Yangtze River Delta, half of China's chips

Who is the first chip city in China?

Looking at the Yangtze River Delta, which is currently the most important integrated circuit development and production base in China, data shows that the scale of the integrated circuit industry in the Yangtze River Delta will account for 60% of the country in 2022. What is more interesting is that each province and city has a clear division of labor and has its own characteristics

Design verification of chip circuits and layouts in Zhejiang, wafer manufacturing on Shanghai semiconductor production line, packaging and testing in Jiangsu, and installation of automotive electronic modules in Anhui...

Integrated circuits are the "heart" of all complete equipment, the core of the information industry, and play a key role in several major fields such as computers, consumer electronics, and automotive electronics. At present, China is the world's largest chip consumer market and the largest chip importer. Shockingly, last year imported chips paid as much as imported crude oil and iron ore combined.

In contrast, the mainland's chip self-sufficiency rate is still at a low level. Official data show that in 2019, the self-sufficiency rate of chips in the mainland is only about 30%, and to achieve the goal of chip self-sufficiency rate reaching 70% by 2025, China's chip industry has huge room for growth. Quietly, the Yangtze River Delta supports half of China's chip industry.

This is where IPOs break out

The wafer manufacturing boom is taking place.

This starts with the process of chip manufacturing. The semiconductor process is complex, involving a wide variety of equipment, from silicon wafer growth, wafer fabrication to packaging and testing, and finally leaving the factory for semiconductor products. In the process of wafer manufacturing, lithography, etching, and thin film deposition are the core processes, which need to be repeated hundreds or thousands of times to form silicon wafers with circuit structure, which enables the commercial link of professional chip design to be realized.

Benefiting from the domestic substitution dividend of wafer manufacturing, the past 2-3 years have become the window period for wafer fabs to land in the capital market. Since SMIC's landing on the Science and Technology Innovation Board in 2020, Jinghe Integration and SMIC Integration have followed closely behind.

The latest IPO is Hua Hong Semiconductor. On August 7, Hua Hong Semiconductor officially landed on the Science and Technology Innovation Board of the Shanghai Stock Exchange, and the IPO raised 21.203 billion yuan, becoming the largest IPO in terms of A-share fundraising this year and the third largest IPO in the history of the Science and Technology Innovation Board so far.

Founded in 2005 and founded in Zhangjiang, Shanghai, Hua Hong Semiconductor is the second largest wafer foundry in Chinese mainland and the sixth largest in the world. It is worth noting that the strategic investor lineup of Huahong's IPO is quite luxurious, with a total of 30 institutions participating in the war investment. Among them, the second phase of the large fund subscribed 3 billion yuan in one go, and the second phase of the state-owned enterprise structural adjustment fund also followed suit. In addition, many leading enterprises in the semiconductor industry are also involved, including SAIC, Montage Technology, Shanghai Silicon Industry, etc.

In addition to the wave of listings, large financings in the field of wafer manufacturing have been generated one after another. According to incomplete statistics from public data, up to now, there have been 15 financing events for Shanghai wafer manufacturing related enterprises, and financing cases of 100 million yuan have followed.

Just this month, Shanghai Jita Semiconductor raised 13.5 billion yuan, creating the largest financing this year. This round of financing brings together a number of national funds, industrial investors, local funds, well-known financial investors, etc. It is only one and a half years after the last round of 8 billion yuan A round of financing, and the list of investors at that time was staggeringly led by Huada Semiconductor, and other investors included CLP Smart Fund, National Reform Double Hundred Fund, National Investigation Fund, China Internet Investment Fund, SAIC Group's Shangqi Capital, Xiaomi Yangtze River Fund, Pudong Science and Technology, Shanghai Puke Investment, etc.

Ningbo, Zhejiang Province, hides a wafer-making unicorn. In April, Rongxin Semiconductor obtained C round financing, and the investor was Huaqin Communications. Founded in 2021, Rongxin Semiconductor is the only national wafer manufacturing enterprise led by a leading industrial institution in China, and the company is mainly engaged in 12-inch wafer manufacturing and wafer-level packaging and testing.

