(Text/Chen Chen Editor/Yin Zhe) As we all know, chip manufacturing is simply divided into three major links: design, manufacturing and packaging. Among them, chip manufacturing is the most important link where domestic semiconductors are "stuck".
In recent years, with the development of industry and changes in the international situation, SMIC once became "the hope of the whole village." Therefore, with the "green light" all the way, SMIC successfully listed on the Science and Technology Innovation Board and became the first domestic wafer foundry stock.
Now, after SMIC, the third largest wafer foundry company - Hefei Jinghe Integrated Circuit Co., Ltd. (hereinafter referred to as "Jinghe Integrated Circuit") also plans to enter the Science and Technology Innovation Board in order to Achieve diversified development.
On May 11, Jinghe Integrated's initial public offering prospectus (application draft) was accepted by the Shanghai Stock Exchange's Science and Technology Innovation Board, and was changed to "inquiry" status on June 6.
The prospectus shows that the company plans to issue no more than 502 million shares and raise 12 billion yuan, all of which is expected to be invested in the second 12-inch wafer manufacturing plant project in Hefei.
According to the plan, the investment project will build a wafer foundry production line with a production capacity of 40,000 pieces/month. The main products include power management chips (PMIC), display driver integrated chips (DDIC), and CMOS images. Sensing Chip (CIS).
Source: Jinghe Integration prospectus, the same below
Since the 12-inch wafer manufacturing plant was put into operation, Jinghe Integration has been mainly engaged in the foundry business of display panel driver chips. It is widely used in the field of LCD panels, including computers, TVs, smartphones and other products.
At the same time, as production capacity continues to increase and processes continue to improve, Jinghe Integration's operating income has achieved rapid growth.
Behind this, there are also a series of risks in Jinghe Integrated's business development, including a relatively single product structure, extremely high customer concentration, insufficient profitability, and whether the expansion project can achieve expected results, etc. .
Therefore, despite its own aura as "the third largest domestic foundry company", the development trend of Jinghe Integration in the next few years is still an unknown that is difficult to determine. To achieve diversification and technological breakthroughs, it still needs to overcome difficulties and forge ahead.
A “mismatch” between birth and success
In the past ten years, Hefei’s new display industry has suddenly emerged, exacerbating the contradiction of “screen but no core”. At the same time, the rapid gathering of electronic information companies has further aroused the local government's ambition to build an "IC City".
"Around 2013, home appliances and flat panel displays have become Hefei's pillar industries, but they all encountered the same problem when seeking transformation and upgrading - lack of 'cores'." Hefei Semiconductor Industry Association Chairman Professor Chen Junning once said.
In order to solve the problem of core shortage, Hefei City invited more than a dozen experts from China’s semiconductor industry to participate in discussions and demonstrations, and finally formulated Hefei’s first integrated circuit industry development plan.
Based on this, in 2015, Hefei Construction Investment cooperated with Taiwan Powerchip Group to build Anhui Province’s first 12-inch wafer foundry - Jinghe Integration.
According to some media reports, this project is aimed at solving BOE’s panel driver chip supply problem.
Jinghe Integration Hefei 12-inch wafer foundry
According to the overall plan, Jinghe Integration will build four 12-inch wafer foundries in the comprehensive bonded area of ??Hefei Xinzhan High-tech Industrial Development Zone fab. The investment in the first phase is 12.8 billion yuan, and the process technology is 150nm, 110nm and 90nm.
As for the important reason why Powerchip reached the cooperation, it was hit hard by the overcapacity crisis at that time, and it was committed to transforming from a dynamic memory chip (DRAM) manufacturer to a chip foundry company.
In October 2017, Jinghe Integrated’s display panel driver chip (DDIC) production line was officially put into production. This is the first 12-inch wafer foundry in Anhui Province and the first over 10 billion integrated circuit project in Anhui Province.
Subsequently, Jinghe Integrated’s production capacity climbed rapidly.
The prospectus shows that from 2018 to 2020 (hereinafter referred to as the "reporting period"), the company's production capacity was 75,000 pieces/year, 182,000 pieces/year, and 266,000 pieces/year, with an average annual compound growth rate of 88.59%.
