From SMIC's prospectus
Latest update time：2020-06-02
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Last night, local wafer foundry giant SMIC officially submitted its prospectus, marking an important step in its listing on the domestic Science and Technology Innovation Board.
According to the announcement, SMIC plans to issue no more than 168,562,000 ordinary shares in RMB to the public (before exercising the over-allotment option), and plans to raise RMB 20 billion for the 12-inch chip SNI project, reserve funds for advanced integrated mature process R&D projects, and replenish working capital. The specific proportions are shown in the figure below:
SMIC's fundraising purposes (source: company prospectus)
In addition to the above information, the prospectus also discloses information including the company's operating conditions, the international competitive environment and the risks the company faces in the future. Let's take a closer look here.
Some basic information about SMIC
According to the 2018 global market sales ranking of the pure-play foundry industry released by IC Insights, SMIC ranked fourth in the world and first among Chinese mainland companies.
SMIC's business scope (source: company prospectus)
It can also be seen from the prospectus that SMIC, founded in 2000, is one of the world's leading integrated circuit wafer foundries. It is also the most technologically advanced, largest, most comprehensive supporting service, and multinational professional wafer foundry in mainland China. It mainly provides customers with integrated circuit wafer foundry and supporting services for multiple technology nodes from 0.35 microns to 14 nanometers and different process platforms. All of this is mainly completed by the company's six production lines (Note: As of the end of 2019, SMIC South's production line has not yet met the conditions for transfer to fixed assets).
The main production lines of SMIC (source: prospectus)
In terms of finance, in 2019 ending December 31, 2019, SMIC's revenue was RMB 22 billion, a slight decline from RMB 23 billion in 2018, but in terms of profit, SMIC's revenue was RMB 1.268 billion in 2019, a significant increase from RMB 360 million in 2018 and even RMB 900 million in the previous year. R&D investment was as high as 21.55%.
SMIC's revenue in the past three years (source: company prospectus)
In the field of logic processes, SMIC is the first wafer foundry in mainland China to achieve mass production of 14nm FinFET, representing the most advanced level of mainland China's independently developed integrated circuit manufacturing technology; in the field of specialty processes, SMIC has successively launched mainland China's most advanced 24nm NAND, 40nm high-performance image sensors and other specialty processes, and cooperated with leading companies in various fields to achieve sustained growth in special memory, high-performance image sensors and other market segments.
In addition to the IC foundry business, SMIC is also committed to building a platform-based ecological service model to provide customers with one-stop supporting services such as design services and IP support, photomask manufacturing, bump processing and testing, and to promote upstream and downstream cooperation in the IC industry chain, and work with partners in all links of the industry chain to provide customers with a full range of IC solutions.
Integrated circuit wafer foundry is the main source of the company's main business income, accounting for 95.94%, 89.30% and 93.12% of the main business income during the reporting period. The income structure of the integrated circuit wafer foundry business in each period divided by process technology is as follows:
SMIC's revenue situation (source: company prospectus)
In terms of patents, according to the prospectus, as of December 31, 2019, there were 8,122 major patents related to production and operation registered under the name of SMIC and its holding
subsidiaries
, including 6,527 domestic patents, including 5,965 invention patents;
1,595 foreign patents, and the company also owns 94 integrated circuit layout designs.
As for shareholders, as shown in the figure below, we can see that Datang Hong Kong is the largest shareholder of SMIC, with a shareholding ratio of 16.23%, followed by Xinxin Hong Kong, which holds 15.05%. Tsinghua Unigroup's subsidiary is the third largest shareholder of SMIC, with a shareholding ratio of only 7.39%. Other shareholders account for as much as 61.33% of the company.
SMIC's shareholder structure (source: company prospectus)
After talking about the shareholder composition, we also need to introduce the employees of SMIC. According to the prospectus, SMIC had a total of 15,795 employees as of December 31, 2019. It can be seen that this data is a significant decline compared to 17,671 in 2018. According to the introduction, this is mainly because after the sale of LFoundry, the number of employees in this part of the business and kindergarten employees was not included. Among the more than 15,000 employees, 2,530 are R&D personnel, accounting for 16.02%. There are 1,867 managers, which is also as high as 11.82%, but the company's sales are only 193, accounting for only 1.22%. As can be seen from the table below, operators are the largest component of the company's employee level, which is mainly related to the nature of the company.
Changes in SMIC's Main Business
According to the prospectus, SMIC has been engaged in integrated circuit manufacturing business in the foundry mode since its establishment. The company's main business, main products and main business model have not changed significantly. The development of the company's main business has mainly gone through the following stages:
(1) Foundation period: 2000-2004
In 2000, the company started construction in Pudong, Shanghai, and is the first integrated circuit wafer foundry in mainland China to provide 0.18-micron technology node.
In 2001, the company completed the construction of the 8-inch production base in Shanghai; in 2002, the company achieved full technical certification and mass production of 0.18 micron. In the same year, the company held a groundbreaking ceremony for the 12-inch production base in Beijing.
