As we all know, in the past two years, because of the ZTE, Huawei incident, so the domestic semiconductor domestic alternative was shouted more and more fierce. Of course, the fact is true, after all, semiconductors are the most indispensable high-tech in the field of science and technology, once the neck, only in their own hands, in order not to be necked, so where are the opportunities for domestic substitution? Can be seen from two aspects
First, from the low technical difficulty of the first development, such as testing
We know that the semiconductor, especially the chip we often say, there are three main processes, respectively, testing, manufacturing, design. Among them, the threshold of the sealing test is the lowest, and the domestic performance is also better.
So I think the domestic alternative, first from the start of the sealing, because the threshold is low, while the sealing is relatively speaking labor-intensive, so the domestic is advantageous, in addition to the mainland also has a sealing of the three strong, Taiwan's Sun Micron is the world's first sealing enterprise.
Second, and then the development of manufacturing, this is the foundation
And after the sealing and testing, and then to develop the manufacturing industry, after all, the manufacturing industry is the basis of the most backward technology in the country, in fact, or manufacturing, such as the sealing and testing, the design of the field of the international level, in fact, is not bad, but the manufacturing is much worse.
Taking TSMC as an example, it has entered 7nm, and this year it will be 5nm, but SMIC is only 14nm, and at least 3-5 years away from 5nm, and TSMC is still making progress, 3-5 years later, SMIC will definitely not be able to catch up, and will only be able to reach TSMC's current level.
And the design field is currently the most domestic enterprises, after all, the design threshold is not too high, not too low, in the use of ARM, RISC-V and other architectures, the design threshold is much lower, coupled with the input is also less, the direct design out to the foundry to produce, which will be on the line.
So overall, the semiconductor domestic alternative in fact, each link is an opportunity, after all, currently in all areas are more backward, even upstream and downstream materials, equipment, are backward, all the companies in any field, there is a solid foundation, will usher in the great development.
Semiconductor industry in 2019 days are not good, the performance of the entire industry companies are not good, heavily dependent on the semiconductor industry, South Korea's per capita GDP has also declined, semiconductor demand downturn, all kinds of chip shipments have fallen sharply, the industry chain of all links have been significantly affected.
But with the accelerated arrival of the 5G era, will become the catalyst for the semiconductor industry inflection point, 5G network needs the support of the whole industry chain, including 5G base stations, high-speed PCB and related components, 5G construction period of about three to five years, will first bring the recovery of demand for related industries. The technology upgrade brought about by 5G will bring the inflection point of the semiconductor industry by driving the related new applications.
In the next few years, the semiconductor industry will re-enter the boom cycle, in the process, the entire industrial chain is expected to get recovery, thus bringing the opportunity to repair the difference in expectations, for the leading companies in various sub-sectors, it is more likely to share the industry's growth dividends, which will bring the performance-driven and valuation enhancement of the double positive expectations.
Digging opportunities in the semiconductor industry, mainly from these perspectives to think:
The first is the chip design industry, the chip design industry belongs to the chip industry chain in the high value-added part of the industry, including Qualcomm, Huawei Haisi, Samsung, ARM, Intel and other companies, mainly is to seize the high point of the chip design, through the accumulation of technology patents, maximize access to industry dividends. In the A-share listed companies, there are also some chip design companies, although they can not compete with the international technology giants, but in their respective segments with obvious monopoly advantages.
Second, is the localization of substitution, although some domestic semiconductor companies, strength and the United States advanced companies still have a certain gap, but from the past few years, the future of the semiconductor industry will be the full implementation of the localization of substitution, the only way not to be the neck of the West, which provides a lot of competitive domestic chip companies provide a very good market opportunities, such as in the video chips, domestic SOC chip companies can be very good.
The first step in the process is to create a new generation of chips that can be used as a substitute for NVIDIA's chips in the United States.