At the same time, its products also quickly occupied the market. According to CCTV reports, 20% of mobile phones, 14% of televisions and 7% of laptops shipped globally in 2020 will all use Jinghe integrated driver chip products.
As for the reasons for rapid development in the past five years, Cai Guozhi, chairman of Jinghe Integration, once summarized that first of all, "choosing the right partner is very important" and the company's correct judgment of market trends and continuous investment. and the “dividends” brought about by the COVID-19 epidemic.
However, it is a bit "regrettable" that during the reporting period, Jinghe Integrated's sales revenue to overseas customers were 215 million yuan, 468 million yuan and 1.263 billion yuan respectively, accounting for 98.59% of the total revenue for the period. %, 87.69%, 83.51%.
Among them, in view of the company’s Taiwan “background” and related resources, Jinghe Integration’s overseas customers account for a high proportion of customers from Taiwan, China.
This means that BOE has not purchased large quantities of Jinghe Integrated panel driver chips. According to industry statistics, my country's driver chips are still mainly imported. In 2019, BOE's drive chip procurement amounted to 6 billion yuan, and the localization rate was less than 5%, which shows the huge gap in supporting facilities.
In addition, while Jinghe Integration relies on overseas markets, it also has the problem of extremely high customer concentration.
During the reporting period, revenue from its top five customers accounted for approximately 90% of total revenue. Among them, in 2019 and 2020, more than half of the company's total revenue came from its largest customer. This is obviously detrimental to the company's bargaining power and stable operations.
State-owned assets and Taiwanese capital support and control
Indeed, as Cai Guozhi said, the rapid growth of Jinghe Integration has indeed benefited from "continuous investment."
On May 12, 2015, the Hefei State-owned Assets Supervision and Administration Commission issued a document approving Hefei Construction Investment to establish a wholly-owned subsidiary Jinghe Co., Ltd. (the predecessor of Jinghe Integration) with a registered capital of 10 million yuan.
At the beginning of its establishment, Jinghe Co., Ltd. had only one shareholder, Hefei Construction Investment. Subsequently, with the rapid development of the domestic semiconductor industry and Hefei's electronic information industry, the company decided to engage in construction.
In October 2018, Jinghe Co., Ltd. increased its capital, and Hefei Xinping and Powerchip Technology became shareholders. In terms of specific shareholding ratio, Hefei Construction Investment holds 32.71% of the shares, Hefei Xinping holds 26.01% of the shares, and Powerchip Technology holds 41.28% of the shares.
Later, after several capital reductions and increases, Jinghe Co., Ltd. was officially changed and established as a joint-stock company in November 2020, namely Jinghe Integration.
As of the signing date of the prospectus, Hefei Construction Investment directly held 31.14% of the issuer's shares, and controlled 21.85% of Jinghe Integrated's shares through Hefei Core Screen, accounting for a total of 52.99% of the shares. The shareholding ratio of Powerchip Technology dropped to 27.44%.
It is worth mentioning that Hefei State-owned Assets Supervision and Administration Commission holds 100% of the equity of Hefei Construction Investment, and is therefore the actual controller of Jinghe Integration.
So, what is the origin of Powerchip Technology, which has appeared many times and once had a dominant shareholding?
Information shows that Powerchip Technology is a company registered in Taiwan, China in 1994. After business reorganization, it transferred its wafer foundry business to Power Semiconductor Manufacturing Co., Ltd. in 2019 and held 26.82% of the shares of Power Semiconductor Manufacturing Co., Ltd., becoming a holding company.
Thanks to the strong "assist" of Powerchip Technology, Powerchip's wafer foundry business has quickly reached the forefront of the world.
Research institutions estimate that Power Semiconductor's revenue in the first three quarters of 2020 will be around US$289 million, ranking seventh among the world's top ten chip foundries, ahead of another Taiwanese semiconductor company - one of the world's most advanced. Ranking.
In addition to Powerchip Technology and Hefei State-owned Assets Supervision and Administration Commission, Jinghe Integration also introduced 12 external investors including Zhongan Zhixin in September 2020.
Among them, Midea Innovation, a subsidiary of Midea Group, holds 5.85% of Jinghe Integrated shares.
CICC, which holds 0.12% of the shares, is the sponsor of Jinghe Integration’s IPO.
