Report Producer/Analyst: Soochow Securities Zhou Ershuang Zhu Beibei Huang Ruilian
<h1 class="pgc-h-arrow-right" >1. The global semiconductor industry maintained high growth and equipment shipments remained high</h1>
The global semiconductor industry maintained high growth from January to July 2021.
From January to July 2021, global semiconductor sales totaled $296.08 billion, +21.4% year-on-year; 2021H1 global semiconductor equipment sales were $48.44 billion, +49.8% year-on-year; and global semiconductor sales in July 2021 were $45.44 billion, +29.1% year-on-year.
Semiconductor equipment shipments remained high, with North American equipment manufacturer shipments rising to $3.86 billion in July 2021, +49.8% year-on-year.
The high growth of the industry is mainly due to the high downstream demand:
(1) With the development of 5G, AI and IoT, the market demand for chips is rapidly increasing;
(2) Various types of remote office, education, and data center expansion have led to a surge in demand in various end markets;
(3) The shortage of goods has further created market panic, leading to aggressive hoarding of goods in the market.
In terms of the Chinese market, china's semiconductor sales from January to July 2021 were 103.76 billion US dollars, +23.7% year-on-year; semiconductor equipment sales were 14.18 billion US dollars, +75.3% year-on-year.
In terms of integrated circuit imports and exports, the import value in August 2021 was 37.90 billion US dollars, +21.5% year-on-year, and the export amount was 14.31 billion US dollars, +38.9% year-on-year, and the import dependence was relatively high.
<h1 class="pgc-h-arrow-right" >2. Tight supply continues to promote fab capital expenditure, which is good for semiconductor equipment manufacturers</h1>
TSMC and SMIC continued to improve their revenues.
2021H1 SMIC revenue was US$2.49 billion, +22.5% year-on-year, and TSMC revenue was US$26.31 billion, +24.8% year-on-year.
At present, the overall production capacity of the semiconductor industry is still in a state of tension, in 2021Q2, SMIC's capacity utilization rate is 100.4%, Huahong Semiconductor is 109.5%, the capacity utilization rate is still maintained at a high level, and the market demand exceeds expectations to aggravate the imbalance between supply and demand and the "lack of core" dilemma. Capital expenditure repair is good for equipment manufacturers.
Driven by the demand of 5G applications, artificial intelligence, cloud computing and so on, the pressure of chip production capacity has risen sharply, and international semiconductor giants have expanded production.
(1) In terms of TSMC, TSMC raised its capital expenditure in 2021 to $30 billion to $31 billion, and announced that it will invest $100 billion in large-scale expansion in the next three years. In 2021H1, TSMC's actual capital expenditure was $14.81 billion, +39.3% year-on-year, which was basically in line with the pace of planned capital expenditure.
(2) SMIC, according to the company's announcement, capital expenditure is expected to be US$4.3 billion in 2021, most of which will be used for the expansion of mature processes, and a small part will be used for advanced processes and civil construction of new joint venture projects in Beijing. SMIC capital expenditure for 2021H1 was $1.305 billion, -38.4% year-over-year.
Due to the continuous lack of core and strong downstream demand, we expect that the company's capital expenditure will increase significantly in the second half of 2021, which is good for domestic equipment manufacturers.
In addition, the world's advanced capital expenditure increased from NT$3.54 billion in 2020 to NT$5.1 billion in 2021; Intel prepared to build a new wafer factory for $20 billion. Under the accelerated expansion of fabs, the upstream equipment market space is vast.
<h1 class="pgc-h-arrow-right" >3. The localization process of equipment is expected to accelerate, and domestic equipment manufacturers will benefit from multiple links</h1>
The localization rate has a lot of room to rise.
2021H1 global semiconductor equipment sales of 48.44 billion US dollars, of which Chinese mainland is 14.18 billion US dollars, accounting for 29.3% of the global market, higher than South Korea 28.8% and Taiwan 22.2%, the world's largest market, but the domestic semiconductor equipment self-production rate is still low, according to MIR Databank data, the localization rate of wafer equipment in Chinese mainland in 2020 is about 7.4%. The current localization level of key equipment varies significantly.
By the end of 2020, the localization rate of cleaning equipment and CMP equipment is relatively high, 20%/10% respectively, while the localization level of ion implantation and process testing equipment is low, about 3%/2% respectively. The overall localization rate of semiconductor equipment still has a lot of room for improvement.
In 2021, the semiconductor equipment market will grow rapidly, and the superposition of domestic substitution will accelerate to benefit domestic equipment manufacturers.
According to semi reports, global wafer fabrication equipment sales will reach $81.7 billion in 2021, +33.5% year-on-year, and further increase by 6.4% to $86.9 billion in 2022; packaging equipment will grow by 56% to $6 billion, up 6% in 2022; semiconductor test equipment will grow by 26% to $7.6 billion, and will grow by 6% in 2022.