Third, the need to make up for the shortcomings of the link in the semiconductor industry, we are currently in the chip design has a strong company such as Haisi, but in the production chain is not advantageous, the most competitive is SMIC, has been able to mass production of 14nm process chips, but the higher technology foundry needs to resort to the Netherlands ASML lithography. In the future, China will invest more technology and funds to support, so the company has R & D in photolithography, there is expected to support.
Fourth, the advantage of the link company, although in the semiconductor industry chain, China is still some links need to continue to catch up, but there are advantages. For example, the semiconductor packaging industry, China's listed companies have several companies in the world's top ten sealing, although the sealing industry's gross and net interest rates are not high, but it is the semiconductor final product must be links, these companies have a high market share, once the industry recovered, it will benefit significantly.
Starting from these four aspects, looking for the industry's strongest profitability, the highest market share, and has been continuing to invest in the development of the company, these companies will further consolidate their position in the industry, in the new round of the semiconductor industry up cycle, the performance will be a significant improvement will be access to the recovery of the semiconductor industry and the full localization of the opportunities brought.
Last year, the U.S. boycott of Huawei event, and later the U.S.-China trade war, the domestic integrated circuit industry, "lack of core less soul" status quo is increasingly obvious! In fact, as early as June 2014, the State Council issued the "National Integrated Circuit Industry Development Promotion Program", deploying the full advantage of the domestic market, create a favorable development environment, stimulate the vitality and creativity of enterprises, drive the synergistic and sustainable development of the industrial chain, accelerate the pace of catching up and surpassing, and strive to achieve the leapfrog development of the integrated circuit industry. With the increase in policy support in recent years, integrated circuits, as well as domestic chip development is also as strong as ever! In mid-January this year, SMIC's 14nm production line went into production, realizing mass production one year ahead of schedule, and 12nm began customer introduction. According to the official website of SMIC, SMIC South IC Manufacturing Co., Ltd. has successfully mass-produced the first-generation 14nm FinFET process in the third quarter of 2019, which is the first 14nm process production line in China, and has become the most advanced integrated circuit production base in mainland China. It is reported that SMIC began research and development of 14nm in 2015, and the current yield rate has reached 95%, meaning that it has accomplished important development goals one year in advance of the "Outline for Promoting the Development of the National Integrated Circuit Industry".
Status: China has been the world's largest IC market for many consecutive years, accounting for the proportion of demand in the global market has increased year by year, exceeding half of the global market in 2014 and reaching 56.2% of the global market in 2017. ICs are China's largest single imported commodity, exceeding $200 billion for the sixth consecutive year since 2013, and surpassing $300 billion in 2018, making them the highest-valued imported commodity. Not only that, the world's top 20 integrated circuit enterprises, one-third of the enterprise more than 50% of the performance from China, two-thirds of the enterprise 30% of the performance from China, so China for most of the world's integrated circuit enterprises is also an irreplaceable and important market, visible semiconductor domestic substitution space is huge!
The following chart is a picture of the semiconductor industry for mining:
In the semiconductor industry, at present we are most likely to grow into the international mainstream semiconductor sealing industry, because it is closest to the characteristics of the manufacturing industry, the need for large-scale investment and a large number of equipment. In terms of technology, semiconductor packaging and testing technology development is not as fast as the semiconductor design industry, equipment can be quickly purchased and R & D upgrades, easy to expand the production scale and market share in the huge domestic market demand, so focus on the semiconductor packaging and testing industry in China already has a huge production base and market base, the industry may be able to most quickly produce similar to TSMC as the world's first-class enterprises, SMIC International, Changdian International is the current market leader, but also the most potential for development!
China's sealing industry future outlook, advanced sealing will eventually become the mainstream
In recent years, overseas mergers and acquisitions have allowed China's sealing and testing enterprises to rise rapidly, access to technology, markets and make up for some structural The company's main goal is to provide the best possible service to its customers.
China's packaging and testing industry's future development direction should be from the "quantitative growth" to the "qualitative breakthrough" transformation.
