Looking forward to the investment direction of semiconductors in 2022, we believe that there are two relatively definite main lines: localization and electrification.

First, localization: gradually deepening, divided into four stages:

1. Domestic 1.0:In May 2019, the supply of upstream chips in Huawei terminals was limited in order to jam the downstream products of the chips, which directly stimulated the purchase of domestic analog chips, domestic RF chips, domestic memory chips and domestic CMOS chips, which is the first step.

2. Domestic 2.0:In September 2020, the upstream wafer foundry chain designed by Hayes was restricted in order to jam the mid-stream foundry of the chip. As the global wafer factories are heavily dependent on American semiconductor equipment (PVD, etching machine, ion implanter, testing machine, etc.), Hayes can only be transferred to the spare tire foundry chain, directly driving the accelerated development of Semiconductor Manufacturing International Corporation and other domestic wafer factories and closed testing plants.

3. Domestic 3.0:In December 2020, Semiconductor Manufacturing International Corporation entered the entity list, restricting the semiconductor supply chain upstream of the chip, which essentially stuck the upstream device of the chip. In order to achieve supply chain security, we must make a gradual breakthrough in semiconductor equipment and semiconductor materials. Because DUV is not under the jurisdiction of the United States, the key at this stage is to replace American technologies such as etching.

In 2022, the localization path will continue to advance to the 4.0 era along the four main lines.

Domestic 4.0:

1) Semiconductor equipment:The volume of 1-10 will be achieved in 2022, and priority will be given to mature process localization equipment (130/90/65/40/28nm).

2) Chip material:After the equipment, the relay will make a 0-1 breakthrough, and priority will be given to the yellow light zone materials and related companies with upstream material preparation capabilities.

3) EDA/IP will land in the capital market and become a new category of hard technology at the bottom.

4) equipment parts:The vertical promotion of localization makes the industrial status prominent, and the plate will usher in a historical development window.

Second, electrification:In the era of electrification 2.0 + Intelligent 1.0, trams have two brains, one for controlling energy (electricity) and the other for processing information.

1. Electrification:The biggest increment of electrification is electronic control, and the biggest barrier and cost of electric control comes from power semiconductors.

1) traditional silicon-based:IGBT and traditional MOS will continue to dominate in medium and low pressure and traditional scenarios. Due to the acceleration of the lack of core overlay industry, new energy-related IGBT and MOSFET will usher in an opportunity period.

2) Silicon carbide:SiC will be used in high-voltage platforms and high-end application scenarios. Epitaxial, substrate, manufacturing, equipment, IDM areas will usher in the industry boom + domestic replacement + share of the triple promotion.

2. Intelligence:

1) traditional cockpit:In essence, it is the derivation of mobile phone and the expansion of non-real-time operating system under the trend of three-in-one screen. Traditional SoC manufacturers will continue to dominate the cockpit market.

2) Intelligent driving:In essence, a new heterogeneous computing architecture, real-time operating system will be combined with FPGA+GPU+ASIC+CPU heterogeneous chips to achieve self-driving.

Conclusion: the direction of semiconductor investment in 2022 is recommended to pay attention to the following targets.

Mainly divided into9 stages:

Stage 1 (before Q2 2017): no industry β + non-individual stock β + non-individual stock αSemiconductor as a segment of the electronics industry that is not concerned by the market, the main investment activities take place in the primary market, the secondary market is in a wild period, there is no obvious investment context.

Phase II (2017Q2-2017Q4: + 27%)No industry β + weak stocks β + weak stocks α

1) No industry β:The plate effect has not yet been formed, and semiconductors are on the eve of market concern.

2) weak stocks βSince the third quarter of 17 years, the technological revolution brought about by 3G-> 4G has directly driven the rapid growth of global semiconductor silicon content, and the whole plate presents a strong industry α stage. it is mainly reflected in the sharp rise in semiconductor product prices and innovation-driven accelerated expansion of new products, which leads to a significant increase in the performance of companies in the semiconductor industry. However, A-share listed companies are not deeply involved in industrial competition and benefit from less price / innovation / domestic substitution cycle dividends.

3) weak stocks αSome listed companies begin to show a stock alpha, and the typical stock is Zhaoyi Innovation. Due to the superposition of its own α and industry β, the range has risen by as much as 154%.

