Jiwei Network report (Wen/ Wang Xiaofang) Last week, the domestic PA leader Weijie Chuangxin "landed" on the Science and Technology Innovation Board of the Shanghai Stock Exchange, becoming the first "Huami OV" domestic mobile phone Tiantuan shareholders to support the RF listed company.
Entering the 5G era, the value of the RF front end has not only risen, but also become increasingly important to mobile phone manufacturers. In order to further ensure the security of the supply chain, mobile phone manufacturers have increased their investment in the field of RF front-end, and the RF front-end has become a "strategic highland" for mobile phone manufacturers to compete for.
Part of the financing information of Weijie Chuangxin (Source Tianyancha)
Why did Huami OV take action?
In fact, in the past two or three years, Huami OV has increased its investment in the field of RF front-end. These investments include devices and module manufacturers such as main filters, PAs, RF switches, and LNAs, as well as some downstream foundries.
Figure Huami OV RF Front-end Investment Table (Source of Information Tianyancha)
In response to this investment "boom", Jia Bin, chairman of Kaiyuan Communication Technology (Xiamen) Co., Ltd., believes that the previous shortage of production capacity has played a great role in the subsequent capital market. After 2018, the global RF front-end chip has had a long period of shortage, and the launch of the science and technology innovation board, coupled with the bright performance of the stock price after the listing of the Zhuosheng micro-CHINext board, has also boosted the investment wave in the RF field.
"In these investments, the starting point of mobile phone manufacturers is not much different. Mobile phone manufacturers are mainly for the sake of supply chain security, so as to get more protection and obtain more competitive costs; at the same time, based on the background of the semiconductor industry, integrating into this investment boom can obtain a good return on investment. Yang Hongxiang, CMO of Shanghai Liexin Semiconductor Technology Co., Ltd., told Jiwei Network.
From the perspective of subdivision, Huawei and Xiaomi are involved in RF filters, PA and other related fields; OPPO and vivo are more inclined to the PA field. Wang Yang, CEO of Shanghai Pingsheng Microelectronics Technology Co., Ltd., added: "Huami OV invests in enterprises that are well recognized for their team strength and technology accumulation, and can form stronger competitiveness by investing in strengthening the upstream and downstream integration of the industrial chain. In addition to the mobile phone track, the Internet of Things application RF related to the Xiaomi ecological chain is also favored. ”
The investment of mobile phone manufacturers and the introduction of supply chains go hand in hand, and RF manufacturers are both invested and then adopted by the supply chain, and also accept investment as supply chain manufacturers. Taking Ruishi Chuangxin as an example, it will obtain investment from Xiaomi Shun in 2020 and enter the Xiaomi supply chain in 2021; in contrast, Ruishi Chuangxin will enter the OPPO supply chain in 2020 and only obtain OPPO investment in 2021.
Figure Enterprise development history (source Ruishi Chuangxin official website)
"Mobile phone manufacturers' investment in RF front-end enterprises has greatly increased the opportunity for the adoption of the latter's projects, and at the same time, the invested companies can obtain more timely and accurate market information; in addition, with the brand endorsement of mobile phone manufacturers, it is also conducive to attracting more capital and talents to enter." However, it may not be conducive to the balance of market demand and product planning, and may hinder the development planning of enterprises. Yang Hongxiang said.
In addition to many benefits such as financial support, order introduction and brand promotion, Jia Bin further pointed out that investment is also conducive to enterprise research and development, because mobile phone manufacturers can bring more technical exchanges and product testing opportunities, which is conducive to the optimization and iteration of products. Wang Yang said that in recent years, the wave of RF front-end investment and listing has helped to accelerate the localization process, enabling enterprises to increase investment in research and development and establish a moat. At the same time, it will help the company to optimize governance, accelerate the development of higher gross profit products, and ultimately compete head-on with international first-line manufacturers.
The strategic significance of the RF front-end is prominent
From the perspective of investment timeline, the capital market's investment in the RF front end is mainly concentrated in the past two or three years. On the one hand, the penetration rate of 5G mobile phones continues to rise, on the other hand, the "Huawei incident" has brought a wake-up call to the supply chain in the industry. So why has the RF front end become so important? Through the actions of Huawei and Apple, some rules can be explored.