However, the China Securities Regulatory Commission and the Shanghai and Shenzhen Stock Exchanges issued announcements at the beginning of this year that new shareholders arising within 12 months before the declaration will be deemed to be unannounced shareholders, and the above-mentioned new shareholders must commit to holding new shares. It cannot be transferred within 36 months from the date of acquisition.
In view of the fact that Jinghe Integrated’s application draft was accepted by the Shanghai Stock Exchange on May 11, 2021, 12 shareholders including Midea Innovation and Haitong Innovation all invested in surprise shares, and then caught up with Jinghe Integrated’s rush to go public. train.
In this regard, Jinghe Integration explained that shareholders’ participation in the shares is a normal business behavior and is a long-term positive view of the company’s prospects.
“The above-mentioned companies/enterprises have promised not to transfer or entrust others to manage the Jinghe Integrated shares held directly or indirectly before this issuance and listing within 36 months from the date of acquisition of Jinghe Integrated shares, and also Jinghe Integration will not repurchase the shares of Jinghe Integration held directly or indirectly before this issuance and listing. ”
Operating performance continues to grow
Backed by the power of semiconductor technology genes. Jinghe Technology, as well as Hefei Construction Investment, which has strong capital and official endorsement, Jinghe Integration has experienced significant growth in revenue in recent years.
During the reporting period, Jinghe Integrated’s operating income was RMB 218 million, RMB 534 million and RMB 1.512 billion respectively, with the average annual compound growth rate of its main business income reaching 163.55%.
Among them, in 2020, the epidemic stimulated a sharp increase in demand for the global stay-at-home economy and remote economy, and semiconductors, as the basic components of technology products, will naturally benefit. As a result, Jinghe Integration’s performance increased by 183.1% year-on-year.
Statistics from Frost & Sullivan, an American research and consulting organization, show that according to the sales ranking in 2020, Jinghe Integration has become the third largest wafer foundry company in mainland China by revenue, second only to SMIC and China Semiconductor Manufacturing Co., Ltd. Hong Semiconductor.
It is worth noting that this ranking does not include foreign-owned companies with factories in mainland China, nor does it include IDM semiconductor companies.
However, compared with the operating conditions of comparable companies in the industry, Jinghe Integration still lags far behind. For example, in 2020, SMIC's revenue was 27.471 billion yuan, and Huahong Semiconductor's revenue was 6.272 billion yuan, which were 18 times and more than 4 times that of Jinghe Integration respectively.
On the other hand, Jinghe Integration has built a research and development platform for 150nm to 55nm processes, covering DDIC (panel driver), CIS (image sensor), MCU (microcontrol), PMIC (power management), E-Tag (electronic tag), Mini LED and other logic chips and other fields.
However, the company's market expansion and operations are highly dependent on DDIC wafer foundry services, so its main business is extremely single.
During the reporting period, Jinghe Integrated’s DDIC wafer foundry service revenue was 218 million yuan, 533 million yuan, and 1.484 billion yuan respectively, accounting for 99.96%, 99.99%, and 99.99% of its main business revenue respectively. 98.15%.
However, because of this, Jinghe Integration expects that if products such as CIS and MCU are mass-produced and more advanced processes are implemented in the future, the company's revenue and production capacity will have the opportunity to usher in a new wave of growth.
At present, Jinghe Integration has accumulated relatively mature experience in 12-inch wafer foundry mass production, but the processes are mainly 150nm, 110nm and 90nm process nodes.
Among them, the 90nm process is one of the most mainstream processes for DDIC products in the industry, and providing 90nm process DDIC product services has gradually become the main business of Jinghe Integration.
During the reporting period, the average annual compound growth rate of Jinghe Integrated's 90nm process product revenue reached 652.15%, and its proportion of revenue increased year by year from 6.52% in 2018 to 53.09% in 2020. This reflects, to a certain extent, that its revenue structure is being optimized.
In addition, Jinghe Integration is developing a 12-inch wafer foundry platform for the 55nm process node. It is expected to invest 1.56 billion yuan in 55nm process product research to promote the revenue conversion of advanced processes.
According to the prospectus, 90nm CIS products and 110nm MCU products will be mass-produced in 2021; the 55nm touch and display driver integrated chip platform has been cooperating with customers and is planned to be mass-produced in October 2021. The 55nm logic chip platform is expected to be developed in December 2021 and introduced to customers for tape-out.