Stage 3 (2018Q1-2018Q4: plummeting 37%)No industry β + negative stocks β + weak stocks α

1) No Industry βThere is still no valuation flexibility.

2) negative stock βThe semiconductor downward cycle that began in the first quarter of 18 led to the start of a negative cycle and a sharp fall in product prices. At the same time, 4G dividend ends, 5G innovation has not yet started, and the 10-year dividend period of Internet and smartphone innovation ends, which directly leads to the negative industry alpha of semiconductors, and related stocks fall sharply. Affected by the downside of the storage cycle, the Zhaoyi innovation range fell by 46%.

3) weak stocks αSome companies show the high growth attributes of the semiconductor downward cycle, such as North Huachuang.

Stage 4 (2019Q1-2020Q1: up 145%)Strong industry β + weak stocks β + weak stocks α, the magnificent market begins.

1) strong industry β:The first round of US technology blockade against Huawei and the launch of Science and Technology Innovation Board have greatly raised the market's attention to the hard technology industry. Semiconductor as a mainstream technology plate officially debut, reflecting a strong industry β attribute, the overall plate valuation increased significantly.

2) strong stocks βThe pre-cycle of 5G base station and the post-application cycle of 5G directly increase the silicon content greatly, and the consumer electronic chip / radio frequency chip / communication chip shows a strong innovation cycle attribute. Similarly, as Huawei shifts to the supply chain of domestic chip products, semiconductor equipment / materials / analog chips show a strong domestic substitution cycle attribute.

3) weak stocks αAlthough there are a large number of Weir shares / North Huachuang / Wentai Technology / Shengbang shares / Zhaoyi Innovation / San'an Optoelectronics / Beijing Junzheng / Huiding Technology / Changdian Technology, the performance growth of related companies has not occurred in the current period. the increase is mainly due to higher valuations.

Stage 5 (2020Q2-2020Q3: up 49%)Strong industry β + strong industry α + weak stock α, Semiconductor Manufacturing International Corporation and his industrial chain began.

1) strong industry β:The second round of US technology blockade against Huawei has upgraded from directly blocking the sale of finished chips to restricting its wafer foundry industry chain. Superimposed Semiconductor Manufacturing International Corporation login board, Semiconductor Manufacturing International Corporation upstream equipment, materials, closed testing industry chain ushered in a round of forced industry beta.

2) strong stock β:Different from the previous innovation cycle and the domestic substitution pull of Huawei's finished chips, this round of market mainly comes from Semiconductor Manufacturing International Corporation and the domestic substitution pull of the upstream industrial chain.

3) weak stock α:It mainly focuses on Semiconductor Manufacturing International Corporation industrial chain, such as North Huachuang / Shanghai Silicon Industry / China Micro Corporation / Anji Technology / Changdian Technology.

Stage 6 (2020Q3-2021Q1:-18%)Negative industry β + weak stocks β + weak stocks α

1) negative industry βLarge-scale reduction by industrial investors dominated by large funds, large-scale reduction after the lifting of the ban on the initial public offering of Kochuang Board, and the inclusion of Semiconductor Manufacturing International Corporation by the United States on the entity list, directly led to the emergence of negative industry beta in the entire semiconductor sector, specifically killing valuations.

2) weak stocks βThe 5G innovation dividend has gradually faded, the innovation dividend of new energy is still accumulating power, and the price cycle is on the eve of a sharp rise, leading to the differentiation of individual stocks in the industry beta.

3) weak stocks αSignificant growth in the performance of major companies has not yet begun, with related stocks falling by an average of 42% during this period.

Stage 7 (2021Q2-2021Q3: up 37%)Weak industry β + strong stocks β + strong stocks α

1) weak industry βThe reduction of large fund / major shareholder / management holdings continues, a large number of companies have increased financing, a large number of semiconductor companies have registered on the Kecheng board, and the increase in the supply of overall chips suppresses valuation expansion.

2) strong stocks βThe serious mismatch between supply and demand leads to the outbreak of inventory cycle; the innovation cycle brought by AIoT and new energy leads to a substantial increase in chip demand; and the double cycle leads to the acceleration of domestic substitution in the middle and upper reaches of semiconductors.

