Growth And Worry: New Opportunities For Domestic Wafer Foundry

Despite the epidemic, domestic foundry leader SMIC has delivered a good result in the first quarter of 2020.

On the evening of May 13th, a quarterly report released by SMIC showed that the revenue during the period was $905 million, an increase of 35.3% over the previous year, and net profit of $64 million 164 thousand, up 422.8% from the same period last year. Gross profit margin was 25.8%, compared to 18.2% in 2019. In May 14th, the closing price of SMIC was HK $18.84 / share, with a market value of nearly HK $100 billion.

Meanwhile, SMIC also disclosed an important message in its earnings report: SMIC decided to raise capital expenditure by US $1 billion 100 million to US $4 billion 300 million. The increased capital expenditure is mainly used for the machinery and equipment of the Shanghai 300mm wafer factory with a majority stake, as well as the mature process line, which means that next, SMC will continue to expand its capacity and maintain confidence in its revenue.

Under the wave of domestic substitution, the growth momentum of SMIC and the upcoming return of A shares are of great significance for the domestic semiconductor industry. In addition to the power of capital platform, from design to manufacture, and then to sealing test, the interaction and collaboration between domestic semiconductor industry chains will be more closely linked.

Including SMIC, the semiconductor industry is facing the uncertainty of the external environment. As the US tightened its export rules, some enterprises in the country received the "letter" from the US equipment manufacturers. In the May 14th performance note, Zhao Haijun, CO chief executive of SMIC, responded that as an international company, SMIC has maintained smooth communication with the US government and the industrial chain. The company has a complete compliance mechanism and long-term commitment. Legal compliance.

Under the wave of domestic substitution, SMIC's growth momentum is of great significance for the domestic semiconductor industry. Visual China

Benefit 5G application

For the growth of performance, SMIC co CEO Zhao Haijun and Liang Mengsong said: "as the market demand and product structure are better than expected, the company has a record high quarterly revenue, and the related revenue of communications, computers and consumer electronics grew year by year, and gradually increased the market share. Mature technology platform capacity full load: camera, power management, fingerprint identification, special storage and other related applications strong demand. Advanced technology R & D and business are progressing smoothly, and continue to expand communication, mobile phones, automotive, consumer electronics related fields.

From the point of view of product application, the highest proportion of communication product revenue is 48.9%, which is 4.5% higher than that of the fourth quarter of last year, and the communication products include mobile phone products. This can also reflect that the demand of chips for the most 5G mobile phones in the first quarter of this year is increasing.

Zhao Haijun said that 75% of the smart phones produced in the first 4 months of this year were 5G chips, while 5G smartphones did not only carry 7 nanometer or even 5 nm. The CPU which was temporarily not in the core processing range had a much larger demand for RF and power management chips (PMU), and 1 had at least 6 pieces, which would benefit the doubling of 150 nm and 250 nm processes. And now the 5G mobile phones can easily reach 40 million pixels and 60 million pixels, and the CMOS image sensors need more, and the demand is very large. He stressed that 5G technology has driven the expansion of the smart phone market, and the market share of customers has also increased. SMIC can also benefit.

From a regional perspective, mainland China and Hongkong account for the highest share of revenue, 61.6% for the United States, 25.5% for second, and 12.9% for Eurasia for third. It is worth noting that the proportion of revenue from the US region has decreased compared with the same period, but the growth rate is still increasing.

Finally, from the point of view of wafer revenue, the top three highest income groups were 0.15/0.18 micron (33.4%), 55/65 nanometer (32.6%) and 40/45 nanometer (14.9%). Compared with the same period in 2019, 55/65 nano accounted for the fastest growth rate, from 21.8% to 32.6%.

In addition, 14 nanometers officially produced mass production this year. In the first quarter, SMIC's most advanced 14 nanometer income accounted for 1.3%, compared with 1% in the fourth quarter of 2019. This year, its 14 nanometer capacity will continue to grow. Previously, Liang Mengsong has said that the 14 nanometer capacity will reach 4K in March this year, reaching 9K in July, reaching 15K in December.

