1. Mask version: the core consumables of the lithography process
1.1 Basic introduction to the mask version: The pattern transfer master mask in the microelectronics manufacturing process (Photomask), also known as light mask, photomask, lithographic mask version, etc., is a graphic transfer tool or master in the microelectronics manufacturing process, and is a carrier of intellectual property information such as graphic design and process technology. In the photolithography process, the mask plate is the carrier of the design pattern. Through photolithography, the design pattern on the mask plate is transferred to the photoresist, and then etched, the pattern is engraved on the substrate, so as to realize the transfer of the pattern to the silicon wafer, which is similar to the "negative" of a traditional camera. Taking thin-film transistor liquid crystal display (TFT-LCD) manufacturing as an example, the exposure masking effect of the mask version is used to transfer the designed thin-film transistor (TFT) array and color filter pattern to the glass substrate according to the film structure order of the thin-film transistor, and finally form a display device superimposed by multiple layers. Taking wafer manufacturing as an example, the manufacturing process needs to go through multiple exposure processes, and the exposure masking effect of the mask version is used to form gates, source drains, doping windows, electrode contact holes, etc. on the surface of the semiconductor wafer. In comparison, the semiconductor mask version is significantly higher than the mask version products in the fields of flat panel display and PCB in terms of important parameters such as minimum line width, CD accuracy, and position accuracy. The mask plate is an important component in the lithography process, and its performance has an important impact on the lithography. According to the different substrate materials, the mask version can be mainly divided into quartz mask version, soda mask version and others (including letterpress, film, etc.).
1.2 Mask plate structure: mask substrate + shading film mask plate is usually composed of a substrate and a shading film, of which the most important raw material is the mask substrate. The substrate has high performance requirements in terms of light transmittance and stability, and must have a flat surface without sand inclusion, bubbles and other minor defects. Due to its stable chemical properties, high optical transmittance and low coefficient of thermal expansion, quartz glass has become the mainstream raw material for the preparation of mask plates in recent years, and has been widely used in the production of mask plates of VLSI circuits. At present, quartz mask version and soda mask version are the two most common mainstream products, both belong to glass substrates. Shading film is divided into hard shading film and latex shading film, of which latex shading film is mainly used for PCB, touch and other scenarios; Hard shading film materials mainly include chromium, silicon, molybdenum silicide, iron oxide, etc., in all kinds of hard shading film, because of the high mechanical strength of chromium materials, can form fine patterns, so chromium film has become the mainstream of hard shading film. The cost composition of the mask version is mainly direct materials and manufacturing expenses, accounting for 67% and 29%, respectively. Among them, the direct materials mainly include mask plate substrate, shading film and other auxiliary materials, etc., and the mask version substrate accounts for more than 90% of the direct material. 1.3 Lithography technology is an important part of mask plate manufacturing, mask plate manufacturing process is complex, processing process mainly includes CAM file processing, photoresist coating, laser lithography, development, etching, decoating, cleaning, macroscopic inspection, automatic optical inspection, precision measurement, defect processing, optical film and other links, of which lithography technology is an important link in mask plate manufacturing. Lithography needs to first apply glue to the mask substrate (usually positive photoresist), and then expose the surface through the lithography machine, usually delimited by 130nm, and the lithography equipment above 130nm uses laser direct writing equipment, but as the linewidth of the mask version is getting smaller and smaller, there will be serious diffraction during the exposure process, resulting in low edge resolution of the exposure pattern and distortion of the pattern, so 130nm and below usually need to be completed by electron beam lithography. Key parameter measurement and detection links are very important for the quality and yield of the mask version, which needs to measure the key dimensions of the mask plate (CD, Critical Dimension), overlay accuracy (Overlay) and other key parameters, and the use of automatic optical inspection equipment (AOI) (AOI) to detect defects generated by the mask plate manufacturing process, such as product surface defects (Defect), Line Breakage (Open), Line Short (Short), White Convex (Intrusion), Missing Pattern, etc., and repair defects and particles in the production process of mask plates by lasers. Second, semiconductor mask version: overseas three-party manufacturers concentrated, domestic substitution 2.1 semiconductor important consumables, overseas manufacturers occupy the main market share The global semiconductor materials market scale has grown steadily in recent years, driven by the increase in demand and wafer capacity transfer, the scale of the mainland semiconductor materials market has accelerated: from $8.7 billion in 2019 to $11.9 billion in 2021, with a compound annual growth rate of 16.95%, far exceeding the overseas market. From the perspective of subdivision, the semiconductor mask version accounts for about 12%, which is equivalent to the proportion of electronic special gas.