Based on this, Jinghe Integration’s corporate territory is indeed expected to further expand in the future, and its operating income is bound to increase to varying degrees.
Profit and gross profit are "all negative"
Although revenue continues to increase, as a new company in the semiconductor industry, it is not easy for Jinghe Integration to achieve profitability. Due to factors such as excessive investment in equipment procurement and a large amount of depreciation expenses every year, Jinghe Integration has been losing money in net profit in recent years.
During the reporting period, Jinghe Integrated’s net profits attributable to the parent company were -1.191 billion yuan, -1.243 billion yuan and -1.258 billion yuan respectively. The net profits attributable to the parent company after deducting non-recurring gains and losses were -1.254 billion yuan, -1.348 billion yuan and -1.233 billion yuan respectively, and the total non-net profit for the three years was -3.835 billion yuan.
As of December 31, 2020, the company’s audited undistributed profits reached -4.369 billion yuan.
In this regard, in the prospectus, Jinghe Integration also made a reminder that "it has not yet made a profit and there is a risk of accumulated unrecovered losses and continued losses", and said that "it is expected that after the initial public offering of stocks and listing, The company is unable to distribute cash dividends in the short term, which will have a certain impact on investors’ investment returns. ”
On the other hand, in order to meet the demand for production capacity expansion, Jinghe Integration continues to increase capital investment such as production equipment, depreciation, and investment. The scale of fixed costs such as amortization is relatively high. This makes its product gross profit margin low even though its production and sales scale is still limited.
In each reporting period, the comprehensive gross profit margins of Jinghe Integrated Products were -602 million yuan, -537 million yuan and -129 million yuan respectively, and the comprehensive gross profit margins were -276.55%, -100.55% and -100.55% respectively. -8.57%.
Compared with comparable companies in the industry, Jinghe Integration's gross profit margin gap is huge, and it is far lower than the average gross profit margin of comparable companies.
It is worth mentioning that TSMC’s gross profit margin was far ahead during the same period. Among mainland semiconductor foundry companies, the gross profit margins of SMIC and China Resources Micro are both lower than the average. Only Hua Hong Semiconductor was slightly higher than the average in 2018 and 2019.
However, as the scale of production and sales gradually increases and the scale effect causes unit costs to drop rapidly, the gap between Jinghe Integrated's gross profit margin and the average of comparable companies is rapidly shortening. In 2020, its comprehensive gross profit margin has improved significantly to -8.57%.
At the same time, the gross profit margins of Jinghe Integrated's various process products are also continuing to improve.
The prospectus shows that in 2020, the company's gross profit margin of 150nm process products has turned negative into positive, while the gross profit margin of 110nm and 150nm process products is relatively better than the gross profit margin of 90nm process products. The main reason is that the 90nm process product process is more complex and the fixed cost allocation ratio is higher.
Jinghe Integration seems to be very confident about future profits. It stated in the prospectus that “Although the gross profit margin of the main business has been negative for several years, it has shown a trend of rapid improvement... The enhancement of scale effect in the future is expected to make the company Profitability has further improved. ”
In fact, as early as the end of last year, Jinghe Integration set four major strategic goals: to achieve a monthly production capacity of 100,000 pieces in the first year of the “14th Five-Year Plan” and to achieve scientific and technological innovation. Listing on the board, start-up of the third factory and corporate profits. It is not difficult to see its emphasis on achieving profitability.
However, with reference to the total profit and net profit in the past three years, there is no obvious improvement trend in Jinghe Integrated's losses. Some industry insiders said, “Since annual equipment depreciation expenses may eat up most of the profits, it may take several years to recover the cost.
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Technology research and development relies on “friends”
There is no doubt that the foundry industry is a technology and capital-intensive industry. In addition to requiring a large amount of capital operation, it also requires R&D capabilities. Extremely high. It can be said that the strength of R&D capabilities directly determines the core competitiveness of a company.
Generally speaking, the R&D capabilities of semiconductor companies are mainly determined by the proportion of R&D expenses to total revenue and the proportion of R&D personnel. Judgment such as the proportion of total personnel and the conversion rate of scientific research results.
First of all, in terms of R&D investment, although it has been "making ends meet" in recent years, Jinghe Integrated's total R&D investment has continued to rise rapidly.