This company carries a strong Tsinghua imprint. On its board are Ben Jinfeng, managing director of ICBC International Financing Capital, Lv Dalong, founding partner of Qingkong Ginkgo, Yu Renrong, founder of Weier Shares, one of the investors of Feng Yuan Capital, and Wang Xing, founder of Meituan, are all Tsinghua alumni.

According to incomplete statistics from public data, Zhejiang wafer manufacturing related enterprises have accumulated 8 financing events, of which a number of new forces have gradually grown into the backbone of the industry.

Anhui also gave birth to a young unicorn. At the end of June, Changfei Advanced Semiconductor in Wuhu, Anhui Province completed a series A equity financing of more than 3.8 billion yuan, setting a record for the largest scale of third-generation semiconductor financing in China.

Jiangsu Province, where Wuxi, the strongest prefecture-level city for integrated circuits, is located, is no less impressive. According to incomplete statistics from public data, the total number of financing events of Jiangsu wafer manufacturing related enterprises has reached 19.

It can be seen that one wafer foundry after another is rising in the Yangtze River Delta region.

Industrial funds were born in batches

There is no doubt that the Yangtze River Delta region has always been one of the regions with the most active economic development, the highest degree of openness and the strongest innovation ability in China, and it is also the highland for the development of venture capital and emerging industries in the whole of China.

Shanghai leads the way. In June, Shanghai SAIC Xinju Venture Capital Partnership (Limited Partnership) was established, with a fund size of more than 6 billion yuan, focusing on the upstream and downstream of the semiconductor industry chain, key technology products related to chips driven by intelligent electrification and networking.

In April, the first phase of the 20 billion Shanghai State-owned Assets Fund of Funds completed the filing, which will focus on the national strategy and the industrial plan issued by the Shanghai Municipal Government in the integrated circuit, biomedicine, artificial intelligence and other leading industries, as well as new energy vehicles, high-end equipment manufacturing, aerospace, information and communication, new materials, emerging digital and other key industries, as well as the key layout of Shanghai state-owned assets to carry out investment in sub-funds and enterprises, focusing on the growth stage, maturity stage, strategic placement projects, etc.

In February, the second phase of the Yangtze River Delta Fund, with a target scale of 10 billion yuan, was unveiled, which will focus on the Yangtze River Delta region, focus on the layout of the three leading industries of integrated circuits, biomedicine and artificial intelligence, and promote the formation of internationally competitive advantageous industries in the Yangtze River Delta region with investment and services.

Zhejiang is not far behind. In April, Huzhou, Zhejiang Province announced the establishment of an industrial fund with a total scale of no less than 20 billion yuan to increase investment in the semiconductor and optoelectronic industries. In March, CITIC Group and Hangzhou jointly initiated the establishment of the first phase of the CITIC Hangzhou Science and Technology Innovation Fund with a scale of 5 billion yuan, which mainly invests in strategic emerging industries such as advanced manufacturing, advanced materials, life and health, artificial intelligence, cloud computing, big data, information software, and integrated circuits.

Anhui and Jiangsu also came. In May, Hefei New Station Area released a 10 billion fund of funds, which mainly focuses on the layout of key industries such as new displays, integrated circuits, new energy, new materials, and big health, and supports and promotes the industrial chain extension, supplementary chain and strong chain in the new station area. In December last year, Chizhou, Anhui Province set up an emerging industry guidance fund with a total fund size of no less than 10 billion yuan, focusing on eight emerging industries, including semiconductors, new materials, high-end equipment manufacturing, artificial intelligence and digital economy, new energy, energy conservation and environmental protection, health care and pension, green food, and cultural tourism.