According to whether it is matched with downstream wafer manufacturers, the current semiconductor mask plate manufacturers are mainly divided into two categories: in-house and independent third party. Specifically, due to the complexity of the manufacturing process and the confidentiality of the process of advanced processes for 28nm and below, the mask plates required by fabs mainly rely on internal factory production, such as Intel, Samsung, TSMC, SMIC and other companies; For mature processes, for cost reduction considerations, fabs prefer to purchase from independent third parties while meeting technical requirements. Overseas mask plate manufacturers started early, the technology accumulation is relatively deep, and currently still occupies the main market share of the global three-party mask version. The three leading companies Japan Toppan, Photronics of the United States, and DNP of Japan together account for more than 80% of the global market share. At present, the domestic mask manufacturers are in the stage of accelerating catch-up, mainly including SMIC Mask Factory, China Resources Dismicro (formerly China Resources Mask, a subsidiary of China Resources Microelectronics), AMEC, Longtu Mask, Qingyi Optoelectronics, Luwei Optoelectronics, China Taiwan Photomask, etc. Among them, SMIC Photomask Factory and CR DS Micro are both supporting factories of wafer factories, and CR DS Micro partial mask version is sold to the outside world. Globally, the semiconductor mask market has grown steadily in recent years, reaching $4.99 billion in 2021 and is expected to grow to $5.39 billion in 2023, with a CAGR of nearly 7% from 2020 to 2023. In terms of sub-processes, mature processes above 130nm will occupy the main market share in 2022, with shipments accounting for about 54%, 28-90nm accounting for about 33%, and advanced process shipments below 22nm accounting for only 13%. 2.2 Mature process products are the mainstay, anti-cyclic characteristics show At present, the production capacity of semiconductor three-party mask plate manufacturers is mainly concentrated in the mature process field, and most of the overseas head mask plate manufacturers have the EUV mask version mass production capacity, of which Photronics and DNP technology nodes have reached 5nm, Tappan semiconductor mask version technology nodes have reached 14nm, and the main production capacity of Chinese Taiwan photomask is concentrated in the process above 65nm, and it is expected that Q4 2023 will achieve mass production of 40nm process. 28nm mass production by 2025. Domestic mask plate enterprises are relatively and still have a large space for development, the current basically in the 350-130nm process range, of which Longtu mask in 2022 mask version process node to 130nm, Louwei Optoelectronics has achieved 250nm semiconductor mask version mass production, and mastered the core manufacturing technology of 180/150nm node. The gross profit margin of the semiconductor mask version is generally higher than that of the flat panel display. In terms of mask accuracy, CD accuracy is usually used to measure the deviation between the mask pattern feature size and the design value, and characterize the mask version pattern feature size uniformity. Compared with flat panel display, PCB and other fields of mask version products, semiconductor mask version in the minimum line width, CD accuracy, position accuracy and other important parameters, have significantly improved, so usually the pricing level is higher, while in the field of semiconductor devices, downstream customers are less sensitive to the price of production molds, so the semiconductor mask version gross margin level is generally higher.
The gross margin of the high-end process semiconductor mask version has been significantly improved. With the acceleration of the pace of process technology innovation, the chip accelerated towards the advanced process, the semiconductor mask plate process increased simultaneously, and the gross profit margin accelerated to improve. Taking Taiwan Mask as an example, the proportion of sales of semiconductor mask versions below 130nm process accounted for only 6% in 2019, which has increased to 32% in 2021, corresponding to a significant increase in overall gross margin from 30.9% in 2019 to 47.6% in 2021. In addition, domestic three-party mask manufacturers such as Louwei Optoelectronics and Longtu Mask have also benefited from the gradual breakthrough of process nodes and the improvement of product yield in recent years, and the market position and pricing power have been improved, and the gross profit margin has increased steadily, the gross profit margin of Louwei Optoelectronics Semiconductor Mask has increased from 36% in 2019 to 51.3% in 2021, and Longtu Mask has increased from 54.4% in 2020 to 57.7% in 2022. The semiconductor mask version has certain anti-cyclical characteristics. From the sales performance of photronics, the leading semiconductor mask manufacturer, and Taiwan Photomask sales, compared with downstream semiconductor sales, the revenue growth rate of the mask version has