Qualitative growth: The traditional packaging industry is characterized by heavy labor costs, light capital and technology.
The semiconductor industry chain in three links, the design of technology accumulation and talent requirements of the highest; manufacturing of high capital investment requirements; packaging industry on capital and talent requirements are relatively low, and the cost of labor in the three links in the most sensitive. Ultimately, the added value of design and manufacturing is the highest, and the added value of packaging and testing is the lowest. China's mainland in 2018 design and manufacturing together accounted for 66% of semiconductor sales, and sealing and testing accounted for 34%. Taiwanese companies have the highest share of the global packaging and testing market, but in 2018, the revenue of the packaging and testing industry accounted for only 19% of the total revenue of the semiconductor market in Taiwan, and more profits came from manufacturing and design. The packaging industry is the most sensitive to labor costs, the mainland sealing and testing industry listed companies in 2018, the number of employees needed per million revenue is 2.06, the head of the four sealing and testing companies (Changdian, Huatian, Tongfu, Jingfang) an average of 1.59 people, the same period of time, the IC design industry and the manufacturing industry (Semiconductor Manufacturing International Corporation, Huahong) were 0.75 and 0.74 people respectively.
In the post-Moore era, when the physical size is about to go to the limit and the process technology can't bring effective cost reduction, the breakthroughs in semiconductor hardware will be more dependent on advanced packaging technologies. Because advanced packaging is more flexible, not limited to transistor size reduction, but can flexibly combine with existing packaging technology to reduce costs; R&D investment and equipment investment is not as high as semiconductor manufacturing capital expenditures, which will become the key to continue Moore's Law.
"Qualitative breakthrough": the traditional sealing due to low technical barriers, fierce competition in the same industry, profits to improve the space is very small, the future of China's sealing industry should be to the higher value-added profits of the transformation of the advanced sealing, capital expenditures will replace the cost of manpower as the new industry driving force. The next semiconductor development cycle will rely on A The next semiconductor development cycle will rely on AI, 5G, IOT, smart cars and other emerging applications, these emerging applications have **** the same requirements for electronic hardware: high performance, high integration, high speed, low power consumption, low cost. Advanced packaging technology is the perfect choice to address the hardware aspects of various performance requirements and complex heterogeneous integration needs.
As advanced packaging involves the technology and equipment used in mid-channel wafer manufacturing, the profit value-added growth at the same time capital and technology investment is much higher than the traditional sealing, advanced packaging capital expenditures are similar to "wafer manufacturing". Advanced packaging involves wafer milling thinning, rewiring, bumping (Bumping) and 3D-TSV process, in the process of etching, deposition and other front-channel equipment, which inevitably means large-scale capital expenditures, but also means that the semiconductor industry chain in the midstream and downstream of the blurred business demarcation, mutual penetration and expansion. For example, TSMC launched the InFO integrated fan-out advanced packaging and CoWoS wafer substrate chip packaging technology provides a kind of IC design business in addition to the contracting of the entire IC manufacturing business model, the success of TSMC to get the 3 generation of Apple's orders; Intel and AMD have also launched the embedded multi-chip interconnection bridge (Embedded Multi-chip Interconnection Bridge, EMIB). Intel and AMD have also launched Embedded Multi-chip Interconnection Bridge (EMIB) technology, and successfully utilized in commercial mass production, that is, Intel's eighth-generation Core G series processors. TSMC's 2016 InFO capital investment alone amounted to $950 million, while Sun Micron's 2016 capital expenditure is expected to be only about $800 million. Unlike traditional packaging, advanced packaging capex is the core driver.