During the reporting period, the company’s R&D expenses were 131 million yuan, 170 million yuan, and 245 million yuan respectively. However, in view of the faster growth of revenue, the proportion of its R&D investment continued to decline, respectively. 60.28%, 31.87% and 16.18%.
However, the current R&D expense rate of Jinghe Integration is still higher than the average level of the same industry. This is mainly because it is in a rapid development stage and its revenue scale is larger than that of comparable companies. Relatively low, but R&D investment remains at a high level.
Secondly, in terms of R&D personnel investment, the number of R&D personnel at Jinghe Integrated continued to grow at the end of each reporting period, reaching 119, 207 and 207 respectively. 280 people, accounting for 9.47%, 15.16% and 16.81% of the total number of employees respectively.
In contrast, as of December 31, 2020, the R&D personnel of SMIC, Hua Hong Semiconductor and China Resources Micro. There are 2,335, unknown, and 697 people respectively, accounting for 13.5%, unknown, and 7.7% of the total personnel.
It can be seen that the proportion of R&D personnel of Jinghe Integration exceeds that of the known SMIC. and China Resources Micro, but the total number of R&D personnel is still much lower.
According to the prospectus, Jinghe Integration currently has 5 core technical personnel, namely Cai Huijia (General Manager) and Zhan Yipeng (Deputy). General Manager), Qiu Xianhuan (Deputy General Manager), Zhang Weiyi (Director of N1 Factory), Li Qingmin (Associate Manager and Director of the Second Technology Development Division)
However, according to background information, there are 5 core technical personnel. All are Taiwanese, and except for Zhan Yipeng, the other four people have worked at Powerchip Technology. This shows that Jinghe Integration's core technology research and development is extremely dependent on Powerchip Technology.
In addition, in terms of the transformation of scientific research results. . As of December 31, 2020, Jinghe Integration and its subsidiaries owned a total of 54 domestic patents, a total of 44 overseas patents, and 71 invention patents that generated main business income. < /p>
In terms of comparable companies in the industry, SMIC has applied for a total of 991 new invention patents, utility model patents, and layout design rights in 2020 alone, with 1,284 new patents obtained; the cumulative number of applications is 17,973. 12,141 patents were obtained;
Hua Hong Semiconductor applied for 576 patents in 2020, and has obtained more than 3,600 Sino-US invention patents in total;
China Resources Micro has been authorized in 2020 and remains valid It has a total of 1,711 patents, including 1,492 domestic patents and 219 overseas patents.
It can be seen that SMIC, Hua Hong Semiconductor and China Resources Micro have more than 1,000 patents, significantly ahead of Jinghe Integration, which has less than 100 patents.
Of course, this is one of the problems that short-established semiconductor companies will inevitably encounter. But to strengthen the accumulation of technology patents and achieve catch-up, Jinghe Integration still has a long way to go.
Raising tens of billions of dollars to transform and diversify
In recent years, with the continuous development of global informatization and digitalization, new energy vehicles, artificial intelligence, consumer and industrial electronics, mobile communications, things The rapid growth of emerging fields such as networking and cloud computing has driven the growing market size of the global integrated circuit and wafer foundry industry.
In order to seize opportunities for industrial development and further strive for a strong position in the industry, Jinghe Integration has been actively planning to be listed on the Science and Technology Innovation Board since 2020, and is expected to be completed in the second half of 2021. This schedule is one year ahead of schedule.
Specifically, for this Science and Technology Innovation Board IPO, Jinghe Integration plans to publicly issue no more than approximately 502 million shares, accounting for no more than 25% of the company’s total share capital after the issuance, and plans to raise 12 billion in funds. Yuan. Accordingly, the company is valued at 48 billion yuan.
As of June 11, the total number of companies accepted by the Science and Technology Innovation Board has reached 575, of which only 9 companies plan to raise more than 10 billion yuan. In other words, Jinghe Integration’s fundraising scale has entered the top ten companies accepted by the Science and Technology Innovation Board.
In terms of use, all the company’s raised funds will be invested in the second 12-inch wafer manufacturing plant project. The total investment in the project is approximately 16.5 billion yuan, of which construction investment is 15.5 billion yuan and working capital is 1 billion yuan.
