SMIC's homeopathic layout in conjunction with large funds to invest in 12-inch production capacity is expected to lock in a larger market share under the tide of shortage.

SMM: last Friday (4th) evening, SMIC issued an announcement that the company's wholly-owned subsidiary SMIC Holdings, the national integrated circuit fund II and Yizhuang Guotou entered into a joint venture contract to jointly establish a joint venture with a registered capital of US $5 billion and a total investment of US $7.6 billion (about 50 billion RMB), including the production of 12-inch integrated circuit wafers and integrated circuit packaging series.

In the current time, SMIC joined hands with large funds to invest heavily in the 12-inch production line, what is the industrial driving force behind it?

High demand superimposed wafer plant to expand production by 12 inches to maintain full load

Recently, wafer capacity emergency has become a "hot word" in the semiconductor industry. Huaxi Securities analyst Sun Yuanfeng reported on October 25th that in the second half of the year, with 5G, AI, IoT driving data centers, consumer electronics, mobile phones and other intelligent terminal demand continues to heat up, the global semiconductor manufacturing foundry's 8-inch, 12-inch capacity are maintained at full capacity.

On the 8-inch side, it is mainly due to high demand such as PMIC and driver chips, and the supply side is in short supply due to superimposed production line restrictions, while on the 12-inch side, the situation is different, mainly benefiting from the expansion of fab production and the increase in new construction:

In terms of logic technology, both SMIC and Huahong are steadily expanding production. At the same time, the global contract manufacturing leader TSMC 5nm process is expected to have full capacity in the first quarter of next year. Smart phones and smart terminals drive HPC demand growth.

In terms of storage technology: domestic Yangtze River storage, Changxin storage capacity is expected to nearly double in 2021 compared with this year, coupled with the recent DRAM, NAND Flash prices gradually stabilized, overseas manufacturers Samsung, Hynix and Meguiar began to actively plan memory shipments in the first half of 2021;

In terms of characteristic process: in order to meet the downstream demand, overseas Infineon, Texas Instruments and other analog chip manufacturers have accelerated the construction of new 12-inch wafer plants, promoting the demand for 12-inch silicon wafers.

12 inches has become the mainstream market share will be concentrated to the head enterprises.

In recent years, with the increase in the number of 12-inch wafers built every year, it has become the current mainstream. According to SEMI's latest outlook report, investment in 12-inch fabs in 2020 increased by 13% over last year, surpassing the all-time high in 2018. Driven by the acceleration of the global digital transformation by the novel coronavirus epidemic, the growth trend is expected to continue into 2021, followed by another peak in 2023.

According to the report of Sun Yuanfeng of Huaxi Securities on November 9, the chip industry will add at least 38 12-inch fabs from 2020 to 2024, and it is a conservative forecast, excluding low-probability or rumored fab projects. During the same period, the monthly fab production capacity will increase by about 1.8 million wafers to more than 7 million.

Sun Yuanfeng believes that the growth of the 12-inch market is driven by two aspects: (1) the demand for electronic terminal products is driven: in the environment of telecommuting and home entertainment affected by the epidemic, the demand for electronic consumer products is increasing rapidly. there is growing demand for cloud services, servers, laptops, games and medical technology.

(2) demand-driven technology upgrades: new-generation applications such as 5G, Internet of things (IoT), automotive, artificial intelligence (AI) and machine learning are developing rapidly, technology continues to drive the demand for greater connectivity, and demand from large data centers and big data is also growing.

According to industry vertical media reports in November, with the rapid recovery of terminal demand such as 5G and smartphones, the current 12-inch capacity of major wafer foundry is fully loaded, and the demand is expected to continue all the way to the first quarter of 2020. On the price side, it is expected to increase by 5% in the first quarter of next year.

In terms of domestic companies, 12-inch semiconductor wafers will be mass-produced and imported from 2019, and wafer manufacturers in mainland China will begin to break through gradually. For example, Shanghai Xinyi and Central shares both have domestic self-controlled 12-inch silicon wafers; as of the first half of this year, the domestic 12-inch silicon wafers have passed a verification cycle of 12 to 24 months, and the scale of mass production has gradually climbed the slope.

Sun Yuanfeng believes that although there has been a substantial increase in domestic wafer manufacturing projects, throughout the historical development path of international semiconductor wafers, domestic wafers are bound to return to market-oriented competition in the future. market share is concentrated to heads with superior resources such as capital, technology, and customers. Therefore, enterprises with capital, technical team, production capacity and other advantages are expected to stand out, gather multi-advantages to give priority to import, and occupy a larger market share.