A share of the core subject of the introduction
(a) long power technology: packaging and testing leader, management optimization and large customers to single drive the company's growth
long power technology as the world's IC sealing and testing link in the first echelon of the enterprise, its discrete devices and integrated circuit packaging and testing business has been covered by the world's major semiconductor customers, and advanced packaging has also continued to the advanced packaging, and the company has also been to the first stage. In 2019, the company took a bold step to optimize and integrate its management team, with the experienced SMIC team responsible for the company's capacity optimization and business integration. In September 2019, Mr. Zheng Li took over the position of CEO and director of the company, who was previously the Senior Vice President and President of Greater China at NXP and assumed a number of senior management positions. With nearly 30 years of experience in integrated circuits, Mr. Zheng Li will lead Changdian Technology to a new level.
In addition, since 2019, affected by the trade friction between China and the U.S., Huawei Hesse-related orders show an accelerated shift to mainland China. As the largest local semiconductor sealing and testing company with the richest technology route, Changdian Technology will undoubtedly be the biggest beneficiary of this round of Huawei's transfer order.
(2) Huatian Technology: CIS + storage + RF, multi-dimensional layout to seize the opportunity
Huatian Technology as a local top three, the world's top ten semiconductor packaging company, the main business covers a comprehensive range of traditional sealing to advanced sealing and other series. Huatian Technology has been expanding steadily in recent years, with a good financial structure and gross margins that have remained stable. With the overall rebound of the industry since the third quarter of 2019, orders have been increasing month by month, and the capacity utilization rate of each plant has been gradually improving.
? Tianshui plant, which focuses on low-end and medium-end traditional packaging, including leadframe, part of BGA, MCM and FC business, saw its capacity utilization rate rebound to 90% in 2019Q2, with stable profitability.
? Xi'an plant mainly focuses on mid-range packaging technologies such as QFN and BGA, with Q1 capacity utilization at around 70% and full production in 2019Q2.
? Kunshan plant mainly focuses on 2.5D-3D high-end packaging technologies, including WLP, Bumping, MEMS, and TSV, etc. Currently, orders for CIS packages for cell phone front lenses and CIS packages for security lenses are full. With the recovery of the global market, the domestic market in Huawei order transfer to accelerate the speed of recovery, advanced sealing demand is expected to increase significantly.
In addition, the capacity expansion of the new plant in Nanjing and the expansion of overseas advanced sealing and testing business will be the most expected profit growth point of Huatian Technology. The company's Nanjing base, which mainly deploys memory, MEMS, artificial intelligence and other advanced packaging and testing production lines, started construction in early 2019 and is expected to go into operation in 2020. Overseas merger and acquisition company Unisem has a complete Bumping, SiP, FC, MEMS and other advanced packaging technology, the company's financial situation is good, the integration is smooth at this stage. Unisem's main customers include Broadcom, Qorvo, Skyworks, etc., and is expected to benefit from the chip packaging of the 5G RF significantly.
From the point of view of Huatian Technology's major business layout: the steady and solid traditional packaging is the core ballast of the company's performance, while the advanced packaging actively deployed in recent years is also blossoming with the boom of CIS, storage and 5G RF, and the company is accelerating forward.
(C) TOMF Microelectronics: the synergistic force of the various bases, AMD cooperation is getting better
After years of endogenous growth + M&A development strategy, the company now has six production bases, the capacity scale and revenue volume.
In the first half of 2019, Tomfoolery UltraVision Suzhou and Tomfoolery UltraVision Penang achieved a brilliant growth of 32.16% against the trend; at the same time, Tomfoolery UltraVision Suzhou became the first factory to provide sealing and testing services for the whole series of AMD 7nm products, and the total shipment of 7nm products at the end of the second quarter exceeded the expectation of AMD by 8%, which marks that the two factories of Suzhou and Penang have increasingly refined their business capability after being incorporated into the Tomfoolery banner. On August 8, AMD launched the world's first 7nm chip, and Google and Twitter announced that they would adopt AMD core processors for their data center CPUs in the future. As two of the largest packaging and testing bases for AMD's 7nm products, Thruflex Suzhou and Penang are expected to benefit significantly from AMD's future revenue growth.
