On the evening of June 1, SMIC’s IPO application was officially accepted by the Shanghai Stock Exchange, aiming to raise 20 billion yuan.
According to SMIC’s prospectus, 8 billion yuan, or 40% of the funds raised, will be invested in the ongoing 12-inch SN1 project of SMIC’s SMIC Southern Semiconductor Manufacturing Co.
Earlier, the National IC Foundation and other institutions jointly injected 21.3 billion yuan into SMIC, bringing the total funds raised by the board to 41.3 billion yuan. Smic raised a large amount of funds in the context of escalating trade frictions between China and the United States, its significance is self-evident.
In the semiconductor industry, technology has always been the core competitiveness of leading enterprises. Wafer foundry technology development progress, need a lot of capital investment. However, the technological progress of the semiconductor industry is a long-term process, and SMIC’s current technological level is still slightly behind. If we want to catch up with the international cutting-edge level, we need to accumulate solid achievements.
Embrace A shares, SMIC’s mass production breakout return to A shares, intended to catch up with advanced process technology
Chip manufacturing and design technology in semiconductor industry is mainly reflected in processing equipment, processing technology, packaging test, batch trial production and design innovation ability.
At present, the most advanced OEM enterprise in China is SMIC, whose main business includes OEM and technical services of chips ranging from 14 nanometers to 0.35 microns. Among them, the foundry business of integrated circuits is the core of SMIC’s revenue, accounting for 93.12% of the business revenue in 2019.
This time SMIC listed on the Science and Technology Innovation Board, the funds raised are mainly used for advanced wafer foundry technology research and development. The SN1 project, which SMIC plans to invest $8bn in, will focus on making integrated circuit chips with 14nm and higher processes. Behind smIC’s accelerated pace of research and development, it is also inevitably affected by the escalating trade friction between China and the United States.
Smic may be affected in terms of production and orders as trade frictions between China and the US escalate. So it makes sense for SMIC to step up research and development.
Smic’s 14nm foundry technology is the most advanced IC foundry technology level in the semiconductor industry in China. But compared with the industry’s highest level of technology, SMIC’s manufacturing process is at least two generations behind. And to close that gap, you need a lot of capital, which is why this is happening.
The nodal algebra of the nanoprocess refers to the distance between the transistor source and drain of the semiconductor material. For example, in the 7nm process, the line width between the transistor source and drain is 7 nanometers.
Moore’s Law states that performance doubles for every doubling of the number of components that can be accommodated on an integrated circuit. According to Moore’s theory, the lower the nanoscale process, the smaller the gate line width, the more components the integrated circuit can hold and the better its performance, so the semiconductor industry’s top companies are moving to the high-end technology.
For semiconductor manufacturing enterprises, the node algebra of the process represents the r&d strength of the enterprise wafer technology. At present, the highest production process in the industry is TSMC’s 5nm process and SMIC’s 14nm process. In 16nm and higher processes, TSMC has 12nm, 10nm and 7nm processes, while SMIC has only 14nm processes above 16nm.
It can be seen that smIC’s manufacturing process and TSMC compared to a large gap. Such a technological gap, SMIC under the pressure of scientific research can be imagined.
In 2018, SMIC spent 4.5 billion YUAN on R&D, accounting for 19% of its revenue. In 2019, 4.7 billion yuan was invested, accounting for 22% of the operating revenue. In addition, SMIC’s annual r&d investment is still increasing.
After intensive research and development, SMIC’s 14nm process was finally put into mass production in 2019, and the yield reached 95%. However, the slow growth of wafer capacity continues to plague SMIC.
Embrace A shares, SMIC’s mass production breakout wafer capacity is A problem
Smic shipped an average of 205,000 units per month in 2019, while TSMC produced an average of 1.083 million units per month, according to industry data. In 2019, SMIC produced 5.153 million chips, while TSMC produced 10.1 million.
In terms of average monthly shipments, TSMC’s output is nearly five times smIC’s; Annual output figures show that TSMC’s output is about twice that of SMIC. And smIC has long mature 28nm process technology, yield has not been a great breakthrough.
The gap in WAFER capacity between SMIC and TSMC comes down to technology. However, TSMC is the industry leader after all, smIC in all aspects of the poor data is understandable.
The gap in wafer manufacturing technology is also reflected in the premium products as a share of total revenue. In the fiscal report of Q1 2020, TSMC’s 7nm process shipments accounted for 35% of the total revenue, and 16nm and higher process level processes accounted for 55% of the total revenue. However, SMIC has only 14nm process higher than 16nm and only 1.3% of total revenue, which is still a big gap.
Obviously, COMPARED with SMIC, TSMC’s wafer manufacturing technology has an advantage in terms of capacity. In 2019, TSMC generated revenue of 247 billion yuan and 16nm and higher process creation revenue of 135.8 billion yuan, while SMIC generated only 286 million yuan. From the comparison between TSMC and SMIC’s 16nm and higher process revenue, the characteristics of semiconductor industry technology to create profits are vividly demonstrated.
In technology research and development, capacity is also smIC must overcome a difficulty. And wafer foundry technology progress, need a large number of high-end technical personnel and long-term accumulation of practice, it is difficult to make a breakthrough in a short time. Breakthrough technology research and development to improve the scale of mass production, hope to seize the opportunity to break through the limit, this is the current listing of another layer of meaning.
After the 3nm process approaching the limit of Moore’s law, the nano process will enter the technical bottleneck, and this period will become the best period for SMIC to break out of the technological siege.
Embrace A shares, SMIC mass production breakout 3nm into the best breakout opportunity
In the nano process, the higher process also means that the transistors on the chip are more concentrated, and too much concentration of transistors will lead to the transistor source and drain channel shortened, transistor gate current can not flow from the source to drain, more likely to cause quantum tunneling effect, so that the logic circuit failure.
According to the industry, the current limit of the nano process is 3nm. Beyond 3nm, quantum effects disable the transistor as a switch, thus rendering the logic circuit useless. Tsai Mingjie, chairman of Mediatek, said that development beyond 3nm will be extremely difficult and the technology is expected to hit a bottleneck by 2025.
After 3nm wafer process research and development, companies will be stagnant for a long time. This period of time will be an opportunity for SMIC to catch up with the international wafer manufacturing process.
The purpose of SMIC’s listing on the Science and Technology Innovation Board is to accelerate the development of foundry technology, and strive to catch up with the international semiconductor cutting-edge level under the opportunity of 3nm pole limit process. However, technological progress in the wafer process is a cumulative process, and SMIC still faces a lot of pressure to catch up with international standards in the bottleneck period of the 3nm process.
As a leading enterprise in the domestic semiconductor industry, SMIC bears the hope of technological breakthrough in the domestic semiconductor industry. Although the road ahead is difficult, SMIC still has to carry forward, after all, as the representative of the highest level of technology in China, SMIC has no retreat.