We believe that the "lack of core tide" continues to maintain strong market demand, superimposed on the domestic resumption of production and work and the United States semiconductor export restrictions to China have not been relaxed will bring domestic equipment manufacturers the opportunity to seize the share of import manufacturers, and the acceleration of the domestic substitution process will be good for domestic semiconductor equipment manufacturers.
Etching equipment under advanced processes is becoming more and more important, and the continuous breakthrough of the business of Micro and Micro Companies will fully benefit.
According to MIR Databank statistics, according to the proportion of global wafer manufacturing equipment sales in 2020, etching equipment, lithography equipment and thin film deposition equipment account for about 22%, 22% and 20% of the value of wafer manufacturing equipment, respectively. Etching equipment is one of the most valuable wafer manufacturing equipment.
With the progress of semiconductor process technology, the continuous reduction of line width, and the 3D of chip structure, the current immersion lithography machine is limited by optical wavelength, and logic chips of 14nm and below need to achieve lithography through the process combination of plasma etching and thin film deposition - multiple template process, and the market size of etching equipment under advanced processes is expected to increase.
Chip processing below 10nm requires a combination of thin film equipment and etching equipment to complete the processing: 14nm chips require about 500-600 processing steps, 5nm chip processing steps are increased to more than 1000 times, and the etching processing steps are tripled to 150-160 times.
At present, the etching equipment market is still dominated by a few overseas giants such as Lam Semiconductor, Tokyo Electronics, and Applied Materials, and the influence of domestic equipment manufacturers such as Zhongwei has gradually increased.
The company announced on June 9 that the U.S. Department of Defense will remove Advanced Micro-Fabrication Equipment Inc. ("AMEC") from the list of Chinese military-related enterprises, which will make the company's future business expansion, talent reserves, product exports and other more convenient.
In the manufacturing of logic integrated circuits, the company's 12-inch high-end etching equipment has been used in the advanced chip production lines such as 65nm to 5nm of internationally renowned customers; at the same time, the company has developed less than 5nm etching equipment for several key steps of processing, and has obtained batch orders from industry-leading customers. In the manufacturing of 3D NAND chips, the company's CCP equipment can be applied to mass production of 64 layers and 128 layers, and the new generation of products being developed can cover key etching applications of 128 layers and above, as well as corresponding etching equipment and processes with extremely high aspect ratios.
In addition, the company's ICP equipment is progressing smoothly, has been mass production in the production lines of multiple logic chip and memory chip manufacturers, by the end of 2020, the company's ICP equipment Primo Nanova has 55 reaction stations in operation on the client side, and the number of customer-verified applications continues to increase.
The company is also continuing to explore the ICP etching needs of products such as logic chips below 5 nanometers, DRAM chips with 1X nanometers, and 3D NAND chips with more than 128 layers, and conducts the development of high-yield ICP etching equipment.
The high prosperity of the downstream of Northern Huachuang continues, and the expansion of production capacity + the breakthrough of equipment is expected to promote performance growth.
North Huachuang has been deeply engaged in the field of chip manufacturing etching and thin film deposition for nearly 20 years, and has now become a leading supplier of semiconductor high-end process equipment and one-stop solutions in China.
In 2019-2020, North Huachuang 12-inch silicon etching machine, metal PVD, vertical oxidation/annealing furnace, wet cleaning machine and other high-end semiconductor equipment have entered mass production, 2021H1 Due to the new construction and expansion of integrated circuit logic devices, advanced storage, advanced packaging and other production lines + photovoltaic and third-generation semiconductor industry boom to promote downstream demand, the company's electronic process equipment revenue growth rate of +63.79% year-on-year.
In addition, on April 21, 2021, the company announced a non-public issuance of A shares, which intends to raise no more than 8.5 billion yuan, with a total of 9.620 billion yuan with its own funds, for the expansion of semiconductor equipment and high-precision electronic components, with a construction period of 24 months.
According to the company's announcement, it is expected that the project will achieve an average annual revenue of 7.903 billion yuan and an average annual profit of about 940 million yuan, and the project will increase the production scale and product production capacity, thereby thickening the company's performance in the semiconductor field.
With the company's mature process equipment breaking through new processes, new process products have successively entered customer verification or mass production, and the company's products have frequently received repeated purchase orders from customers, and the growth of the company's semiconductor equipment business is expected to accelerate.
Optimistic about the cleaning equipment to take the lead in localization, the domestic double faucet will enter a period of rapid growth.
The technical threshold of the cleaning machine is relatively low, and we think it is easier to take the lead in achieving full localization. Cleaning equipment in the semiconductor equipment market value accounted for about 5-6%, compared to lithography, etching and other core equipment value is low, but with the complexity of the wafer process process, the number of use of future cleaning machines will gradually increase, the proportion of cleaning machines in the whole line is expected to increase to 10% in the future.
Domestic cleaning equipment double faucet will grow rapidly:
(1) Shengmei Semiconductor:
Shengmei Semiconductor has submitted an application for IPO registration and intends to raise 1.8 billion yuan for the construction of semiconductor equipment R&D and manufacturing center, high-end semiconductor equipment R&D projects and supplementary working capital. On 17 August 2021, the Csrc (CSRC) announced that it had agreed to the registration of Shengmei Shares' initial public offering shares on the Star Market.