Since the supply chain was hit by the United States, Huawei urgently needs to build an industrial chain that is independent and controllable for chips.
From the perspective of the RADIO front-end plate, Huawei is not completely unprepared before being sanctioned by the United States. In fact, Huawei's HiSilicon Semiconductor has been investing in the research and development of rfed front-ends. However, due to the lack of support from autonomous technology, process and industrial chain, the BAW filter cannot find an alternative source.
Before 2019, Huawei mainly used SAW filters from American and Japanese manufacturers, and almost did not use domestic SAW filters. Since being "embargoed" by the United States in 2019, Huawei has begun to replace the AMERICAN RF front-end devices, and at the same time, it has greatly accelerated the localization process of domestic SAW filters.
Huawei founded Hubble Investment in 2019. Previously, Huawei has always followed the long-term principle of not investing in and controlling any company. Today, from the layout of Hubble's investment, it can be seen that its mission and the self-help strategy of Huawei chips are closely linked.
Figure Huawei RF front-end sector investment (Source Of Information Tianyancha)
Contrary to Huawei's "embargo", Apple has maintained close business contacts with US and Japanese RF giants Skyworks, Qorvo, Broadcom, Murata, etc., and even the largest customers of some manufacturers.
From the perspective of the evolution history of the RF front end, Apple has always been an important "pusher" in the process of moving from discrete devices to modularization. As early as 2008, Apple launched the first 3G-enabled mobile phone, the iPhone 3G, and for the first time in this phone, a modding solution was adopted. Since then, successive iPhones have been leading the general direction of RADIO front-end moduleing. Until the release of the iPhone 13 last year, it still topped the list of smartphones in the same period with support for 45 frequency bands.
Figure The PAMiD module used by the iPhone 3G
Due to its dominant position in the smartphone market, Apple has always had a great say in the supply chain, and its RF modules are mainly from international giants such as Skyworks, Qorvo, Broadcom, and Murata, which can be said to be the best solution at present. Even so, Apple still expanded its self-developed chips to the rfed front-end field.
For Apple's active investment in self-development, Jia Bin made an interpretation: "On the one hand, according to market rumors, Apple's self-developed baseband may be close to the launch, if coupled with the independent research and development of the RF front-end, Apple will have the opportunity to provide a more complete solution; on the other hand, usually Apple mobile phones do not distinguish between regional versions, a mobile phone needs to support almost all commercial frequency bands in the world, therefore, self-development can not only reduce the cost of module procurement, but also help to create product characteristics and appearance differentiation." ”
So, in the face of high-tech barriers to RF module research and development, can Apple quickly break through it? Zhong Lin, chairman of Jinjiang Sanwu Microelectronics Co., Ltd., believes that compared with domestic manufacturers, Apple has a great advantage in cutting into the RF front end. Mainly because the RF front-end industry ecology in the United States is more mature, Apple can absorb local and even global relevant talents to form a team with strong research and development strength. Coupled with rich capital investment, high-quality resources, platform support, the difficulty of breakthrough is not too big.
In contrast, the real situation of Apple and Huawei is very different. However, from the perspective of the supply chain, both are increasing investment in the RF front end and strengthening the control of the supply chain, and the general direction can be described as completely consistent.
As a leading enterprise in the global smartphone market, Huawei and Apple have always been regarded as the "wind vane" of the work industry, and through the observation of the two, it can be found that the relationship between the RF front-end supply chain and mobile phone manufacturers is strengthening, which brings new opportunities and challenges to domestic RF front-end manufacturers.
It is urgent to strengthen the domestic supply chain
As cellular communications evolve from 2G, 3G, and 4G to 5G, the importance of RF front ends continues to rise, including the amount of devices used, design and process requirements have increased significantly. In the 6G era, the demand and importance of rf power front ends will be further enhanced, and it is foreseeable that the market will have a large room for growth for a long time.
However, for now, domestic RF front-end manufacturers are difficult to directly compete with international giants such as Qorvo, Skyworks, Broadcom and Murata in terms of products, industrial chains and markets. This is mainly due to the lack of high-performance filters, and the foundry link of the industrial chain is too weak, which in turn leads to many manufacturers can only rely on low gross profit margin products to compete in the market.
