First, from the simple pursuit of advanced technology-> return to mature technology ("new 90/55nm" is much larger than "old 7nm")

After Semiconductor Manufacturing International Corporation entered the entity list, the practical significance of 7nm based entirely on American equipment is far less than that of American equipment.Based on the mature process of domestic equipment, the wafer foundry is not the bottom technology of semiconductors, but the integrator of chip equipment, materials and processes. The main contradiction of Chinese semiconductors has shifted from the lack of advanced process training to the lack of domestic semiconductor equipment and materials.

China lacks advanced 14/7/5nm technology, but China also lacks mature 13um/90/65/55nm technology. Weierhaowei's CIS chip (55/45nm), Zhaoyi's innovative NOR (55/45nm), Huiding's fingerprint identification (55nm), Zhuosheng micro / Siripu / Shengbang analog chip (up and down 90nm) all need mature process capacity.From the perspective of the current industry, China can achieve a comprehensive domestic replacement of photovoltaic, LED and LCD panels, and mature process chips can also be produced by domestic equipment, materials and processes.

With the advantage of root technology, the United States will continue to attack other countries and control the chip manufacturing of high-end processes and advanced processes, and this situation will not be reversed in the short term. We expect that the process of domestic substitution at low latitudes will continue and China will dominate pan-semiconductor technology from the bottom up. Before great progress is made in the field of root technology, such as equipment and materials.First, do a good job of mature process return to furnace for recycling., and then gradually overcome the advanced technological barriers, spiral development.

It is the most realistic task for Chinese semiconductors to return to the mature process reengineering based on domestic equipment.7nm of American equipmentIts practical significance is far less than55nm based on domestic TechnologyThe fab.The practical significance of fabless, which serves these mature processes in China, is also greater than that of FinFET processes with much smaller customer base.

Second, by simple external circulation->Internal and external double cycle (de-A, not localization)

The global science and technology pattern will be reshuffled, showing a state of atavism against globalization. Even if it is as strong as the United States, it only participates in a small part of the semiconductor industry. China, Europe, Japan, the United States, South Korea and Taiwan each occupy an indispensable part of the industrial chain.

Semiconductors are an industry with a fully global division of labor, and no country can achieve all internal circulation alone.Therefore, there is no so-called full-link localization in the semiconductor industry, and the basis for de-beautification and de-An in some key areas is the combination of equipment and materials from Europe and Japan, as well as manufacturing from South Korea and Taiwan Province of China.

On the other hand, the United States is based on high-end manufacturing and makes up for its shortcomings downward. The third quadrant refers to Japan (materials), South Korea (storage), Europe (equipment) and Taiwan Province of China (OEM). Relying on its leading edge in the subdivision industry, it independently circulates outside China and the United States.The intermediate medium for the external circulation of the global hard technology market。

According to the resource endowment of self-development and the distribution of elements, the global hard science and technology is divided into three quadrants:

First quadrant:Led by the United States

Second quadrant: led by Chinese mainland

Third quadrant:To South Korea, Japan, Taiwan Province of China, Europe as the leading (intermediary).

Under the pressure of external environment, China's local Fabless and Fab are facing the crisis of upstream supply chain, but the path of China's independent development will not be changed because of external pressure. With the proposal of the internal circulation policy, the futureChina is based on mature Fab and carries out external circulation with the third quadrant.

1. Mature process = internal circulation is dominant and external circulation is secondary.

2. Advanced technology = external circulation is dominant and internal circulation is secondary.

Based on the objective laws of the global industry, we believe that the external circulation of science and technology between China and the United States will continue in the following links:

1. Equipment:External circulation of equipment with European and Japanese "intermediate media", but internal circulation of domestic equipment in American ETCH, PVD, CVD, CLEAN, CMP, ANNEAL, etc. (northern Huachuang, Yitang, Shengmei, Huahai, Wanye, Zhongwei, Zhi Chun, Fine Test, etc.)

We divide the equipment companies into three categories: ecological level, platform level and product level. Platform is the only way for global semiconductor giants, and most of the global semiconductor equipment is controlled by a few (Applied Materials Inc, LAM, TEL, etc.).

By analyzing the growth path of the giants, we sum up two inevitable trends of semiconductor equipment:

1) platform of the productThe front process equipment is fully covered (except lithography and measuring equipment)

2) full coverage in pan-semiconductor fieldThe homology of pan-semiconductor technology leads to the expansion of product matrix to multiple fields such as LCD, LED, third-generation semiconductors and so on.

Based on the above analysis, we define the future market pattern of domestic semiconductor equipment as "one super and four hegemons are more powerful":

1) platform levelNorth Huachuang (etching machine, PVD, cleaning machine, CVD, ALD, oxidation, annealing, MFC)

2) quasi-platform level:Yitang Semiconductor and Shengmei Semiconductor

3) single product level:Shenyang Tuojing, Shangwei, Zhongwei, Wanye Enterprises, Huahaiqingke, Zhongke Flying Test, Zhongke Xin, Huafeng Measurement and Control, Precision testing Electronics, to Pure Science and Technology. Together, they constitute the underlying ecology of semiconductors in China.

