appetite for semi-conductor products. For example, the sales of one particular kind of diode in 2005 amounted to HK$20 billion globally," said Yang.

"That is very encouraging and we want to take an even bigger slice of the market."

Overseas markets account for 15 per cent of the company's total turnover.