3) strong stocks αWith price cycle elasticity (drive / MCU/MOS), innovation cycle elasticity (AIoT/IGBT/PMIC), domestic alternatives (semiconductor equipment / materials), the growth of individual stocks has increased significantly.

The following is the rightThe trend of semiconductors in the next two years:

Stage 8 (2021Q4-2022Q4)Weak industry β + strong stock β + strong stock α

1) weak industry βThe reduction of large fund / major shareholder / management holdings continues, a large number of companies have increased financing, a large number of semiconductor companies have registered on the Kecheng board, and the increase in the supply of overall chips suppresses valuation expansion.

2) strong stocks βSerious mismatch between supply and demandInventory cycle burst; brought by AIoT and new energyInnovation cycleLead to a substantial increase in demand for chips; double cycles lead to mid-stream semiconductor manufacturing andAcceleration of domestic substitution of upstream equipment / materials。

3) strong stocks αSemiconductor devices / IGBT/ analog chips / materials have strong alpha properties.

Stage 9 (2022Q4-2023Q4)Weak industry β + weak stock β + strong stock α

1) weak industry βThe reduction of large fund / major shareholder / management holdings continues, a large number of companies have increased financing, a large number of semiconductor companies have registered on the Kecheng board, and the increase in the supply of overall chips suppresses valuation expansion.

2) weak stocks βThe mismatch between supply and demand will lead to an inflection point in the price cycle and a cyclical decline in the prices of some semiconductor commodities; the innovation cycle brought about by AIoT and new energy will lead to a substantial increase in chip demand; and the domestic substitution cycle will continue to break out.

3) strong stocks αSemiconductor equipment / IGBT/ analog chip / material has strong alpha property

To sum up, we classify the development of semiconductors into three periods:

1）The reckless period of the industry: stages one and two before 2019、三

2）Beta dominant period: stages 4, 5 and 6 from 2019 to 2020

3）Alpha dominant period: stages 7, 8 and 9 from 2021 to 2023

Obviously, in the future, with more and more chips provided by semiconductor companies (shareholder reduction, IPO, private placement), there is less and less room for β-driven valuation improvement in the semiconductor sector.The future of the semiconductor plateThe dominant driving force is the α of endogenous growth.。

It is recommended to start from alpha (Corporate governance, R & D strength, industry status) and other aspects to optimize the matchDomestic substitution cycle和Individual stocks in the innovation cycle。

Recommended concerns are as follows:

1) Semiconductor equipment:North Huachuang, China Micro Corporation, Shengmei Semiconductor, Wanye Enterprise, Xinyuan Weiwei, Shenyang Tuojing (to be listed), Yitang Company (to be listed), Huahai Qingke (to be listed), Optical Technology, Huazhuo Jingke (to be listed)

2) Semiconductor materials:Central, Jingrui Electric, Shanghai Silicon Industry, Lion Micro, Shenggong Co., Chinachem Technology (Xuzhou Bokang), Tongcheng Xincai, Dinglong Co., Ltd., Anji Technology, Jiangfeng Electronics, Jianghua Micro, Zhongjing Technology

3) EDA/IP:Huada Nine days (to be listed), Jielun Electronics (to be listed), Core Vision (IPO termination), Guangliwei (to be listed), Xinhe Technology (unlisted), Cambrian, Core original shares, Silxin (to be listed)

4) IGBT:Hua Hong Semiconductor, Shilan Wei, Starr Semiconductor, time Electric, China Resources Micro, Xin Jie Neng, Yangjie Technology, Acer Technology

5) SiC:San'an Optoelectronics, Phoenix Optics, Shandong Tianyue, Tiankeheda, Dongguan Tianyu, Hantiancheng

6) GPU/FPGA/ASIC/CIS:Weier, Anlu Technology, Gekewei, Xinyuan shares, Ziguang Guowei, Jing Jiawei, Stevie (to be listed)

7) equipment components:North Huachuang (MFC products), Shenggong Co. (Silicon electrode), Wanye Enterprise, Xinlai Yingcai, and Lin Weina, Hua Zhuo Jingke (to be listed), Suzhou Kema (unlisted), Fuchuang Precision (to be listed), Quartz shares

Risk Tips:The prosperity of semiconductors is not as good as expected; the domestic substitution of semiconductors is not as expected; and the electrification and intelligence are not as expected.