Compared with other application chips, RF front-end chips are more unique in technology and industrial chain. Gu Jianzhong, COO of Chipple Technology (Shanghai) Co., Ltd., said that the RF supply chain is very complex, unlike CMOS chips, which are mainly CMOS Fab and packaging and testing plants. The RF front-end supply chain involves several chip combinations of different processes, such as GaAs, CMOS, CMOS SOI, substrates, SMDs, filters, etc., and the main supply chain risk is that there are too many supplier categories.
Since 2018, with the acceleration of chip localization, the market share of domestic RF chips has increased significantly. Jia Bin pointed out for the industrial chain: "From the perspective of industrial division of labor, many domestic design companies are oem overseas, but they have realized the design autonomy of low-end products, and the OEM, equipment, and materials are far from autonomous; from the product point of view, high-performance RF filters and high-complexity RF module chips are still firmly in the hands of international manufacturers in the United States and Japan." ”
As early as 2019, Huawei HiSilicon handed over its self-developed PA to Sanan Optoelectronics FOUNDRy, with the purpose of dispersing supply channels, supporting the domestic FOUNDC industry chain, and thus improving supply chain security. This also shows that as far as industrial development is concerned, not only enterprises need to master core technologies, but also need the support of a complete industrial chain ecology.
Yu Qiang, vice president of marketing and application engineering of Kangxi Communication Technology (Shanghai) Co., Ltd., said that in the global supply chain shortage environment since the end of 2020, GaAs production capacity is not a bottleneck, and with the continuous expansion of domestic GaAs fab capacity, GaAs process wafer production capacity will be more abundant. This round of wafer shortage is mainly reflected in the SOI/CMOS process, especially the mature CMOS process, and 2022 is still not optimistic.
"At present, the RF front-end packaging and testing end has been generally localized, and the commonly used processes are WBQFN, WBLGA, FCLGA, and SIP. RF front-end chips have strict requirements for core/wire, and domestic enterprises mainly use manufacturers with mature experience in the field of RF chip packaging and testing, such as Changdian, Huatian, Yongsi, Jiasheng, etc. After the expansion of production in 2021, the production capacity has been released. With product iteration and performance improvement, ATE equipment also needs to be updated synchronously, which is another major investment. Yu Qiang told JiWei Network.
After a long period of R & D investment and market development, some domestic RF front-end enterprises have begun to take shape, mobile phone manufacturers are also accelerating the introduction of domestic RF devices, modules, in some segments, such as RF switches, LNA, PA, etc., can gradually confront the United States and Japan international manufacturers.
However, domestic manufacturers as a whole are still mainly discrete devices for the low-end market, and there are almost vacancies in the 5G modules and transmitter modules with higher profits, and even from "domestic substitution" to "alternative domestic" whirlpool, the gross profit margin of the entire industry is at a low level. Wang Yang believes: "Gross profit margin is a key indicator to measure the value of products and the value of the company, gross profit margin of 20% and 40% For value judgment, the difference is not 2 times, but 10 times." High gross profit margin, which means that the product and market have thresholds, few competitors, and high technical content. ”
Figure Revenue Comparison of Some Domestic and Foreign RF Front-end Manufacturers (Information Source: Public Financial Reports)
So, how do manufacturers break through the "shackles" of low gross profit margin? Yu Qiang put forward five major directions: continuously improve R&D capabilities and product performance, accelerate the entry into the high-end market; create differentiated product lines to provide product characteristics that are more in line with customer needs; strengthen cooperation and cooperation with SoC manufacturers, improve system performance and reliability; enhance end-customer stickiness and enhance client bargaining power; expand market scale and actively integrate supply chain resources to optimize product costs.
With the continuous development of the industry, with the joint efforts of RF manufacturers and mobile phone manufacturers, the domestic RF front-end industry chain will become more and more complete. In addition, after the investment boom of mobile phone manufacturers, there is also a wave of listing, Yang Hongxiang said: "This is a major benefit to promoting the localization of the RF front end, which is conducive to enterprises increasing investment in research and development and production, catching up with international manufacturers, and attracting more domestic and even international talents to invest in the RF industry." However, he also pointed out that the blind pursuit of listing may adversely affect the long-term development of enterprises.
(Proofreading/Andrew)