Several listed companies want to grab a piece of the $10 billion filter "cake"

Latest update time：2018-05-06

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Source: Content from National Business Daily, thank you.

On the evening of May 3, Magetech announced that it plans to jointly invest 32.6429 million yuan and 13.0571 million yuan in Chongqing Shengpu Electronics Co., Ltd. (hereinafter referred to as Shengpu Electronics) with Hefei China Electronics Technology Guoyuan Industrial Investment Fund Partnership (Limited Partnership) (hereinafter referred to as Hefei Electronics Guoyuan). After the capital increase is completed, it will hold 35% and 14% of the latter's shares respectively. Magetech said that this equity cooperation is committed to promoting the localization of chips for filters, a core component of the mobile communications industry.

With the coming of the 5G communication era, RF filters are expected to usher in a market worth tens of billions of dollars. In the filter market, which is currently dominated by Japanese and American companies, domestic listed companies represented by Microgate Technology and Sunway Communication are also gradually increasing their investment and actively entering this market to grab a piece of the "cake".

Want to promote the localization of filter chips

The announcement shows that Shengpu Electronics was established in December 1993. In 2017 and the first quarter of 2018, Shengpu Electronics' operating income was 85.6218 million yuan and 23.5746 million yuan respectively, and its net profit was 475,200 yuan and 160,700 yuan respectively.

As of March 31, 2018, Shengpu Electronics' owner's equity was RMB 40.9767 million, and its valuation was RMB 47.5653 million, with a premium rate of only 16.08%.

According to the agreement on capital increase and share expansion, Maxjet Technology plans to invest 32.6429 million yuan, of which 25.8167 million yuan will be included in the registered capital of Shengpu Electronics; Hefei Electric Technology Guoyuan plans to invest 13.0571 million yuan, of which 10.3267 million yuan will also be included in the registered capital of Shengpu Electronics.

After the capital increase is completed, Maxjet Technology and Hefei Electronics Guoyuan will hold 35% and 14% of Shengpu Electronics' shares respectively, while the shareholding ratios of the original shareholders Chongqing Optoelectronics and the 26th Institute of China Electronics Technology Group Corporation (hereinafter referred to as the 26th Institute) will be reduced to 48.45% and 2.55% respectively.

Magetech said that this equity cooperation is committed to promoting the localization of chips for filters, core components of the mobile communications industry, meeting the needs of the domestic high-end smartphone industry, and welcoming the continued growth of the filter market space brought about by 5G and the Internet of Everything era.

A person from the secretary's office of Maxjet Technology told the reporter from the "Daily Economic News" that Institute 26 is professional in the research and development of filter chips, and the company hopes to use the platform of Shengpu Electronics to produce mobile phone filters. Shengpu Electronics has a relatively large wafer manufacturing capacity in the upstream of filters and strong technical development capabilities, but because it originally did military work, its downstream packaging capacity is relatively small. If it wants to make civilian products in the future, Maxjet Technology can just complement its resources.

In early 2016, Magetech raised RMB 450 million through a private placement to start the construction of a radio frequency surface acoustic wave (SAW) packaging process development and production project. However, due to the extended delivery period of equipment from foreign manufacturers, the project was delayed until the end of this year.

The 5G era brings a multi-billion dollar filter market

The market space for filters is highly anticipated by the industry. In a research report last June, Soochow Securities stated that in the 5G communication era, higher requirements for radio frequency signals will lead to a substantial increase in the demand for filters; taking mobile phones as an example, it is expected that by 2020, the global market size of filters for smartphones (SAW/BAW filters) will reach US$11.2 billion.

However, the filter market is still mainly controlled by several companies in Japan and the United States. The aforementioned research report of Soochow Securities shows that in the mainstream surface acoustic wave (SAW) filter and bulk acoustic wave (BAW) filter markets, Japan's TDK and Murata jointly occupy about 70% of the global market share of the former, while the latter is basically monopolized by Avago and Qorvo of the United States.

Despite this, domestic companies represented by Magetech are also actively striving to enter this market. Magetech's 2017 annual report shows that its main business revenue from products such as inductors and filters increased by 24.6% year-on-year in 2017; in 2018, Magetech will fully promote the sales of integrated inductors and SAW filters.

Another domestic listed company, Xinwei Communication, also chose to cooperate with the 55th Institute of China Electronics Technology Group Corporation in June last year, which included both parties investing in the joint construction of a 6-inch GaN chip line platform.

In addition, companies such as Dongshan Precision and Chunxing Precision have also made arrangements in the field of filters.

“At present, domestic manufacturers still face problems such as talent shortage and the need for large investments in production funds and R&D expenses,” the aforementioned secretary’s office person added.

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