In February this year, Jiangsu Suzhou set up a 5 billion yuan integrated circuit industry fund to support the attraction and rapid growth of enterprises. In addition, Suzhou Industrial Park Integrated Circuit Industry Investment and Development Co., Ltd. was established, the company is committed to building three major platforms for project recruitment, industry alliance and equity investment, so as to realize industrial agglomeration, service agglomeration and capital agglomeration in the integrated circuit industry.

If the fund is strong, the venture capital will be gathered; If venture capital is active, the industry will prosper. In the Yangtze River Delta region, integrated circuit industry funds have sprung up like mushrooms, and a vigorous industrial upgrading war is being staged here.

Strive for integrated circuit industry

Various provinces and cities in the Yangtze River Delta region have introduced policies and measures to support the integrated circuit industry.

In March this year, Jiangsu Province issued Several Policies on Further Promoting the High-quality Development of the Integrated Circuit Industry, providing support in terms of project land, tax incentives, environmental capacity, energy consumption indicators, talent introduction, etc., and giving 1 million yuan to integrated circuit enterprises that were shortlisted for the top 500 Chinese enterprises for the first time. Encourage and support integrated circuit enterprises to strengthen the integration of resources, and provide subsidies for mergers and acquisitions and reorganization carried out by enterprises in accordance with the principle of marketization, and provide subsidies not exceeding 5% of the actual capital contribution (cash paid) of the target enterprise by the acquiring enterprise if qualified, with a maximum of 20 million yuan.

In August last year, Zhejiang Province issued Several Policies for Promoting the High-quality Development of Integrated Circuit Industry and Software Industry in Zhejiang Province in the New Era, the document proposed that focusing on the field of integrated circuits and software, the local government should focus on cultivating software and integrated circuit design enterprises whose R&D investment accounts for more than 10% of sales revenue and annual R&D investment exceeds 50 million yuan, as well as integrated circuit manufacturing, packaging and testing, equipment and material enterprises whose R&D investment accounts for more than 5% of sales revenue and annual R&D investment exceeds 50 million yuan. Increase support.

In February last year, Anhui Province issued the "Anhui Province "14th Five-Year Plan" Science and Technology Innovation Plan, set up a major project for integrated circuits, and proposed to focus on the development of independent and controllable high-end chip design technology, chip manufacturing technology, advanced packaging technology including eight core technologies. In the same month, the "14th Five-Year Plan for the Development of New Generation Information Technology in Hefei" proposed that the future technology plan of integrated circuits in Hefei will revolve around terminal chips such as dynamic memory chips, display driver chips, home appliances and automobiles, discrete devices and compound semiconductors.

Earlier, the Notice on Several Policies to Promote the High-quality Development of Shanghai's Integrated Circuit Industry and Software Industry in the New Era was issued, and the policy emphasized increasing special financial support. For major integrated circuit and software projects that meet the following conditions, the special fund for strategic emerging industries of the city will further increase support:

(1) For major projects of integrated circuit equipment and materials that have made major breakthroughs in independent research and development of parts and raw materials and achieved actual sales, the support ratio is 30% of the new investment in the project, and the support amount is not higher than 100 million yuan in principle;

(2) For major projects of EDA, basic software, industrial software, and information security software, the new investment in the project may be relaxed to not less than 50 million yuan, the support ratio is 30% of the new investment in the project, and the support amount is not higher than 100 million yuan in principle;

(3) For qualified design enterprises to carry out tape-out services that are conducive to promoting the application of the city's integrated circuit line line with a line width of less than 28 nm (inclusive), the relevant tape-out fee shall be included in the new investment of the project, and 30% of the tape-out fee will be supported, and the support amount shall not be higher than 100 million yuan in principle.

However, at present, the domestic semiconductor market is also facing the problem of shrinking demand and overcapacity, local manufacturers are mainly gathered in the low end, the moat is not high, under the fierce competition, semiconductor unicorns or will enter the elimination and integration period.

The wheel of history is rolling, and under the background of the wave of domestic substitution, the Yangtze River Delta has a long way to go.