What is the status of China Core now? What is the market size and localization of the industry? What are the segments of the industry that investors focus on? Is the future of the integrated circuit industry worth investing in and starting a business?
Author: Dong and Zhang
Guide: Tan Ying
In April 2018, the US Department of Commerce issued a notice stating that the US government will ban ZTE from purchasing sensitive products from US companies within the next seven years. In May of this year, after the US government included Huawei in the “entity list” of export control, the US chip giant began to cut off confessions to Huawei. With the occurrence of the ZTE Huawei incident, the IC industry has been pushed to the height of the attention of the whole people. The status quo of China’s lack of high-end chips is gradually exposed to the public.
According to the data of China Semiconductor Industry Association, the sales of China’s IC industry reached 653.14 billion yuan in 2018, a year-on-year growth rate of 20.7%, far exceeding the world’s average growth rate of 8.09%, indicating that China’s integrated circuit industry is at a high speed. Development period.
But according to the data released by the General Administration of Customs, the import value of China’s integrated circuits reached US$312.06 billion in 2018, while the export value was only US$84.64 billion. Among them, the trade deficit of more than US$220 billion also shows China’s integrated circuits. The industry is also at a stage of industrial development that is highly dependent on imports.
In the industry with high technical barriers and capital intensiveness, what is the status of China Core? What is the market size and localization of the industry? What are the segments of the industry that investors focus on? Is the future of the integrated circuit industry worth investing in and starting a business? Based on these issues, this article will focus on the following five sections, in-depth analysis of the development status of integrated circuits and industry opportunities, hope to give some reference to investors and entrepreneurs concerned about integrated circuits, increase understanding of the industry:
1, the years of Chinese core and the driving factors;
2, the industrial chain of integrated circuits, market structure, degree of domestic substitution and potential opportunities;
3, the market size of China Core;
4, investment and financing analysis;
5. Industry opportunity analysis.
First, the years and drivers of the Chinese core
Conceptually, integrated circuits emphasize circuit design and routing, while chips focus more on circuit integration, production, and packaging. In this article, integrated circuits and chips have the same meaning.
After decades of development, China has established an integrated circuit industry with a certain technical foundation and strong international competitiveness. From the point of view of major events, the development of China’s integrated circuits has probably completed the integrated circuit industry from scratch, through preliminary formation, technology introduction, Sino-foreign joint ventures, construction of factories in Taiwan, construction of wholly foreign-owned enterprises, and national strategy. A historical leap from weak to strong.
We think from both the demand and supply sides, as well as the PEST model, and summarize the drivers of integrated circuits:
1. Policy support: At the policy level, in order to promote the rapid development of the entire integrated circuit industry, the Chinese government and local governments have issued more than dozens of policy documents in recent years;
2. Financial support: From September 2014 to May 1818, the first phase of the National Fund has been invested, with a total investment of 138.7 billion yuan; and the fund set up by the local government has exceeded 300 billion yuan. The development of the integrated circuit industry;
3. Domestic replacement acceleration: design, manufacturing, packaging and testing strength to accelerate the acceleration of localization substitution: affected by the transfer of semiconductor industrialization to China, coupled with the support of the National Fund, and the active acquisition of foreign high-quality assets, the strength will be fast Strengthen;
4, the rise of emerging technologies: 5G, IoT, AI, cloud computing, car networking and other emerging technologies bring incremental opportunities for the development of integrated circuits.
Second, the chip’s industrial chain, market structure, degree of domestic substitution and potential opportunities
From the perspective of the integrated circuit industry chain, materials and equipment are located upstream of the industrial chain, which plays a supporting role in the development of integrated circuits. The midstream is the production of chips, which can be divided into three parts: design, manufacture, and packaging. Downstream is the application of various market segments of chips, such as mobile phones, computers, automobiles, Internet of Things, and network communications.
In the forthcoming “2019 IC Industry Research Report”, we will elaborate on the market size, market structure, degree of domestic substitution and potential opportunities in each link. This article takes the equipment link of the industry as an example:
According to SEMI’s latest statistics and forecasts: the world semiconductor equipment market is 64.55 billion US dollars in 2018, and the market size is expected to be 52.69 billion US dollars in 2019, down 18.4% year-on-year. It will grow by 2020, with a market size of US$58.79 billion, a year-on-year increase of 11.6%.
The scale of semiconductor equipment market in China in 2018 is 13.11 billion US dollars. It is estimated that the market size will be 11.69 billion US dollars in 2019, down 10.8% year-on-year; in 2020, it will increase sharply to 14.5 billion US dollars, up 24.0% year-on-year. 24.7%, ranking first in the world.
Semiconductor equipment mainly includes wafer manufacturing equipment, packaging equipment, test equipment, and other equipment. The manufacturing equipment mainly includes a lithography machine, an etching machine and a thin film deposition device, and the packaging equipment mainly includes a slicer, a loading machine, a lead sewing machine and the like. The test equipment mainly includes a test machine, a sorting machine, and a probe station. According to the value chain distribution, manufacturing equipment accounts for about 78% of semiconductor equipment, test equipment accounts for about 10%, packaging equipment accounts for about 7%, and other equipment accounts for about 5%.