(4) JFET: CIS continues to boom, years of deep plowing has finally borne fruit
JFET is one of the leading companies in the domestic WLP advanced encapsulation technology, mainly focusing on advanced encapsulation in the field of sensors. Our products are used in consumer electronics, security, biometrics, automotive electronics, and many other fields. At present, the company is the world's second largest service provider capable of providing wafer-level dimensional packaging business for image sensing chips. in January 2019, the company acquired the overseas company Anteryon, whose complete wafer-level optical component manufacturing mass production capacity and technology form a good synergy with the company's existing WLCSP packaging and testing.
Driven by the "Safe City, Skynet Project, Snow Project", China's video surveillance market growth rate of about 15%, is expected to reach 168.3 billion in 2020. The company's high-level CMOS package products are expected to continue to benefit from the growing demand for video surveillance. In addition, in the automotive field, the huge demand for the number of ADAS system lenses is also the main driving force for the company's packaging and testing wafer shipment growth. According to HIS data, with the ADAS penetration rate increase, in 2020 the global automotive camera will reach 83 million, compound growth rate of 20%. It is expected that automotive electronics, medical and health, security and other applications will be the next five years the market growth of new momentum, as the main downstream packaging and testing vendors, Jingfang Technology will be prioritized to benefit. Camera, fingerprint identification and 3D sensing still account for a large share of the sensor packaging and testing market. At present, cell phone camera, fingerprint identification and 3D sensing penetration rate increase, are accelerating the development of image sensors, CIS chip packaging demand rapid growth will be the company's future worth looking forward to see.
By the influence of high boom, the company's current production capacity presents the state of oversupply.
December 2019, the crystal square technology issued a fixed-price plan, intends to raise funds of not more than 1.4 billion, for the IC 12-inch TSV and heterogeneous integrated intelligent sensor module project, the project will form an annual output of 180,000 pieces of production capacity after completion of the project; the production is expected to increase by 160 million net profit per annum. Net profit of 160 million. With the fundraising project, the company's performance will be significantly enriched.
(E) Changchuan Technology: Significantly benefited from the boom cycle in the packaging and testing link Capax enhancement
Changchuan Technology, as a professional semiconductor equipment company, the company's main for the IC packaging and testing enterprises, wafer manufacturing enterprises, the company's main business is to provide the best service. As a professional semiconductor equipment company, the company mainly provides test equipment for IC packaging and testing enterprises, wafer manufacturing enterprises, chip design enterprises, etc. IC test equipment mainly includes testers, sorters, probe stations, automated production lines, etc. At present, the company's main products include testers, sorters and automated production lines. With the current round of semiconductor boom cycle bottoming out, led by TSMC wafer makers Sazi raised capital expenditure, significant expansion of production to cope with strong market demand, in accordance with the semiconductor industry chain conduction law, fab capacity expansion is bound to spread to the middle and lower reaches of the packaging manufacturers. In addition, in the process of the global semiconductor industry's shift to domestic, mainland China, both wafer fabs and packaging plants are boom cycle will be stronger than the global industry cycle. At the same time we also see that, with the long power / Huatian / through the rich / crystal side of the full capacity, the expansion of its willingness to more urgent, so we believe that Changchuan technology as a leading semiconductor packaging and testing equipment suppliers, will be expected to significantly benefit from this round of semiconductor industry boom cycle + localization trend.
Investment Recommendations
Since the second half of 2019, a new round of semiconductor boom has basically been established globally and kicked off. For mainland IC practitioners, the logic of Huawei's order transfer and industry shift will further strengthen this boom cycle and make its interpretation in mainland China more vivid. Sealing and testing link as the most mature field in the local semiconductor industry chain, its order-taking ability is more certain. Subjects, we optimistic about the sealing link of the long electric technology, crystal square technology, through the rich microelectronics, Huatian technology, as well as sealing and testing equipment manufacturers Changchuan science and technology.
Semiconductor domestic alternative space is huge, how to tap the opportunity?
At present, the Chinese