Integrated circuit manufacturing capacity and investment focus

Sales of leading enterprises are increasing, and some enterprises have continued to make profits. The shipment volume of SMC's international advanced manufacturing process has been steadily increased, and 8 inch production lines such as Huahong Hongli and Huarun Microelectronics have been running at full capacity. In 2016, SMIC ranked fourth in the world in revenue of pure wafer OEMs, with sales amounting to $2.92 billion, up 30.3% year on year. Huahong Hongli maintained 24 consecutive quarterly profits with record sales ($712 million) and net profit of $129 million, up 14.5%, ranking eighth in the world.

(two) continuous improvement in manufacturing technology and continuous expansion of capacity.

Wafer fabrication technology continues to improve. The 28NM Technology launched by SMIC has already made stable OEM for many enterprises at home and abroad. 16nm technology research and development steadily, sales of 65nm and below accounted for 44.6% of total sales. The 55nm image sensor technology developed by Huali Microelectronics is the most advanced image sensor technology platform in China. Thanks to the booming demand for Smartphone cameras, shipments of image processor chips from Huali Microelectronics have continued to grow steadily. Huahong Hongli has a comprehensive combination of embedded non-volatile memory technology platforms, covering Flash, EEPROM, MTP, OTP and other technologies. In the manufacturing of CMOS-MEMS sensors, it has successfully achieved full compatibility between MEMS devices and standard CMOS processes and production lines.

(three) manufacturing capacity is increasing year by year, and the proportion of capacity is becoming more reasonable.

The capacity of China's manufacturing industry has increased year by year and has become a new driving force for global growth. According to ICInsights data, domestic wafer production capacity in 2016 was 1.89 million (8 inches), accounting for 10.8% of global total production capacity. From the perspective of capacity change, after 2000, China's manufacturing capacity has experienced two waves, each wave lasted 5-7 years. The first time for ~2007 2002, the second time from 2014, is expected to last until 2021. After 2014, China's new capacity accounted for more than 30% of the world's new capacity, becoming a new driving force for global wafer capacity growth.

The manufacturing industry is accelerating transformation and upgrading, and the distribution of production capacity is becoming more reasonable. According to the distribution of wafer productivity in China, the 12-inch wafer productivity has increased rapidly in recent years, reaching 1.017 million wafers per month in 2016 (equivalent to 8 inches below), with 55% of the total wafer productivity, exceeding 200 mm and 150 mm and below. The capacity of 8 inch wafers increased steadily (10 years CAGR was 6.2%), reaching 625 thousand pieces / month. Wafer capacity for 6 inches and below reaches 107,000 wafers per month, and growth is relatively slow (CAGR for 10 years is 2.7%) (data from ICinsight).

More and more factories have been built up in China, and the number of new factories is increasing. The state and local governments attach great importance to the development of integrated circuits. Driven by the relevant policies such as the National Outline for Promoting the Development of Integrated Circuit Industry and various funds, the upsurge of building wafer factories has been formed in many places. According to the International Semiconductor Equipment and Materials Industry Association (SEMI), 62 semiconductor wafer factories will be put into operation from 2017 to 2020 in the world, 26 of which are located in the mainland of China, accounting for 42%, most of which are wafer substitutes.

Fab investment is increasing and capacity supply continues to expand. According to Gartner, there will be 19 12-inch wafer factories in China in 2021, with a total capacity of 2.07 million wafers per month (not converted to 8 inches, the same below). Domestic-funded wafer factories will have a capacity of 1.195 million wafers per month, accounting for 57.7%. Among them, the monthly memory capacity reaches 1 million 295 thousand, and the logical foundry achieves 775 thousand. If all projects reach production on schedule, the target set by Made in China 2025 for 2020 to produce 700,000 wafers and 1 million 12-inch wafers by 2025 can be achieved.

Supply and demand is the core issue facing the industry.

China's integrated circuit manufacturing industry is still facing many problems, which restrict the overall development of the IC industry. The contradiction between supply and demand of industry chain, capital and talent is the main contradiction.

The problem of design and manufacture is still going on. China's manufacturing industry is developing rapidly, but mainly for overseas customers; chip design industry is growing rapidly, but mainly relying on overseas manufacturing resources. SMIC sold less than half of its revenue from Chinese customers in 2016. In this context, the expansion of domestic factory capacity may not directly improve the self-sufficiency of domestic chips, but some projects will face enormous risks.

The global silicon wafer shortage has become a bottleneck in manufacturing capacity. At present, China's semiconductor equipment and materials account for less than 1% of the global market, seriously restricting the domestic chip industry's self-sufficiency and healthy development. WSTS estimates that the semiconductor market will pick up in the next few years, with a surge in demand for mainstream 300 mm silicon wafers, leading to full capacity for the world's six largest 300 mm silicon wafer manufacturers, global supply of silicon wafers in short supply, and some small wafer manufacturers being forced to cut production because they are unable to obtain enough silicon wafers.

The manufacturing technology is relatively backward, and the technology gap still exists. In terms of foundry, China's most advanced technology differs from the international mainstream technology in nearly three generations. SMIC is still stuck in the 28 nm PoliSiON process. In memory manufacturing, Wuhan Xinxinxin core only realized 32-layer DNA ND flash chip trial production, but this year Samsung fourth generation 64-layer DNA ND chip mass production, will bring enormous pressure to Meguiar, Toshiba and Wuhan Xinxin core and other competitors.

Industrial capital expenditure is relatively small, and technology development still needs a lot of money. The first is the overall capital expenditure of integrated circuits in China.