We have detailed the production process of the chip, the corresponding equipment and the difficulty of localization. Among them, the technical threshold of test equipment is low, domestic manufacturers occupy a certain market share, and manufacturing equipment is high in technology and capital barriers. There is still a particularly large gap between domestic and developed countries.
According to the manufacturing process, manufacturing equipment includes: crystal growth furnace, slicer, chemical mechanical polishing machine, oxidation furnace, lithography machine, etching machine, ion implanter, CVD, PVD, and the like. In one of the foundries, the value of the lithography machine is about 30% of the manufacturing equipment, the value of the etch machine is about 25%, and the value of the thin film deposition equipment is about 25% (including CVD and PVD).
It should be noted that manufacturing equipment, especially high-end manufacturing equipment, is a highly monopolistic market.
According to eachThe market share of subdivided equipment market share, in the field of lithography machine, PVD, etching machine equipment, the total market share of the top three equipment manufacturers is more than 80%. The lithography machine is monopolized by Asma ASML, Nikon Nikon, and Canon Canon. The etching machine is monopolized by the Pan-Semiconductor LAM, Tokyo Electronics TEL, and Applied Materials AMAT. PVD is monopolized by Applied Materials AMAT, Evatec, and Afco Ulvac.
The domestically produced equipment is generally used in the process of manufacturing the rear section and having a large line width. For example, CVD equipment (Shenyang Tuojing) is generally used for the deposition of Cu or Al dielectric layers SIO, SIN, TEOS, etching equipment (micro-semiconductor) is generally used for etching Cu or Al dielectric layers, PVD equipment (Northern Huachuang) It is generally used for the deposition of Al or Hard Mask TiN. The most advanced exposure machine in China is produced by Shanghai Microelectronics, and the corresponding process capability is 90nm.
Semiconductor test equipment includes testers, probe stations, and sorters. The chip test is divided into the initial test and the final test. In the initial test, the test machine cooperates with the probe station to complete the wafer test, and the bad chip is not packaged, thereby saving the package cost; in the final test, the test machine is matched with the sorting. The machine completes the finished product test, and tests the bad chip to not be shipped, thereby improving the chip yield.
The tester is a customized device. The customization is mainly reflected in the customization of the test board and test program. Each test chip has its own specific test program. Generally determined by the design vendor. The probe station and sorter are relatively versatile devices. The probe station is generally determined by the foundry, and the sorter is generally determined by the manufacturer.
In the test equipment, the test machine has the largest market share, and the total number of test machines accounts for about 65% of the test equipment market space. Among them, the digital (Soc) test machine accounted for about 50%, the memory (Memory) test machine accounted for about 10%, the analog test machine accounted for about 5%, the sorter and the probe station accounted for similar, about each It accounts for about 15% of the total market space of test equipment.
In the domestic market, in the field of low-end test equipment, domestically-made replacement has been realized; in the field of mid-range test equipment, some of them have achieved domestic substitution; in the field of high-end test equipment, domestic companies are currently developing. In the field of sorting machines and analog testers with relatively low technical difficulty, domestically produced test equipment with high quality and low cost, represented by Changchuan Technology and Beijing Huafeng, has entered the domestic leading enterprises for sealing and testing. Domestic test equipment, starting from the low-end test field such as analog test machine and sorting machine, competes with international manufacturers.
We believe that in the semiconductor investment boom, equipment domestic substitution is easy to difficult, that is, test equipment manufacturers are expected to take the lead. We have calculated the fabs currently under construction in China. According to estimates, the investment amount exceeds 700 billion yuan. Assuming that 70% of the fab’s investment is used to purchase equipment, in the next few years, the investment in domestic equipment will be 500 billion yuan, and the test equipment will account for 10%, which is 50 billion yuan. Even with the relatively low technical difficulty, the best sorting machine and analog test machine field (20%) made by domestic substitution has a market size of 10 billion. The domestic test equipment leader Changchuan Technology’s revenue in 2018 was only 216 million yuan, and the domestic test equipment market still has a lot of room for growth.
Third, China’s core market size of 100 billion US dollars: automotive electronics, Internet of Things, servers to drive the main demand for industry
From the perspective of downstream applications, according to the calculation of the Whale Institute, the size of China’s IC market in 2018 is 135.6 billion US dollars, 2019, 2020 is expected to reach 150.3 billion US dollars, 169 billion US dollars, three-year compound growth rate is 10%.
Automotive electronics, Internet of Things, and servers have become the main forces driving the demand of the integrated circuit industry: mobile phones and computers accounted for the largest share, but the compound growth rates in 2017-2020 fell to 7.7% and 4% respectively. Automotive electronics, the Internet of Things, and servers accounted for 16% of the total and the annual compound growth rate exceeded 15%.
