(Original title: the first loss of science and technology board loss of 2.6 billion behind the annual loss: the core technology relies on the parent company and TSMC difference of 3 generations)
The localization of the chip industry is imminent!
In 2018, China's integrated circuit industry realized sales revenue of 251.93 billion, but the self-sufficiency rate of which was only 15.35%. That is to say, 85% - more than 200 billion yuan of chips to rely on imports.
In fact, China's chip self-sufficiency rate in core areas is even lower. For example, computer systems, general-purpose electronic systems, communications equipment, storage and other equipment used in the chip, domestic chip share are almost zero.
But the integrated circuit manufacturing is a money-smashing industry, to vigorously develop, in addition to the support of the state, and even less help from the capital market. The original intention of the birth of the Science and Innovation Board is to support the development of these industries.
In the first batch of nine companies announced yesterday, there is the integrated circuit manufacturing field and ship chip. The prospectus shows that its most advanced product is a 28nm wafer.
This is also the only one of the 9 companies that lost money. 2018 and ship chip loss of 2.6 billion, the main reason for the substantial loss is the depreciation of assets. There is no way, the production line investment is large, but the chip is updated and iterative, resulting in a high rate of depreciation of the production line, which is determined by the properties of the industry. Once the asset depreciation is completed, the realization of profitability is not a problem.
Another reason for the substantial loss of the chip and ship is amortization of intangible assets. Prospectus shows that the company's core technology all need to obtain the controlling shareholder Lianhua electronic authorization. The original book value of up to 2.387 billion yuan intangible assets, mainly technology license fees. Amortization of technology licensing fees, increasing the amount of loss and ship chip.
Unlike the depreciation of assets, the huge amount of intangible assets reflect the core technology of the and ship chip can only progress depends on the parent company UMC. At present, UMC has given up 7nm wafer research and development, coupled with Taiwan's Ministry of Economic Affairs regulations in the mainland region to invest in the establishment of the wafer manufacturing process needs to lag behind the company's process technology in Taiwan more than one generation. And ship chip for a long time, only in the 28nm wafer market to compete.
On the one hand, this market is highly competitive, on the other hand, with Samsung, TSMC 10nm wafers have entered the mass production stage, SMIC's 14nm wafers have also entered the customer verification stage. 28nm market heat how long can continue to be a big question.
The future is still full of challenges for the and ship chips that will soon be landing on the Semiconductor Manufacturing Board.
And ship chip loss of 2.6 billion truth: production line depreciation and amortization of intangible assets
Integrated circuit manufacturing vertically integrated manufacturing (IDM) and wafer foundry (Foundry) two models.
IDM refers to the business scope of the enterprise covers integrated circuit design, wafer manufacturing, packaging and testing of the whole industry chain mode, the representative companies have Intel, Samsung, etc.; foundry is only to undertake one of the manufacturing process, the representative companies have SMIC, TSMC, UMC, etc..
We are a subsidiary of UMC, also a foundry.
Founded in 1980, UMC was the first semiconductor company in Taiwan. The group has five foundries under its umbrella, including UMC, Unimicron, Unimicron, Unitech, and Hop Tai Semiconductor, and is the world's third-largest chip foundry, with a market share of 9%.
Wafer refers to the silicon wafer, which can be understood as the "foundation" for manufacturing chips. "Inch" represents the diameter of the silicon wafer. The larger the radius of the wafer size, the greater the number of chips that can be manufactured on each wafer, meaning that the cost of mass production is reduced. Currently, mainstream wafer foundries are transitioning from 8 inches to 12 inches.
Wafer production, yield is important. At the moment, 12-inch wafer production is still in the yield of the technology to climb, the cost remains high, and 8-inch wafer has a mature special process.
And ship chip was originally mainly engaged in 8-inch wafer R & D and manufacturing, the yield rate can basically reach 99%; in 2016, and ship chip set up a subsidiary of the company Xiamen Lianxin, began to engage in 12-inch wafer R & D and manufacturing business.
In 2018, and ship chip realized 3.694 billion yuan in revenue, a loss of 2.6 billion yuan. In fact, in 2016 and 2017, and ship chip loss of 1.149 billion yuan, 1.266 billion yuan.
One of the reasons for the huge losses of the and ship chip is the huge depreciation of fixed assets caused by the transformation.
For each foundry, competitiveness is determined by the level of its process technology. As of 2018, there are only six pure foundries left with advanced process technologies of 28nm and below, namely TSMC, Ge-Xin, and the parent company of the ship chip, Lianhua Electronics, SMIC, the issuer, and Huali Micro, and three vendors left with 14/16nm or below, namely TSMC, Ge-Xin, and Lianhua Electronics; and only TSMC is left with pure foundries capable of providing 7nm manufacturing services at the moment.
Mastering the most advanced process technology, in addition to technology to pass, but also to have a large-scale capital investment. Under normal circumstances, a 28nm process IC production line investment of about $ 5 billion, 20nm process production line up to $ 10 billion.
Last year, UMC Electronics, Grid Core announced the cessation of investment in technology below 10nm. Behind this, with the need for huge capital investment and whether it can produce cost-effective .