declined relatively little during the downward cycle of the semiconductor boom, reflecting a certain degree of anti-cyclicality; At the same time, the photronics mask version business showed a certain leadership in some cycles, and reached the turning point of prosperity first compared with downstream semiconductor sales. The reason is that when the semiconductor industry is in a downward cycle, the capacity utilization rate of wafer manufacturers declines, in order to improve capacity utilization, wafer fabs tend to provide foundry services to small and medium-sized chip design companies, so the types of semiconductor products can be increased, and the demand for mask versions has increased; In addition, when downstream demand is low, chip design companies may be willing to open up the market by developing new products, which will also bring incremental demand for mask versions. 2.3 Overseas third-party manufacturers: the head enterprise started early, the advanced process direction is clear Photronics (Photronics) was founded in 1969, is one of the world's leading mask plate manufacturers, and also the largest mask plate manufacturer in North America. The company went public on NASDAQ in 1987 and has manufacturing and sales centers in North America, the United Kingdom, Germany, Japan, Taiwan, South Korea and Singapore. Phoenix currently has eleven factories worldwide, all of which are quartz mask versions, mainly used in the semiconductor chip and display panel industries. As an independent third-party mask plate manufacturer, Phoenix is currently one of the few manufacturers that can currently provide the mask version required for advanced processes, and its binary OPC mask version can already support the process node from 14nm to 28nm, and the addition of PSM phase shift technology further improves the graphic exposure resolution, so that it can break through 14nm, and can provide EUV (Extreme Ultra-Violet, extreme ultraviolet lithography) mask version of 5nm and later nodes. In 2022, Phoenix achieved operating income of $825 million, a year-on-year increase of 24%; IC segment revenue was $593 million, an increase of 29% year-on-year, of which 28nm and below advanced process products (high-end products) accounted for a relatively low proportion, still dominated by process products above 28nm. Downstream customers mainly include UMC, Samsung, etc., and the top five customers account for more than 45% of the total revenue. Founded in 1908, Toppan established Toppan photomask with Japanese private equity firm Integral Corporation in April 2022 to separate its semiconductor mask business and strengthen the development and sales of semiconductor mask and FC-BGA substrates. On the technical side, Toppan is also focused on the development of EUV lithography masks, which are now capable of mass production. With 8 manufacturing sites worldwide, Toppan is the only supplier in the world with manufacturing facilities in North America, Europe and Asia. Toppan Shanghai plant mainly produces 66/55nm process mask versions, and has been producing 28/14nm advanced process mask versions since 2019. Toppan's competitive advantage lies in its global production and sales network to cope with geopolitical risks and a stable customer base. In fiscal 2022, Toppan Electronics (including semiconductor business and display components business) achieved operating income of 255.3 billion yen, a year-on-year increase of 20.6%, and semiconductor business achieved revenue of 159.1 billion yen, accounting for more than 60%. Looking forward to 2025, the company plans to achieve operating income of 295 billion yen in the medium term, and the proportion of semiconductor business will further increase. Founded in 1876 and involved in multiple business areas centered on printing technology, DNPDNP (Dainippon Printing Co., Ltd.) was the first company in the world to use multi-electron beam drawing equipment to manufacture mask plates, which can be used not only for today's most advanced EUV lithography, but also for 5nm high-end processes. In addition, DNP is advancing process development for higher process products at 3nm and below through cooperation with IMEC (Belgian Research Center for Microelectronics). In November 2022, DNP announced that it intends to invest 20 billion yen to build a new production line at its Kurosaki plant in Kitakyushu, Fukuoka Prefecture, Japan, for the production of OLED fine metal mask versions. The new line is scheduled to start production in the first half of 2024. After the expansion, DNP will expand its business volume in the direction of tablets and laptops by virtue of its market share of smartphone application masks. In fiscal 2022, DNP's electronics segment achieved revenue of 203.6 billion yen and a gross margin of 22%. In the electronics business, sales of leadframe and semiconductor packaging components declined, with only strong growth in the mask business, which led to year-over-year sales growth in the electronics segment. Looking ahead to 2025, the company expects to achieve operating income of JPY 230 billion in the electronics segment.