The market size of automotive electronics is rapidly increasing from $8.4 billion in 2017 to 2020The US$126 annual compound growth rate is 15%; the market size of the Internet of Things is rapidly increasing from US$6 billion in 2017 to US$9.5 billion in 2020, with a compound annual growth rate of 16.6%; the market size of servers is from 2017. The US$3.35 billion was rapidly increased to US$6.97 billion in 2020, with a compound annual growth rate of 27.7%. Automotive electronics, the Internet of Things, and servers have become important growth points for the IC market. The following is an estimate of the size of the integrated circuit market. The specific detailed calculation logic will be reflected in the report:
IV. Investment and Financing Analysis: The number of companies that have been invested has risen year by year, and the design companies are unique.
In the primary market, from 2010 to 2019, Q1, the number of integrated circuit investment events exceeded 835, involving 450 enterprises, and the amount of investment and financing reached about 107.7 billion yuan.
In terms of the number of projects that have been financed, the number of investment and financing companies in the IC industry has increased year by year, but since 2015, there has been a qualitative leap, and the companies that are financed have grown rapidly. The main reason is that under the capital of the National Integrated Circuit Fund and the local funds, the IC industry has ushered in a period of growth and has also received close attention from the venture capital circle.
From the perspective of obtaining financing, the proportion of rounds B and C and subsequent rounds has increased year by year. We think the possible reason is that integrated circuits are technology-driven enterprises. Under the blessing of capital, enterprises are more Easy to go to the next round.
At the same time, the number of seed angels has also increased rapidly. The main reason is that the outbreak of emerging technologies such as 5G and AIOT has led to the entry of many startups.
We have divided the number of investment and financing of integrated circuits and the amount of investment and financing according to the industrial chain. There are 347 design enterprises, accounting for 76%, and the total investment and financing is 61.5 billion yuan, accounting for 57%, regardless of the amount of investment. The investment amount and the design aspect accounted for the highest proportion. The main reason was that the emergence of Foundry reduced the entry barrier of the IC design industry, and many small and medium-sized IC design manufacturers were established.
There are only 9 manufacturing companies, but the total investment and financing amounted to 23.1 billion yuan. This shows that the foundry is a heavy-capital enterprise. According to industry experience, an 8-inch production line needs about 5 billion yuan, and a 12-inch production line needs 80. In addition to the investment of 100 million yuan, the annual cost of operation and maintenance, equipment renewal and new technology development accounts for 20% of the total investment.
Materials and equipments are the weakest link in domestic development. Only in the fields of targets, package substrates, CMP polishing fluids, photoresist removal fluids, lead frames, etc., which have relatively weak technical barriers, China can be mass-produced. Most venture capital institutions are also targeting the above areas.
The number of enterprises in the packaging and testing is relatively small, and the reason for the low investment and financing amount is: compared with design, manufacturing, equipment and materials, etc., because the technical threshold is relatively low, China has developed into a global leader, market structure. The head effect is obvious. With the exception of a small number of strategic investments, companies that receive financing are mostly in the Seed Angel and Round A.
V. Industry Opportunity Analysis: IoT chips and AI chips are expected to take the lead in localization
With the diversification of the Internet of Things, artificial intelligence technology and downstream applications, the application scenarios of chips are becoming more and more extensive, and more demands are placed on chip manufacturers to meet the requirements of low power consumption and high computing power. Domestic chip makers in demand are expected to seize opportunities in emerging markets. We believe that IoT chips and AI chips are expected to be the first to achieve localization. (This article focuses on writing AI chips, and the IoT chip section can look at the big report in detail.)
In the development of artificial intelligence technology, deep learning has come to people as a new computing method. The deep learning mode is different from the traditional computer mode. It does not require programming, but it requires massive data parallel computing. Traditional processor architectures (X86 and ARM, etc.) cannot support deep learning for massively parallel computing. Therefore, new underlying hardware is needed to accelerate computing. Because artificial intelligence chips have high-performance parallel computing capabilities, they also support various nerves. Network algorithms have made artificial intelligence chips a new trend.
At present, the technical architecture of artificial intelligence chips is mainly divided into four categories. The first type is a general-purpose chip, such as a GPU; the second type is a semi-customized chip represented by an FPGA; the third type is an ASIC. Represented a fully customized chip; the fourth category is a brain-like chip that designs a chip architecture by simulating the structure of human brain neurons.
The application scenario of artificial intelligence mainly includes two aspects, one is the cloud, and the other is the edge or terminal. From the actual situation, the chips of the four technology architectures have their own advantages. The GPU technology architecture can focus on the cloud application field due to its high power consumption and high cost disadvantage. FPGA technology architecture can be semi-customized development according to different industries, but its development is difficult; and ASIC can be applied to more kinds of terminal equipment due to its low power consumption, low cost, moderate development difficulty, and ASIC Without the monopoly of one or several companies, the future can focus on.
Note: For more analysis and predictions on the IC industry, please pay attention to the 2019 IC Industry Research Report launched by the Whale Institute.