In 2003, the company acquired Motorola's wafer factory in Tianjin and established SMIC Tianjin. The company has successively achieved comprehensive technical certification and mass production of 0.35 micron to 0.13 micron, marking the completion of the initial accumulation of the company's integrated circuit wafer foundry technology. In 2004, the company achieved profitability for the first time and was listed on the Hong Kong Stock Exchange and the New York Stock Exchange.
(2) Accumulation period: 2004~2015
Since 2004, the company's Beijing 12-inch production base has been gradually put into production. The successful implementation of the 12-inch integrated circuit wafer foundry business is an important milestone in the company's development process, marking that the company has become an enterprise with both 8-inch and 12-inch integrated circuit wafer foundry businesses.
In 2005, the company's annual operating income exceeded US$1 billion for the first time, and it successfully achieved the upgrade and mass production of 90 nanometers, 65/55 nanometers, and 45/40 nanometers in 2006, 2009, and 2011, respectively, and its technical service capabilities were greatly improved. In 2013, the company's annual operating income exceeded US$2 billion for the first time.
(3) Rapid development period: 2015 to present
In 2015, the company became the first enterprise in mainland China to achieve 28-nanometer mass production, achieving a breakthrough in zero production of high-end chips in mainland China. The company entered a period of rapid development after strategic adjustments, and started the construction and expansion of production bases in Shanghai, Beijing, Tianjin and Shenzhen respectively.
In 2017, the company's annual operating revenue exceeded US$3 billion for the first time. In 2019, the company made significant progress, achieving mass production of 14nm FinFET, and the second-generation FinFET technology entered the customer introduction stage.
Today, the company has become one of the world's leading integrated circuit foundry companies. In order to meet the increasingly stringent production requirements of domestic and foreign customers, the company has further established a large database, relying on artificial intelligence and intelligent learning systems to timely discover the key factors that affect the company's production cycle, production quality and finished product yield, and continuously improve its production and manufacturing capabilities. In the future, the company will adhere to its internationalization strategy, maintain advanced technology research and development, and further enhance its core competitiveness.
The report points out that since its establishment, SMIC has been engaged in integrated circuit manufacturing business in the wafer foundry mode, and has derived related supporting services. At the same time, the company has accelerated the iteration and update of technology and services according to market demand and technology development direction, and continuously launched process platforms at different technology nodes to maintain the world's leading technology research and development advantages. The mass production time of the company's key technology nodes is shown in the figure below:
Introduction to SMIC's Technology Platform
We talked about SMIC's process structure above, but did not introduce it in depth. In this part, we will give a detailed introduction.
The report pointed out that after years of development, SMIC has achieved rich scientific and technological achievements, some of which have reached the international leading technical level. The company has successfully developed a variety of technology nodes from 0.35 microns to 14 nanometers, which are applied to different process technology platforms. It has the mass production capabilities of multiple technology platforms such as logic circuits, power/analog, high-voltage drive, embedded non-volatile storage, non-volatile storage, mixed signal/RF, image sensors, etc., and can provide customers with integrated circuit wafer foundry and supporting services in different fields such as communication products, consumer products, automobiles, industry, computers, etc. The company's technical level and the application of the company's scientific and technological achievements in different industries are as follows:
1. Logic process technology platform
In the field of logic circuit manufacturing, SMIC has successfully developed multiple technology nodes including 0.35/0.25 micron, 0.18/0.15 micron, 0.13/0.11 micron, 90 nanometers, 65/55 nanometers, 45/40 nanometers, 28 nanometers and 14 nanometers. It is one of the most technologically advanced wafer foundries in mainland China with the widest coverage of technology nodes.
In the field of advanced logic technology, SMIC is the first foundry in mainland China to provide the world's leading 14nm technology node. Currently, the company's first-generation 14nm FinFET technology has entered the mass production stage, and the second-generation FinFET technology has entered the customer introduction stage. Chips made on wafers using the company's advanced FinFET technology have been widely used in smart phones, tablet computers, set-top boxes and other fields.
In the field of mature logic processes, SMIC is the first foundry in mainland China to provide 0.18/0.15 micron, 0.13/0.11 micron, 90 nanometers, 65/55 nanometers, 45/40 nanometers and 28 nanometer technology nodes. At present, the company's 28 nanometer process is the mainstream technology in the industry, including traditional polysilicon and high-k metal gate processes with a back gate; the company's 45/40 nanometers, 65/55 nanometers and 90 nanometer processes have achieved a fusion of high performance and low power consumption; the company's 0.13/0.11 micron and 0.18/0.15 micron processes have achieved full copper processes and aluminum processes respectively, effectively controlling costs while meeting high performance. The company's chip products made using mature logic process technology platforms have been widely used in processors, mobile basebands, wireless interconnect chips, digital TVs, set-top boxes, smart cards, consumer products and many other fields.
2. Characteristic process technology platform
In addition to logic circuit manufacturing, SMIC has successfully developed a variety of special process platforms such as power/analog, high-voltage drive, embedded non-volatile storage, non-volatile storage, mixed signal/RF, image sensors, etc., all of which have reached the industry's advanced technical level.
