On July 7, Semiconductor Manufacturing International Corporation, who opened the recent technology market of A shares and Hong Kong stocks, and Science and Technology Innovation Board began to apply for shares.

As we all know, China's economy, which is in the process of industrial upgrading, is stuck in the chip field, and the lack of core greatly limits the process of industrial automation and intelligence. For a while, we found that a lot of everyday things, even very cheap toys, automatic sensing doors and so on will use this small chip, so last year the whole people launched chip science popularization. It can be said that the chip, which connects 5G, consumer electronics, military and other industries, is the key to China's industrial upgrading.

At present, with the intensification of trade frictions between China and the United States, many overseas-listed semiconductor companies are beginning to return home. As the largest and most technologically advanced professional foundry of Chinese mainland, Semiconductor Manufacturing International Corporation applied for purchase in Science and Technology Innovation Board yesterday, which is of great significance to boost the development of domestic semiconductor industry.

Sheng Mei, a veteran of the industry, applies for the listing of science and technology.

After Semiconductor Manufacturing International Corporation, there is also a veteran of the semiconductor industry listed in the United States, whose history can be traced back to 1998, the domestic leader in semiconductor cleaning equipment. The company has submitted an application for listing on the Kechuang board on June 1, and was questioned by the Shanghai Stock Exchange on June 9. It is expected that it will also land on the Kechuang board in the near future.

The controlling shareholder and sponsor of Shengmei Semiconductor is listed in the United States as a controlling company ACM Research (ACMR). It was established in 1998 and has been engaged in the research and development of semiconductor professional equipment since its establishment. It invested in the establishment of Shengmei Semiconductor in 2005, made a breakthrough in 2008, obtained Hynix certification in 2009, and obtained Hynix order for cleaning equipment used in 12-inch 45nm process for the first time in 2011. After more than ten years of development, it has entered the production line of global first-line semiconductor manufacturing enterprises.

Although compared with Semiconductor Manufacturing International Corporation, Shengmei's progress is slightly slower, but a good meal is not afraid of late. Reviewing Semiconductor Manufacturing International Corporation's scientific and technological listing, Semiconductor Manufacturing International Corporation's Hong Kong shares were obviously sought after by funds during the approval period. From June 1 to July 7, the company's Hong Kong shares more than doubled to 117.04%. Similarly, affected by the listing of Sheng Mei Kechuang, ACM Research is also likely to replicate the sharp rise of Semiconductor Manufacturing International Corporation.

Second, the key to Shengmei lies in the supporting role in the industrial chain.

Shengmei Semiconductor is mainly engaged in the R & D and production of semiconductor cleaning equipment, electroplating equipment and advanced packaging wet equipment. It is a rare domestic semiconductor enterprise with worldwide influence. Customers have internationally renowned chip manufacturers, global storage leader Hynix, and more importantly, Shengmei's supporting role for the domestic semiconductor industry.

Including Changjiang Storage, Huahong Group, Semiconductor Manufacturing International Corporation, Hefei Changxin and other major wafer manufacturing and packaging enterprises in China are all Shengmei customers, it can be said that this industrial chain from wafer manufacturing to cleaning and closed testing, in the follow-up, if the decoupling between China and the United States becomes more and more intense, it is the cornerstone of supporting downstream consumer terminals and many chip designers such as Huawei Hayes and Cambrian.

1. The semiconductor industry has a very high threshold

Obviously, semiconductors, as a symbol of high-end manufacturing, can not be done by any country. Its characteristics of high capital intensity, high patent barriers, high initial investment and low return make it difficult for new players to enter. Looking at the world, only the United States and individual European countries, as well as Japan, South Korea and Taiwan, can still occupy a place in the industry. In other countries and regions, I am afraid that only China has the ability to cut into the existing competition pattern.

Shengmei is located in the global semiconductor cleaning equipment segment, the market is also highly concentrated, especially in the field of monolithic cleaning equipment, DNS (Deans Semiconductor, Taiwan subsidiary of Japan Screen Semiconductor Solutions), Japan Tokyo Electron (Tokyo Electronics), LAM (Lam Research Corp LRXCX), SEMES (Sumisi, Samsung holding subsidiary, South Korea's largest semiconductor equipment manufacturer), only four enterprises have a combined market share of more than 90%. Can't help feeling that every link of semiconductor is a giant's game.

The domestic market can play even less, in addition to the industry leader Shengmei, there are northern Huachuang, core micro and even pure technology. However, the four business priorities are different. North Huachuang's cleaning equipment is suitable for 65nm and 28nm process chip manufacturing, while pure technology provides key technologies for 8-12 inch high-order single wafer cleaning equipment. At present, in the domestic cleaning equipment market, Shengmei accounts for about 80% of the market share, and it is the cleaning equipment enterprise with the largest domestic market share and the most complete products.

