Despite Semiconductor Manufacturing International Corp.'s lackluster IPO last week (shares fell 11 percent in New York and 8 percent in Hong Kong on their first day of trading), there are a handful of other China-based chip companies looking to go public later this year. Potential candidates include Advanced Semiconductor Manufacturing Corp., Central Semiconductor Manufacturing Corp. and Huahong NEC.

All of these companies have been around for several years, and are keen to take advantage of the apparent enthusiasm over China's chip market, which should grow to $36 billion this year. The poor performance of SMIC's offering, however, indicates that any IPO hopefuls may have to work harder to convince investors of their competitive advantage.

Over the next few years, IPOs could raise tens of billions of dollars for Chinese companies, helping them expand their operations, increase their competitiveness at home and, in some cases, turn up the heat on competitors abroad.

This year it will be the big Chinese companies that will snatch the headlines for overseas listings, but smaller chip design houses are looking to craft IPO runs during the next three to four years. It is equally important — perhaps more so — for these smaller companies to access the international capital markets if they are to grow into globally competitive concerns.

As it stands, chip designers like to work for foreign companies in China. The pay is better, the training more comprehensive. And while the stock option system is in place at some small, private Chinese companies, it is not nearly as entrenched in China as in the United States or Taiwan. One Chinese company manager put it this way: "When we make a few engineers millionaires, then that will be a different story."

But a lot of mom-and-pop Chinese investors may not be able to buy into their country's tech growth scenario. In the foreseeable future, Chinese tech houses will choose to list on overseas markets because China's domestic stock exchanges are relatively immature and are bogged down by lower-quality, state-owned or -controlled enterprises.

It's conceivable that the government will drag its feet on granting approval for some young, private tech companies to list domestically because they could pull too much capital away from state enterprises. The government has more incentive to approve state companies than private ones.

That will change in time, but not soon enough for the first generation of tech firms. The government should make correcting this disparity a high priority, because foreign stock exchanges won't be an option for the hundreds of companies it will take to form the heart of China's future design industry.

Taiwan bureau chief Mike Clendenin can be reached at mclenden@cmp.com.