In 2016, and the ship chip chose to set up a subsidiary in Xiamen, Xiamen United Core for the production of 28nm, 40nm, 90nm and other process 12-inch wafers, the total investment amounted to a high of 6.2 billion U.S. dollars. But the chip is another rapidly changing product.
Intel founder Moore proposed in 1965, up to 10 years, the integration of integrated circuits will double every two years. Later, the group shortened that cycle to 18 months, meaning that the performance of integrated circuits would double every 18 months, referring to the doubling of the number of transistors on the chip with each generation of the process.
You could also interpret this to mean that the price of a chip with the same performance will drop by half every 18 months. This also means that by year 5, the chip is a tenth of what it was 5 years ago, essentially worthless and in need of a replacement.
For wafer fabs, new manufacturing equipment needs to be purchased for each generation change. Theoretically, the production line iterates very quickly and needs to be depreciated in the accounting treatment.
Huge production line assets plus a large percentage of depreciation, which creates a huge amount of depreciation. The accounting policy for Hutchison Chip is 6-year depreciation, or 16.67% per year.
In 2018, the depreciation amount of He Ship Chip is 2.8 billion. As of the end of 2018, the net value of the production equipment of He Ship Chip was 12.6 billion dollars.
However, the production line life of 5 years only exists in theory. Although the chip iteration is fast, the actual application scenario of the chip update speed will not be so fast, and the life of a production line is not only 5 years.
After the depreciation period, generally these companies will immediately realize profits. So the loss due to production line depreciation is just an accounting loss. It is said that no fab has ever been able to turn a profit on its statements in the first 5 years, and it took TSMC 6 years to do so, and UMC, the parent company of Ship Chip, 9 years .
If you look at cash flow, Hershey is actually doing very well, with net operating cash inflows of $1.267 billion, $2.913 billion, and $3.206 billion from 2016-2018, respectively.
In addition to huge asset depreciation, and ship chip loss is also due to amortization of intangible assets, last year intangible asset amortization amounted to about 477 million yuan.
Behind the huge amortization of intangible assets:
Core technology relies on the parent company, and TSMC difference of 3 generations
and ship chip huge amortization of intangible assets, mainly to the parent company to pay the "tax" fee
and ship chip huge intangible assets, mainly to the parent company to pay the "tax" fee
and ship chip. ".
According to the prospectus, the production of wafers in the core technology all need to obtain the controlling shareholder Lianhua Electronics technology authorization. The original book value of up to 2.387 billion yuan intangible assets, mainly technology authorization fees. This part of the fee is divided into five years of equalization, because of this, each year roughly need to amortize 477 million yuan.
Although and the ship chip hundreds of millions of dollars a year in R & D investment, and the ship chip R & D investment in more industry-specific product research and development and its own manufacturing process improvement, rather than substantial technological breakthroughs .
In fact, the hundreds of millions of dollars invested in R&D each year is only enough to improve the technology. Over the past three years, the company's R&D investment has been $188 million, $291 million and $386 million respectively. In contrast, SMIC's R&D investment in 2016 and 2017 was as high as $318 million and $427 million, equivalent to RMB 2.13 billion and 2.8 billion.
In this light, whether or not the core technology of the WoShip chip can progress can only depend on the parent company UMC. But from the current point of view, and the core technology of the chip has been difficult to further .
According to UMC, the company will also invest in R&D for 14nm wafers and an improved 12nm wafer process in the future. However, UMC has basically given up on the more advanced 7nm wafers and future 5nm wafers and other processes. The reason is simple, UMC can't sustain large-scale investment in R&D like TSMC.
Coupled with the provisions of the Taiwan Ministry of Economic Affairs, the investment in mainland China to build a factory in the wafer process needs to lag behind the company's process in Taiwan process more than one generation.
This means that if UMC gives up on the impact of high-end processes, it will be difficult to make a bigger breakthrough with the WoS chip alone, and its manufacturing process will be stuck at 28nm for quite some time.
The only way to compete in the 28nm market is to have a chip with a chip.
At this stage, the 28nm wafer market still looks promising. As R&D difficulties and production processes increase, the price/performance improvement of IC process evolution tends to stagnate, and the cost of 20nm and 16/14nm processes was once higher than 28nm.
This is the first time in more than 60 years of Moore's Law that we have encountered the problem of shrinking processes but increasing costs instead of decreasing them. Because of this, 28nm has a longer lifecycle as the most cost-effective process.
In the 28nm process, the main competitors with the ship's chips are TSMC, GeForce, UMC, Samsung and SMIC, as well as Hua Hong's Huali Microelectronics, which just announced the mass production of MediaTek's 28nm chips.
Although there are few competitors, the competition for 28nm is exceptionally fierce. Because TSMC's technology breakthrough was the earliest, it is now fighting a low price war to gain more market share with less depreciation pressure, plus the entire process expansion is relatively aggressive, supply exceeds demand, bringing a lot of pressure to several other vendors.