(2) Pure technology:
The cleaning machine business has received repeated orders from core customers, and the localization rate has increased to broaden the growth space.
The company already has the production of 8-12 inches of high-end single-wafer wet cleaning equipment and trough wet cleaning equipment related technology, 2021H1 company obtained SMIC Ningbo, SMIC Shaoxing, SMIC Tianjin, Huawei, Yandong Technology, Lijidian and other old customers of the repeated orders of 17 sets of equipment; at the same time obtained green energy core, Tianyue, Innosec, Crystal Fang and other new customers of 11 sets of equipment orders.
12-inch monolithic equipment is the focus of business development, the company has been able to provide all wet process equipment at the 28nm node, and the first batch of monolithic wet equipment has been delivered and successfully verified.
The company's 2021 semi-annual report shows that in the second half of 2021, 7 sets of 12-inch slot equipment and 8 sets of 12-inch monolithic equipment will be delivered to mainstream customer production lines such as SMIC, Huahong Group, and Yandong Technology.
The company's more advanced 14nm-7nm technology generation has received formal orders for multiple processes for 4 sets of machines, which will be delivered to the customer's production line for verification in 2022.
The testing equipment track is good, the localization space is large, and the ecology of domestic leading products is gradually improved.
In November 2020, Tongfu Microelectric was set to increase by 3.25 billion yuan for integrated circuit packaging and testing and vehicle-mounted product packaging and testing projects; in January 2021, Huatian Technology issued an announcement to raise 5.1 billion yuan to expand production capacity; in April 2021, Changdian Technology was set to increase 5 billion yuan for production expansion, testing equipment is a necessary guarantee for the scale of the packaging and testing plant, the amount of investment in testing equipment: the corresponding relationship of the output value is about 2:1, and the increase in capital expenditure of the packaging and testing plant will give rise to more demand for testing equipment.
Huafeng Measurement and Control Tianjin Base, a leader in domestic testing equipment, will continue to promote the production capacity landing + product ecological layout, which will expand the performance growth space.
On September 8, 2021, the company officially settled in the Tianjin production base, which is arranged with two 8200 production lines and a new 8300 production line, and the production capacity target of the new site is revised from 800 units /year in the prospectus to 1200-1500 units/year, so that the company's production capacity expands from 100 units/month in early 2021 to 200 units/month. The release of new production capacity will effectively alleviate the company's production capacity shortage and accelerate the progress of product promotion.
Huafeng measurement and control continues to increase the number of mature products mining and new product research and development, and the product ecology is further improved.
(1) The testing capabilities of mature products 8200 have been continuously improved, such as from common ground source to floating source, test board increase and optimization, from traditional IGBT single tube to third-generation semiconductor and high-power module testing.
As of August 2021, 8200 global shipments have exceeded 4,000 units (about 3,000 units at the end of 2020, and the fourth 1,000 cycle takes only 1 year), and has initially formed an ecological industry chain linked by procedures;
(2) 8300 coverage is larger + the number of simultaneous measurements is less difficult, can be tested for PMIC and power SoC, the current customers include more than 10 design companies and 7-8 packaging and testing plants, such as Ai Wei, Jichuang North, Silicon Jie, etc., as of August 2021, 8300 global shipments have accumulated more than 100 units.
Thanks to the continuous advancement of PC and tablet development and localization, the 8300 platform 2021H1 orders exceed 100 units, close to the level of the whole year of 2020.
In view of the company's high brand recognition + new and old product customers have crossover + product compatibility design, the 8300 import market progress is expected to be faster than the 8200.
<h1 class="pgc-h-arrow-right" >4</h1>
【Zhongwei Company】Domestic etching equipment leader entering the global supply chain; [North Huachuang] multi-business layout wafer equipment leader; [Pure Technology] domestic cleaning equipment leader, in the stage of capacity expansion; [Huafeng Measurement and Control] Semiconductor test machine leader, product ecology continues to improve; [Huaya Intelligent] Semiconductor precision metal parts leading supplier; [Huaxing Yuanchuang] semiconductor test equipment new entrants.
<h1 class="pgc-h-arrow-right" >5</h1>
Fab expansion falls short of expectations:
The semiconductor industry is closely related to the macroeconomic situation and has cyclical characteristics. If global and Chinese macroeconomic growth slows down significantly, or the industry boom declines, the capital expenditure of semiconductor manufacturers may decrease, the expansion of fabs is less than expected, and the demand for semiconductor equipment may also decline, which will bring some pressure to the short-term performance of the semiconductor equipment industry.
The localization of equipment is less than expected:
The technical threshold of integrated circuit special equipment is high, and the technical difficulties of some links or the bottleneck of domestic equipment manufacturers' production capacity may lead to the progress of equipment localization being less than expected.
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