Recently, SMIC has produced 14 nanometer Kirin 710A chips (used to honor PlayT4 phones) and is regarded as a new breakthrough in localization. Fang Jing, chief analyst of XinDa's securities and electronics industry, told the twenty-first Century economic news reporter: "the SMIC 14nm line is mainly running RF Transceiver, and the utilization rate of capacity is not high, but we expect that after the HUAWEI Kirin 710 is fully charged, the share of 14nm revenue will significantly improve, driving the company's performance."

Zhao Haijun said that with the continuous improvement of technology, customers gave positive feedback to SMIC 14nm. The technology will continue to match the standard international level. Next year, the 14nm revenue will exceed 10%.

SMIC has also brought heavy news, plans to return to A shares, and launch a new wave of domestic substitution in the science and technology innovation board.

Highlight strategic layout

From the first quarter, the top five foundry giants maintained growth momentum. In the first quarter of 2020, the top five of the global revenue of the foundry industry were TSMC (54.1%), Samsung (15.9%), Ge core (7.7%), United Power (7.4%) and SMIC, and SMIC ranked fifth in the 4.5% row.

In addition to SMC's refreshing performance, TSMC also set a new high. In 2020, TSMC's revenue was 310 billion 600 million NT $42%, and its net profit reached 116 billion 990 million NTD, a sharp increase of 90.6% over the same period last year, with a growth rate of Q1 and a gross margin of 51.8%.

XinDa electronics said that the importance of the strategic layout of wafer fabs in the advanced manufacturing area is highlighted, and is the core link of independent control. At the same time, in order to get rid of dependence on overseas suppliers, it will also increase the proportion of upstream equipment materials and downstream seals.

But in the long run, the foundries still need to face the subsequent impact of the epidemic and the potential impact of the US tightening of export controls.

Because of the epidemic and other factors, this year, the major organizations have lowered their expectations for the whole semiconductor industry. A semiconductor factory worker in China told reporters: "at present, the domestic is more concerned about the impact of the epidemic, the situation is serious abroad, the supply chain is affected, for example, because Southeast Asia has a lot of low value-added production capacity, after a period of time, there was a big impact. Now we all rely on the Chinese branch. "

The foundry industry also needs to pay attention to the impact of the epidemic. According to the Research Institute of Tubo consulting, the foundry industry in the first quarter of 2020 continued the last month's orders and inventory revaluation. The estimated output value was only 2% lower than that of the previous quarter. The annual performance of the foundry industry benefited from the low base period in 2019, with an annual growth of nearly 30%. However, when the new crown pneumonia is affecting the global market and the economic kinetic energy is slowing down, the demand side has enormous variables, which will weaken the next growth force.

However, for the epidemic, SMIC executives also said at the performance meeting that the company had no infection cases and the production line was running normally. For the second quarter's performance, SMIC expects revenue to grow by 3% to 5% and gross margin between 26% and 28%.

On the other hand, the export control of the United States often leads to market forces, such as the recent American company's semiconductor equipment manufacturers, pan Lin group and application materials sent letters to domestic companies. In this regard, SMIC also said at its performance meeting that the company has always had a complete compliance mechanism. It is understood that wafer manufacturers need to sign a commitment letter with us equipment companies that do not produce military chips, and the US will also send personnel to factory verification, while the core has not involved military operations.

Recently, other companies in the United States have issued similar letters, according to core research. These are the measures that the US company and its hired firms have seriously studied after the new regulations issued by the US Department of Commerce. In fact, when domestic enterprises purchase equipment from the United States, they promise not to be used for military affairs. This is a very old policy. The change of the new regulations of the US Department of commerce is mainly to expand the scope and reiterate regulation.

In addition, the United States is exploring other restrictions on export control, and businesses must also respond early. For example, TSMC executives also said: "we do feel a sense of urgency in the whole industry that changing the rules will damage the semiconductor industry in the United States. The final result has not yet been finalized. Even after the final draft is finalized, it will leave a 30 day reaction time for the industry. We have studied many different scenarios. There will be some short-term impacts. We will cooperate with our customers dynamically and take relevant measures to minimize the impact.