(Yicai) May 28 -- Shares of Red Avenue New Materials Group rose after the Chinese fine chemicals supplier said it will spend CNY300 million (USD41 million) on a new research and production base for polishing pads used in chip production.

After surging by its 10 percent daily trading limit in the morning, Red Avenue [SHA: 603650] closed up 3.9 percent at CNY30.90 (USD4.27) a share in Shanghai today.

Red Avenue's unit Shanghai Red Avenue Electronic Materials inked a deal with Jintan district in Changzhou, China's eastern Jiangsu province, to build the new plant with an annual capacity of 250,000 units, the parent firm announced late yesterday. The factory will likely bring revenue of CNY800 million a year once it achieves full production, it added.

Polishing pads are one of the main components of precision polishing equipment used on wafer surfaces in the semiconductor manufacturing process. They have a significant potential for market growth.

The new project will expand Red Avenue's product range, the Shanghai-based firm noted. It will also likely create a new growth point for the company once it reaches mass production, it pointed out.

Editor: Martin Kadiev