Among them, the power/analog technology can provide a module architecture based on the existing low-power logic process platform, providing superior performance for analog and power applications; the high-voltage drive technology platform covers 0.15 micron, 55 nanometers, 40 nanometers and other technology nodes, provides medium-voltage and high-voltage devices, and optimizes the high-voltage display driver chip SRAM unit; the embedded non-volatile storage technology platform covers 0.35 micron to 40 nanometer technology nodes, with low power consumption and outstanding durability; the non-volatile storage technology platform covers 24 nanometers, 38 nanometers and 65 nanometers to 0.18 micron technology nodes.
The chip products made by the company using its unique process technology platform have been widely used in many fields such as power management, automotive and industry, communications and consumer electronics.
3. Supporting services
(1) Design services and IP support
SMIC has a professional design service team of more than 200 people. It cooperates with the technical R&D team to provide design services and IP support for integrated circuit wafer foundry business. At present, the company has the basic IP development and chip customization capabilities under the most advanced FinFET process in mainland China, and can provide customers with a variety of IP modules, as follows:
① A full range of standard cell libraries, suitable for various chip designs with high performance, consumer, low power consumption and specific functions;
② Various input/output port IPs such as general-purpose, oscillator and customized types, as well as corresponding ESD compliance inspection services;
③ From high-speed series to high-density series, from high-speed to low-voltage static random access memory compilers;
④Analog IPs such as analog-to-digital conversion, digital-to-analog conversion, phase-locked loop, temperature and voltage sensor, and electronic fuse can cover a variety of applications from high performance and high precision to low power consumption and small area.
In addition, the reference design process developed by SMIC based on the leading EDA platform can serve the chip design of various technology nodes such as 0.13/0.11 micron, 65/55 nanometers, 45/40 nanometers, 28 nanometers and 14 nanometers. At the same time, the company provides cost-effective back-end layout and layout and routing services to help customers accelerate product design and mass production introduction.
(2) Photomask manufacturing
SMIC has the largest and most advanced photomask manufacturing facilities and the most professional photomask manufacturing process R&D team in mainland China, and is able to provide photomask products for 14nm mass production and more advanced technology node R&D. The core processes involved in the company's photomask manufacturing include front-end layout data processing, electron beam drawing, development and etching, and back-end defect inspection and control, all of which are developed by the SMIC team and have independent intellectual property rights. Its product line can cover all of the company's integrated circuit wafer foundry processes. At present, the company is the only company in mainland China with the ability to mass produce FinFET photomasks. Its 14nm photomasks have been stably mass-produced, and have reached the industry's leading level in terms of performance, quality, yield and delivery cycle.
(3) Bump processing and testing
SMIC is the first manufacturer in mainland China that can provide mid-stage bump processing on integrated circuit wafers manufactured using 28nm to 14nm processes. The integrated circuit products it packages and tests cover a wide range of fields, including mobile communications, consumer electronics, memory, power management, etc.
Comparison between SMIC and its peers in terms of mass production time for key technology nodes (source: company prospectus)
According to the company's prospectus, SMIC is currently developing 12 projects, including existing project upgrades for advanced and mature process technologies, specialty process technologies, and new product development projects. The details are as follows:
In addition, the prospectus also disclosed that SMIC also undertook several national special projects, including 7/5 nanometer integrated circuit pilot processes and new system integration technologies. This deserves high attention.
Risks facing SMIC
When talking about the risks that the company may face, SMIC said that it needs to focus on multiple risks, such as technology sharing, the risk of shortage or loss of technical talents, technology leakage and operational risks. In particular, its sixth point talks about the risks brought about by the adjustment of US export control policies.
According to them, at present, economic globalization has encountered twists and turns, multilateralism has been impacted, and international financial markets have been shaken. In particular, the Sino-US economic and trade frictions have had an adverse impact on the production and operation of some companies and market expectations. The company insists on international operations and consciously abides by the laws and regulations of relevant countries and regions involved in production and operation activities. Since its establishment, it has operated in compliance with regulations and carried out production and operation activities in accordance with the law.
In May 2019, the U.S. Department of Commerce added several Chinese companies to the “Entity List”; in May 2020, the U.S. Department of Commerce revised the Foreign-Produced Direct Product Rule. According to the revised rules, some semiconductor equipment and technologies imported from the United States may not be used to manufacture products for certain customers before obtaining administrative approval from the U.S. Department of Commerce.
There are still many uncertain legal concepts in the above-mentioned revised rules, and the extent of their specific impact has not yet been accurately assessed. The above-mentioned Sino-US economic and trade frictions and other related external factors may lead to certain restrictions on the wafer foundry and related supporting services provided by the company to some customers. The company may face production restrictions and reduced orders, which will have an adverse impact on the company's business development and operating performance.
As mentioned above, although SMIC has achieved good results in the past few years, compared with its international competitors, as shown in the figure below, SMIC still has a long way to go.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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