Since late March, the semiconductor sector has been in a bit of a downturn, but semiconductors are known as the crown of manufacturing and the backbone of economic development, and we still have to be confident.
Moreover, in February 2024, global semiconductor sales increased by 16.3% year-on-year, which has increased year-on-year for four consecutive quarters, and the growth rate of mainland China has reached the highest in the world of 28.8%.
The global chip delivery cycle is also continuing to decline, with the delivery cycle in February 2024 being less than 17 weeks, close to the level at the beginning of 2021.
The memory chips in the chip, which are the vane of the industry, have been reversed, chip prices and inventory turnover rates are rising, and the popularity of GigaDevice, BIWIN Storage, Longsys, and Demingli has rebounded.
There are signs that the semiconductor industry is already on the eve of an upswing. At this time, it is particularly important to tap potential companies, and the most potential of mainland semiconductor is undoubtedly in the field of lithography.
Because:
In terms of chip design, Huawei's Ascend, Haiguang Information, Cambrian, Jingjiawei, and Yangtze River Storage are constantly narrowing the gap with NVIDIA and Samsung.
On chip equipment, North Huachuang, Tuojing Technology, Shengmei Shanghai, Xinyuan Micro, Huahai Qingke, China Micro Corporation, Zhongke Flying Measurement, etc., have all broken the monopoly in their own fields and gradually replaced them domestically.
In terms of chip materials, Huate Gas, CSSC Special Gas, Jinhong Gas and other electronic special gas companies are fiercely competitive, and Jacques Technology has Jiangfeng Electronics and Research New Materials for precursors and targets, and the localization rate is also high.
Only lithography, whether it is a high-end lithography machine or photoresist, the localization rate in mainland China is extremely low. However, there are companies in China that have made rapid progress in high-end photoresists, such as Rongta Photosensitive, Nanda Optoelectronics, Anji Technology, Tongcheng New Materials, Shanghai Xinyang, Dinglong Co., Ltd., etc.
Among them, the most potential and the deepest moat is Dinglong shares, which not only conquers high-end KrF/ArF photoresist, but also CMP polishing pads and many other businesses are also the only ones in China.
Dinglong's initial business is toner, ink cartridges and other printing and copying consumables, is the only domestic toner company that has mastered the four color preparation processes, and has the largest scale, the most complete product models and the most advanced technology.
However, now that all walks of life are moving towards digital transformation, the demand for printing and copying is declining, so the company has expanded its business in the direction of semiconductor display materials and semiconductor manufacturing materials, and has achieved good results, with the proportion of revenue increasing from 1.04% in 2019 to 32.12% in 2023.
In 2023, Dinglong Co., Ltd. will achieve revenue of 2.667 billion yuan, a year-on-year decrease of 2%, and a net profit of 222 million yuan, a year-on-year decrease of 43.08%, mainly due to the decrease in shipments of printing and copying consumables, and the optoelectronic semiconductor materials business will increase by 64.06% year-on-year.
Therefore, the future focus of Dinglong shares is focused on the optoelectronic semiconductor materials business, and we will look at their growth respectively.
- Materials for semiconductor manufacturing.
Dinglong's semiconductor manufacturing materials mainly include CMP polishing materials and high-end photoresists.
CMP polishing material is the key consumable in the polishing process of chip manufacturing, accounting for 6.57% of semiconductor materials, including cover polishing slurry, polishing pad and cleaning solution.
Dinglong Co., Ltd. is the only supplier in China that has fully mastered the full set of technology and technology of CMP polishing pads, and Yangtze River Storage, SMIC, Changxin Storage, Hua Hong Semiconductor, China Resources Micro, etc. are all customers of the company.
Previously, Anji Technology was the only manufacturer in mainland China that produced CMP polishing slurry, and now Dinglong has also been certified by customers and can produce it on a large scale.
In 2023, due to the impact of chip destocking, the global CMP polishing material market will decline slightly, but it will increase from $3.5 billion to $4.2 billion from 2024 to 2027 at a compound annual growth rate of 6.26%.
Don't look at the market size and growth rate are not high, but domestic manufacturers are Anji Technology and Dinglong shares, as well as the logic of domestic substitution, and the growth should not be underestimated.
In 2023, Dinglong Co., Ltd. CMP polishing slurry will achieve revenue of 77 million yuan, a year-on-year increase of 330.84%, entering the starting stage, and the sales revenue of polishing pads in the fourth quarter will be 149 million yuan, a year-on-year increase of 49.21%, a record high in revenue.
Photoresist accounts for 5.24% of semiconductor materials, slightly lower than CMP polishing materials, and high-end photoresists mainly include KrF, ArF and EUV, KrF and ArF are used to produce 250nm-7nm chips, and EUV is used for chips below 7nm.
At present, the most demanded in the market is still KrF and ArF photoresist, and there are still very few companies in mainland China that can mass-produce photoresist, while Dinglong has laid out 8 high-end KrF photoresists and 8 immersion ArF photoresists that have not yet broken through in China.
Among them, 7 have completed the customer sample delivery and have been approved, and gradually entered the mass production stage, and the rest will be sent in 2024.
In terms of production capacity, the basic construction of the company's Qianjiang Phase I small-scale photoresist mass production line has been completed, and the construction of the Qianjiang Phase II 300-ton photoresist mass production line will also start in the second half of 2023. It can be said that everything is ready, and it is expected to contribute new performance growth momentum to the company.
- Semiconductor display materials.
Display materials are mainly used in the production of OLED display screens. OLED display screens are widely used in smart phones, but due to the difficulty of manufacturing and the lack of mature technology, the penetration rate in tablets and laptops is only in single digits, mainly in high-end products.
Compared with the traditional LCD liquid crystal display, it has significant advantages in energy consumption, contrast, response speed, etc., and it can be concluded that with the gradual breakthrough of technology, OLED will become the mainstream.
However, OLED display materials also have a very low localization rate, including yellow polyimide YPI, photosensitive polyimide PSPI, thin film encapsulation material TFE-INK, etc.
(PI in the display and semiconductor fields and key domestic and foreign companies)
There are not many domestic manufacturers with layout and energy production, and only a few such as Lianlong and Wanrun have layout. Dinglong Co., Ltd. is the only YPI manufacturer in China to achieve mass production and shipment, and it is also the first PSPI manufacturer to break the foreign monopoly, and is the first supplier of many downstream panel manufacturers.
In 2023, the company's display materials products will achieve revenue of 174 million yuan, a year-on-year increase of 267.82%, and it is obvious that the display materials business has become a new growth curve for the company.
- Semiconductor encapsulation materials.
Semiconductor packaging, especially advanced packaging, is in short supply under the explosion of computing power demand, and the production capacity of TSMC, Samsung, Micron Technology, and SK hynix advanced packaging is basically saturated, so it will catalyze the demand for packaging materials.
Dinglong's semiconductor packaging PI (polyimide) material has entered the customer sample delivery stage, and the temporary bonding adhesive has completed customer verification and entered the mass production stage, and has entered the supply system of many wafer factories and packaging plants.
Overall, the uniqueness of Dinglong's multiple businesses has built a deep moat for the company and provided a guarantee for the company's performance growth, thus attracting 275 institutional positions (at the end of 2023).
The above is only for the analysis of listed companies and does not constitute specific investment advice.
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Source: Flying Whale Investment Research