So semiconductors are so difficult to play, but why do they attract so many high-end players?

2. The semiconductor industry has a broad market

Semiconductor products are mainly integrated circuits represented by chips, accounting for about 80% of the global distribution of semiconductor products. Other products include optoelectronic devices, discrete devices and sensors. Industry revenue reached $419.148 billion in 2019 and is expected to reach $572.788 billion in 2024.

As China is experiencing a new round of rapid rise of smart phones, Internet of things, artificial intelligence, 5G communications and other industries, it has become the most important market for semiconductor applications and consumption. Semiconductor companies all over the world are staring at the biggest piece of fat in the Chinese market, which is why some articles begin to get stuck by others.

Iron striking still needs to be strong on its own, so Chinese semiconductors have begun to intensify their development in recent years. 62 wafer factories around the world have been put into production from 2017 to 2020, of which 26 are located in the mainland. including Changjiang Storage, Hefei Changxin, Semiconductor Manufacturing International Corporation, Huahong Huali all have a number of wafer plants are being expanded, as well as Jita Semiconductor, Shilanwei, Guangdong Core and other new production lines. The period from the establishment of the new wafer plant to the production cycle is about 2 years, so the next few years will be a period of rapid development of semiconductors in the mainland.

According to SEMI, Chinese mainland is expected to become the world's largest equipment market by 2020. This has caught up with a good period of rapid development for Shengmei, which already has technological reserves.

And as the future chip technology enters the 3D era and the continuous improvement of technology nodes, the requirements for the cleaning process of the wafer surface become higher and higher. at present, the chip manufacturing process has set up cleaning processes after repetitive processes such as lithography, etching, deposition and so on. the number of cleaning steps accounts for more than 30% of all chip manufacturing steps, which accounts for the largest proportion of all process steps. The number and importance of cleaning processes will continue to increase, and the demand for cleaning equipment will also increase.

It can be seen that the semiconductor market is very large, and the position of the industry is very critical. although we have caught up and improved rapidly in recent years, there is still a gap between our domestic enterprises and the international advanced level, so why should our domestic enterprises compete with international giants?

Third, domestic manufacturers have obvious advantages in rapid response.

If you want to compete with international first-tier brands, backward players should take the road of differentiation, which is reflected by the level of R & D technology. The semiconductor industry is a costly and laborious industry, and enterprises must have their own unique skills. For example, Shengmei is the first to solve the worldwide problem of high sulphuric acid consumption and difficulty in dealing with the global integrated circuit manufacturing industry for many years.

At the same time, relying on the huge domestic market, domestic semiconductor equipment enterprises have unique conditions, close to customers, have the advantage of rapid response, and can troubleshoot and solve problems in time.

This condition is extremely critical, because the semiconductor industry production line and even the downstream consumer electronics production line, any production line is hundreds of millions of dollars, once started, it will need mass production, if you encounter problems and stop production, it is wasting money. At the same time, the threshold of customer certification in the semiconductor industry is high, and there are strict requirements for the technical standards and reliability of enterprise equipment. However, once the certification is passed, it will maintain a long-term cooperative relationship. Therefore, the advantage of rapid response of domestic manufacturers is obvious.

Shengmei is located in Shanghai, the city with the most complete integrated circuit industry chain and the most industrial structure in China, which is conducive to the development of customer resources, supplier procurement, personnel training and introduction, and has obvious location advantages.

However, as mentioned above, at present, the scale of domestic enterprises is still small, Shengmei's revenue is less than 1 billion, and the bargaining and anti-risk ability of raw materials procurement is relatively inferior.

Conclusion

At present, Shengmei has three state-owned shareholders, namely, Shanghai Integrated Circuit Industrial Investment, Pudong Industrial Investment, and Zhang Jiangke Venture Capital, with a shareholding ratio of 1.18%, 1.18% and 0.39%, respectively.

Science and Technology Innovation Board listing fund-raising is intended to be used for the construction of R & D and manufacturing centers. From the valuation point of view, Science and Technology Innovation Board listed semiconductor enterprises generally enjoy a relatively high valuation, subject scarcity + plate high valuation, which is conducive to corporate financing. ACM Research (ACMR), the controlling shareholder in US stocks, is expected to benefit from the listing of Shengmei Tech, whose share price is likely to rise in the same way as Semiconductor Manufacturing International Corporation's Hong Kong shares.