2. Materials:External circulation of materials (large silicon wafers, photoresist, etc.) with these "intermediate media" in Japan and Europe, internal recycling of domestic materials in a variety of large silicon wafers, electronic gases, electronic chemicals, sputtering targets and other fields (Central, Shanghai Silicon, Lion, Jacques, Jingrui, Jiangfeng Electronics, etc.)

3 、 IP/EDA:Carry out software ecological external circulation with American (ARM, Synopsys, Cadence, etc.), but also carry out internal circulation in various new scenarios and new applications of EDA and IP in China (Huada Nine days, Core Vision, Guangliwei, Xinhe Technology, Core original shares)

4 、 Fab/IDM:External circulation with memory chips in South Korea and foundry in Taiwan Province of China, and internal circulation in China relying on self-built fab and IDM (SMIC, Huahong, Changshun, Changxin, Huarun Micro, Shilan Micro, Jie Jie, Yangjie, Gekewei, Zechuang).

Therefore, in the future, China will maintain the lowest internal circulation in mature processes to carry out independent innovation of underlying technologies (equipment, materials, EDA/IP), and review the development of pan-semiconductors in China. In the next few years, we think that Chinese semiconductors will beOn the basis of the inner cycle as much as possible, the double cycle system is realized by relying on the outer cycle.

Third, led by technological breakthroughs->Capacity expansion is dominated

Semiconductor Manufacturing International Corporation undertakes three tasks:

1. Research and Development and Breakthrough of Advanced TechnologyLike FinFET 14/7nm.

2. Operation and production of stock production capacityMainly in SMIC plants in Beijing, Shanghai, Tianjin and Shenzhen

3. Expansion of new production capacityThe capacity expansion based on the existing mass production technology is mainly a mature process.

For a variety of reasonsMature new capacity expansion, which should have been given first priority, has not been fully implemented.. Semiconductor Manufacturing International Corporation Beijing Joint Venture Line finally received formal funding at the end of 2020 after several setbacks, but at this time the global production capacity crisis based on 8-inch and 12-inch mature technology has broken out.

China's huge Fabless industry is facing the shortage of foundry capacity in global wafer factories, and there is no strong capacity reserve force at home.According to Semiconductor Manufacturing International Corporation's prospectus and IC insight data, Semiconductor Manufacturing International Corporation's monthly production capacity of 8-inch slices is about 400000 tablets, far less than Taiwan Semiconductor Manufacturing Co Ltd's monthly production capacity of about 2.7 million tablets, while Hua Hong Semiconductor, which ranks second in China, has a monthly production capacity of only 220000 tablets, according to Huahong's official website.

Among the three major tasks of Semiconductor Manufacturing International Corporation in the futureThe top priority is to expand production to meet the needs of domestic Fabless and to provide safe and controllable OEM services.Maintaining the normal operation of the stock capacity is the second priority. As for the breakthrough in advanced technology, this is not within the reach of the individual company, but toThroughout the United Nations semiconductor equipment, materials, IP/EDA manufacturers work together to break through the systematic project.

Therefore, Jiang Shangyi's return and Semiconductor Manufacturing International Corporation's substantial revision of mature process Capex are in line with the general trend of this industry, and are Semiconductor Manufacturing International Corporation's correct and inevitable choice in the face of brand-new international forms and conditions (sanctions on American equipment).

1. Production capacity is the king：Production capacity has become the most certain opportunity in this period, and the fab has become the chassis for all downstream innovations.

2. Equipment comes first：Behind the price increase is the shortage of goods, behind the shortage is the tide of production expansion is coming, equipment will usher in a round of strong growth.

3. Local production capacity：Different from the previous cycle of capacity expansion based on the background of globalization, this capacity expansion will run under the framework of localization and de-A.

Fourth, it is recommended to pay attention to three major opportunities.

1. Opportunities for fab manufacturing:Semiconductor Manufacturing International Corporation, Huarun Micro, Changdian Technology, Wentai Technology, Hua Hong Semiconductor, Shilan Wei, Jie Micro Power, Yang Jie, Shenzhen Science and Technology, Jingfang Technology, Tongfu, Huatian, TCL, BOE, San'an Integration

2. Opportunities for equipment expansion:North Huachuang, Yitang Semiconductor, Shengmei Semiconductor, Wanye, Huafeng Measurement and Control, Changchuan, Zhichun, Dazhong, Huahai, Zhongwei, Jingmei, Jingsheng

3. Opportunities for material localization:Central shares, Shanghai Silicon Industry, Lion Micro, Jiangfeng Electronics, Jacques Technology, Jingrui shares, Cunninghamia lanceolata, Sanli Spectrum, Anji Technology, Divine Industry shares.

Risk Tips:The macroeconomic environment deteriorated, the epidemic situation was repeated, and the demand for electronic components was lower than expected.