Behind the price competition is the problem of precipitation of technical strength. To be clear, the ability to do advanced processes does not mean that the technical strength of the pass, which also involves process costs, yields, and many other issues.
In the case of SMIC, for example, its process technology broke through 28nm early, but never produced the desired revenue. As of the second quarter of 2018, 28nm revenue still only accounted for 8.6% of SMIC's total revenue.
Looking at the gross margin situation, it is difficult to get a profit level that exceeds that of the industry if you do not want to find a way to break through to a higher process.
But if it stays at 28nm, how long can the heat of this market last for and ship chips is a big question. At present, Samsung and TSMC 10nm wafers have entered the mass production stage, and SMIC's 14nm wafers have also entered the customer verification stage. In other words, and ship and TSMC gap at least on the surface is 28nm to 10nm, the gap is three generations. Times will always improve.
IBS estimates that global demand for 28nm wafers was 2.91 million wafers in 2014, will increase to 4.3 million wafers in 2018, and is projected to slow to 3.51 million wafers in 2024.
Even with the successful listing of the and ship chips, it can't hide the general trend of slow development and increasing decline of UMC. Compared to Samsung, Intel, TSMC, and GeForce, UMC is not only small in revenue size and slow in growth, and the advanced process is already far behind, and there is no intention of catching up in the short term.
And compared to SMIC, with no massive capital at its back, UMC is at a disadvantage in an industry that relies on a lot of R&D and capital expenditures.
Early in 2017, UMC reported that its 28nm tech team was poached by Shanghai's HUALI Microelectronics, which is a case in point.
In the early years, and ship chips can still rely on the dividends of the localization rate to obtain considerable growth. But with more and more domestic fabs landing, the industry's overall capacity release rate will far exceed the downstream industrial chain demand increase rate, excess capacity will be inevitable.
According to SEMI's statistics, it is estimated that between 2017 and 2020, there will be 62 new fabs in operation around the world, of which 26 new fabs will be in operation in mainland China, accounting for as much as 42% of the new fabs.
More to the point, the semiconductor industry boom may also be facing an inflection point.
The U.S. Semiconductor Industry Association announced that global semiconductor market sales in January 2019 were down 5.7% from January 2017, to $35.5 billion, marking the first negative growth in 30 months since July 2016. The core reason for this is the return of storage chip prices and incremental markets such as AI that have yet to create real demand .
Core technology stagnation, market competition intensified, the industry is facing overcapacity. Not to say that the situation of the chip and the ship is in crisis, at least the days to come will not be too good.
The highest valuation of 27 billion!
After the issuance of the market value or close to SMIC, is it worth it?
The prospectus shows that the issue of no more than 400 million shares is expected to raise nearly 3 billion. It is expected that after the issue, 400 million shares accounted for at 11.1%.
This means that the valuation of the and ship chip can be up to 27 billion. From the current heat of the Science and Technology Board, 27 billion is not impossible.
People may not understand what 27 billion means. Let's put it this way, as of this Friday, SMIC's market capitalization is at 39.472 billion Hong Kong dollars, which translates into 33.788 billion yuan. 2017 SMIC revenue of 3.101 billion U.S. dollars, which translates into 20.777 billion yuan. And in 2018, the operating income of He Ship Chip was only $3.694 billion
Not surprisingly, He Ship Chip's revenue should be one-sixth of SMIC's, while the market capitalization is up to 80 percent . And that's not counting the increase in market capitalization from the rise in share price since the IPO.
What's more, even in the U.S., the market capitalization of UMC, the parent company of Hutchison Chip, is only $30.8 billion. From its listing on the New York Stock Exchange in 2000, the initial share price peaked at $11.73, to today's share price of only $1.88. It's not an exaggeration to say that for quite a long time, UMC has been a company that hasn't brought returns to investors .
In 2017, UMC's operating income was 149.285 billion Taiwan dollars, but the net profit was only 6.679 billion Taiwan dollars, the net interest rate was only 4.5%, and the performance was not at all like a high-tech company.
The core technology relies heavily on the chip and how will the ship perform?
In recent years, as the limits of Moore's Law are approaching, the development of advanced processes is slowing down, coupled with China's local chip design industry is booming, bringing a huge domestic demand market such as the Internet of Things. China's chip industry has a historic opportunity.
With the launch of the Science and Technology Innovation Board, the state has lifted the country's efforts to support key industries such as integrated circuits, biomedicine, artificial intelligence, and other key industries, and there is no need to worry about funding.
Therefore, Readers sincerely hope that in this process, the vast majority of resources can be used on companies that really have core technologies.
Of course, considering that China's IC industry still has a considerable gap relative to foreign developed countries, and the ship chip in the country is still a relatively high-quality IC company, and the ship chip's 28nm wafers are even better than SMIC's similar products.
We are looking forward to the better development of Hutchison Chip after landing on the KTC. One day in the future, we expect that the company will not only be limited to 28nm wafer products, but will also continue to impact higher-grade wafers, contributing to China's IC industry.
As long as you bite the bullet and make the technology work, there is no worry about customers and markets, and China's IC manufacturing industry will usher in a bright future.
This article is derived from reading the new three board
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