2.4 Semiconductor production capacity transfer, industry inflection point is coming, domestic mask demand is expected to usher in growth, global wafer production capacity is gradually shifting to the mainland, demand space is accelerating to open. From 2015 to 2021, the proportion of 12-inch wafer production capacity Chinese mainland produced in the world gradually increased from 9.7% to 16%, and the demand space for mask plates is expected to further open up in the future as the capacity of new fabs gradually lands. SEMI expects to add 25 new 12-inch wafer fabs Chinese mainland 2022-2026, with a total planned monthly production capacity of more than 1.6 million wafers; It is expected that by the end of 2026, the total monthly production capacity of Chinese mainland 12-inch fabs will exceed 2.763 million wafers, and the global share will increase from 22% in 2022 to 25% in 2026. The transfer of wafer production capacity is expected to further open up the demand space for mask plates, and under the trend of accelerating the research and development of domestic mask plate technology, third-party mask plate manufacturers are expected to achieve a rapid increase in market share. Mask version imports are restricted. In October 2022, the revised Export Administration Regulations announced by the US Department of Commerce increased the supply restrictions on semiconductor equipment and components, including the supply restrictions on the mask version, and included the mask version of the 250nm and below process into the restriction list, the import of domestic advanced process mask version or further blocked, the domestic substitution process of the mask plate industry is expected to accelerate. The inflection point of the semiconductor industry is expected to accelerate. Semiconductor short cycle is linked to inventory and supply and demand structure, semiconductor industry supply and demand mismatch in 2021 brought about a lack of core price increase, manufacturers have increased the scale of chip production capacity, chip oversupply in the second half of 2022, 23Q1 semiconductor inventory is high, the industry as a whole is still destocking at this stage, it is expected that demand will gradually repair in the second half of 2023, inventory will gradually dematerialize, and the first half of 2024 will accelerate passive destocking to inventory clearance, the industry is expected to usher in an inflection point of supply and demand structure improvement, price upward and performance increase, expected 2024 is expected to start a new cycle of semiconductor inventory. Global chip wafer production capacity continues to expand. Global 200mm fab capacity is expected to grow by 20% from 2021 to 2025, global semiconductor manufacturers are adding 13 new production lines, which will bring wafer capacity to an all-time high of more than 7 million wafers per month, and global semiconductor manufacturers are expected to significantly increase 300mm fab capacity by 2026, which is expected to reach 9.6 million wafers per month. The development direction of advanced processes is clear. Under the development trend of advanced semiconductor processes, the key process nodes of semiconductor mask version are accelerating. The layout of the mainland industrial chain is relatively late, starting from the packaging and testing link, and has only entered a period of rapid development in recent years, packaging and testing is still the main subdivision of the domestic semiconductor industry, semiconductor product process nodes from 130 nm, 100 nm, 90 nm, 65 nm, etc. gradually developed to 45 nm, 28 nm, 14 nm, 7 nm, etc., the current mainstream advanced manufacturing process of domestic chips is 28nm. Taking Taiwan Photomask as an example, in 2021, it will concentrate on the process semiconductor mask market above 65nm, and from the fourth quarter of 2022, 40nm products will enter the R&D certification stage, and are expected to achieve mass production in the fourth quarter of 2023. 28nm advanced process products are expected to begin R&D certification in 2024 and enter mass production in 2025. Third, flat panel display: the direction of technology iteration is clear, and the panel recovery boosts demand3.1 The long-term development of the flat panel display industry is characterized by high pixel accuracy, large size, fierce competition, accelerated transfer, and product customization. Benefiting from the increase in the average size of TVs and the demand for large-screen mobile phones, in-vehicle displays and public displays, according to Omdia's forecast, the global demand for flat panel displays will exceed 300 million square meters in 2025. The flat panel display mask version is still dominated by the domestic market, with domestic demand accounting for more than 50% in 2022; With the steady growth of panel demand, the domestic market share will continue to increase, and it is expected to reach about 57% in 2026. The market structure of flat panel display mask manufacturers is still relatively concentrated: in 2020, the major overseas leading companies such as Photronics, SKE, HOYA and LG accounted for nearly 80% of the market. In addition, Qingyi Optoelectronics and Luwei Optoelectronics are the main flat panel display mask manufacturers in China, accounting for about 10% of the total.