If the raised funds are not enough to meet the entire investment, Jinghe Integration plans to make up for the funding gap through bank financing and other methods.
According to the plan, the second factory project will build a 12-inch wafer foundry production line with a production capacity of 40,000 wafers/month. Among them, the products include power management chips (PMIC), display driver integrated chips (DDIC), CMOS image sensor chips (CIS), etc., which are mainly targeted at innovative application fields such as the Internet of Things, automotive electronics, and 5G.
In terms of image sensor technology, Jinghe Integration has completed the first phase of development of 90nm image sensor technology. In the future, it will further advance the image sensor technology to 55nm and introduce mass production in the second factory;
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In terms of power management chip technology, Jinghe Integration plans to further develop the BCD process platform based on the existing 90nm technology platform, supplemented by IP verification, model verification, simulation, etc. to build a 90nm power management chip platform, and in The second factory has entered mass production;
In terms of display panel driver chips, Jinghe Integration has further improved its process capabilities based on the existing 90nm touch and display driver chip platform, pushing the technology node to 55nm .
The prospectus shows that the project progress of the second 12-inch wafer manufacturing plant is: in March 2021, the installation of clean rooms will begin; in August, civil engineering and electromechanical installation will be completed and process equipment will begin to be moved in; in December , reaching a production capacity of 30,000 pieces/month.
In addition, in March 2022, the first anniversary of the start of construction of the project, it will reach full production capacity of 30,000 pieces/month. In the same year, Jinghe Integration will also install a 40nm OLED display driver chip micro-production line.
In the future, as the project gradually advances construction and production capacity is implemented, Jinghe Integration will continue to adhere to the current strategic plan:
Relying on Hefei’s flat panel display, automotive electronics, home appliances and other industrial advantages , combining different industrial development trends and product needs, forming a product line with four distinctive processes: display driver, image sensing, microcontroller, and power management ("imaging microelectronics").
Conclusion
Relying on Taiwan’s technical team and Hefei’s state-owned capital, Jinghe Integration has become an important global display panel driver chip foundry in just five years since its establishment, and has become the world’s leading display panel driver chip foundry. Ranked first in display driver chip foundry market share.
Such an achievement is truly rare for domestic semiconductor companies. However, having bet on "a straw" for many years, Jinghe Integrated's business development undoubtedly has potential for more major risks. At the same time, external pressures such as fierce competition in the industry and changes in the international situation are also increasing.
Cai Guozhi, chairman of Jinghe Integration, took office in 2020 and has worked in companies such as Acer, Powerchip Technology and Power Semiconductor.
In this regard, Jinghe Integration has been committed to promoting corporate transformation in recent years and has formulated a detailed three-year development plan.
In July 2020, Cai Guozhi, chairman of Jinghe Integration, revealed the company's specific strategic plan in an interview with Wenxin Voice:
2021: The goal is to double revenue to 3 billion, and the company must start To make money, we need to complete N2 factory construction, product diversification, and IPO listing on the Science and Technology Innovation Board;
2022: The goal is for the N2 factory to officially enter the mass production stage, and the company’s revenue to exceed the 5 billion yuan mark , and maintain stable profits;
2023: The goal is to achieve a monthly production capacity of 75,000 pieces, the company's revenue to reach 7 billion, and start planning the construction of N3 and N4 factories.
But behind the clear goals, Jinghe Integration inevitably faces a series of challenges.
For example, the "Matthew Effect" in the semiconductor foundry industry is becoming more and more obvious at this stage. How can Jinghe Integration reverse its disadvantage or break through? With the existing enterprise scale and related reserves, can its diversification strategy still be successfully promoted and capture the market?
In addition, since customers are mainly overseas, how can the company really improve the self-sufficiency rate of key domestic chips?
Based on this, even if it is successfully listed on the Science and Technology Innovation Board, Jinghe Integration still needs to overcome many problems and difficulties, including improving profitability, upgrading processes, raising capital, recruiting talents, promoting diversification and coping with industry competition. wait.
As for whether the 12-inch wafer foundry project raised this time can achieve the expected performance, and whether the relevant strategies can be effectively implemented in the future, thereby improving the current series of problems and promoting the further growth and even realization of Jinghe Integration Rise up and wait and see!