3.2 Large size and high precision is the main development direction of flat panel display mask version In recent years, large-size TV panel products have accelerated into the market, represented by 8.5-inch and 85-inch panels produced by the 85-generation line and the 10.5-inch and 75-inch panels produced by the 75-generation line, the demand for large-size TV panels has rebounded sharply since the fourth quarter of 2022, and it is still showing a continuous upward trend after 2023. In August 2022, the weighted average size of LCD TV display panel shipments was 46.8 inches, rising to 49 inches in December 2022, 49.5 inches in March 2023, and exceeding 50 inches for the first time in May 2023 to 50.2 inches. The higher the panel generation, the larger the glass substrate size of the panel, the higher the utilization rate and efficiency, and the 8.5 generation line can be cut by 66 inch + 32 inch TV to achieve higher cutting efficiency; 10.5 generation wire cutting 65-inch and 75-inch TVs can achieve a cutting efficiency of more than 90%. The increase of panel size drives the development of its upstream material mask version in the direction of large size, and will also drive the demand for large-size mask version. With the update and iteration of flat panel display technology, new display technology requires mask version to develop in the direction of higher precision, such as mask plate manufacturing technology used in Micro-LED (miniature light-emitting diode), LTPO (low-temperature polycrystalline oxide), QD-OLED (quantum dot panel) and other industries. According to IHS predictions, the display accuracy of future displays will gradually increase from 450PPI (Pixel Per Inch, pixels per inch) to more than 650PPI, which puts forward higher technical requirements for the semiconductor layer, lithographic resolution, minimum via, CD uniformity, sleeve accuracy, defect size, and cleanliness of the flat panel display mask version. 3.3 Panel prosperity accelerates recovery, mask version demand is expected to boost the global display panel industry After experiencing global economic weakness, epidemic impact, oversupply and other factors affecting the price of 2022, 23Q2 related product prices and panel factory capacity utilization rate have a clear upward trend, the display panel market fundamentals in the second half of 2023 may usher in a greater improvement, a new round of upward cycle will begin. According to Omdia's latest research, the total capacity utilization rate of global display panel manufacturers recovered from 66% in the first quarter of 2023 to 74% in the second quarter, benefiting from good orders for LCD TVs, laptops, display panels and smartphones. Shipments also improved in tandem. The domestic market showed stronger growth resilience. According to CODA, in 2022, the output value of the domestic display industry will be nearly 500 billion yuan, accounting for more than 38% of the global market, and the investment structure has also improved significantly, and the investment direction has shifted from LCD to higher technology high-performance OLED, Micro LED and some upstream materials, and the domestic panel market will gradually iterate to higher value-added products in the future, while its global proportion will be further increased. The global display panel production capacity has a relatively obvious trend of shifting to the mainland. In recent years, domestic panel companies have rapidly increased the sixth-generation flexible OLED production line, and the mainland OLED market share has increased rapidly, according to DSCC data, domestic companies are expected to account for more than 50% of global flexible OLED production capacity in 2023; In the liquid crystal display (LCD) production capacity dominated by Chinese panel manufacturers, the share of Chinese companies is expected to increase to more than 70% by 2027; In the total production capacity of display panels (including OLED and LCD), Chinese panel companies accounted for about 60% of the market share in 2023 and are expected to remain at about 70% from 2024. IV. Investment Analysis 4.1 Founded in 1997, Luwei Optoelectronics Co., Ltd. has been committed to the research and development, production and sales of mask plates, and its products are mainly used in flat panel display, semiconductor, touch and circuit board industries. The company is based on the two core product lines of flat panel display mask version and semiconductor mask version, after years of technology accumulation and innovation, it currently has G2.5-G11 full-generation mask version production capacity in the field of display panel products, which can be matched with all generations of flat panel display manufacturers. In the field of semiconductor products, the company has realized the mass production of 180nm and above process node semiconductor mask plates, and has obtained the key core technology of 150nm process node semiconductor mask plate manufacturing, while actively carrying out the process technology development of 130nm and below process node mask plate products, which can meet the application needs of domestic advanced semiconductor packaging and semiconductor devices. With the opening of the terminal application space, the company's process technology level has improved, the product structure has been continuously optimized, and the revenue scale has achieved continuous growth in recent years. In 2022, the company's revenue reached 640 million yuan, a year-on-year increase of 29.7%. Net profit attributable to owners was 120 million, a year-on-year increase of 129%. The gross profit margin of the company's sales has gradually increased in recent years, reaching 32.95% in the first quarter of 2023.
4.2 Qingyi Optoelectronics Co., Ltd. products are mainly used in flat panel display, semiconductor chips, touch screens, circuit boards and other industries, can not only provide traditional TFT LCD mask version, but also provide LTPSLCD, AMOLED, Mini-led and other flat panel display with high-end mask version, size to achieve full generation coverage, and BOE, Huaxing Optoelectronics, Tianma, Xinli and other well-known panel enterprises have established long-term and stable supply relationships; In the field of semiconductor mask version, the company has carried out close cooperation with many domestic mainstream manufacturers such as SMIC Ningbo, Changjian Technology, Tongfu Microelectric, China Wafer Square Technology, and Huatian Technology. Through independent research and development, the company has reserved 150nm process node semiconductor mask plate manufacturing technology, which can cover the third generation of semiconductor-related products. In 2022, the company's revenue will be 762 million yuan, a year-on-year increase of 40.12%; Net profit attributable to owners was 99 million yuan, a year-on-year increase of 122.4%. From a structural point of view, flat panel display mask version is still the company's main mask product direction, accounting for more than 76% of revenue in 2022.
Source | Ping An Securities
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