From 1 to N, domestic semiconductor equipment exploded!

Latest update time：2022-05-30 09:23

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Resonance of stock and increment.

Author / Wen Yu

Editor/ Xiaoshimei

The chip industry, which has been silent for a long time, has another exciting news.

In the past April, mainland China's semiconductor equipment companies won bids for 67 units, with a localization rate of 62%.

Surrounded by giants, the strong get stronger

Semiconductor equipment mainly refers to equipment used in integrated circuit manufacturing and packaging and testing, and can therefore be further divided into wafer manufacturing equipment and packaging and testing equipment. Among them, manufacturing equipment accounts for as much as 86% of the value and is the most core component.

The three major challenges of technical barriers, market barriers and customer awareness barriers have led to the gradual move of semiconductor equipment towards a monopolistic competition pattern, and the market share has accelerated its concentration on leading companies in the past few years.

Statistics from VLSI Research show that in 2021, the industry's CR5 was approximately 84%, a significant increase of nearly 20 percentage points from 65% in 2019 .

In terms of subdivision, semiconductor manufacturing equipment mainly includes thin film deposition equipment, etching equipment, photolithography equipment, cleaning equipment, CMP, ion implantation equipment, heat treatment equipment, coating and development, etc. Among them, the value of thin film deposition, etching and photolithography accounts for the highest proportion, reaching 27%, 22% and 20% respectively.

▲ Image taken from Great Wall Guorui Securities

Every sub-sector is firmly controlled by giants.

For example, thin film deposition equipment mainly includes CVD, PVD, and ALD, which are basically monopolized by AMAT (Applied Materials), Lam Research, and TEL (Tokyo Electron). In the CVD field, the three companies have a combined market share of about 70%; in the PVD equipment market, Applied Materials alone accounts for 85%; in the ALD equipment market, Applied Materials and Tokyo Electron have a market share of 60%.

Etching equipment is still dominated by the above three giants. According to Gartner data, in 2020, Lam Research, Applied Materials, and Tokyo Electron accounted for 47%, 27%, and 17% of the global etching equipment market, respectively.

Needless to say, almost all of the lithography machines are produced by ASML, Nikon and Canon. Among them, ASML has a monopoly on the high-end lithography machine market and has no rivals in the EUV field.

In the field of CMP equipment, Applied Materials and Japan's Ebara dominate over 90% of the global market.

What is even more despairing is that in recent years, the United States, Japan and other countries have been continuously pushing for the establishment of an exclusive "semiconductor industry alliance", trying to add artificial barriers on the basis of the inherent barriers of the industry .

The circle culture of the leaders has strengthened the Matthew effect of the supply chain. Coupled with the patent blockade, latecomers are lagging behind and cannot keep up. In the field of semiconductor equipment, which has extremely high customer stickiness and high certification barriers, this problem is infinitely magnified.

However, even in such a difficult situation, Chinese companies have shown great resilience.

Domestic substitution, counterattack against the trend

In April this year, in a new round of mainland semiconductor equipment bidding, domestic companies won 67 bids, with a localization rate of 62%. Judging from the annual data, the localization rate of semiconductor equipment was 27.4% last year, a significant increase from 16.8% in 2020.

This means that the domestic substitution process that has lasted for many years has entered a period of concentrated realization.

Before Trump took office, the mainstream idea in China was "it is better to buy than to make", and local wafer fabs basically tended to purchase mature equipment from leading overseas companies, so as to reduce certification cycles and costs as much as possible, and thus quickly complete production line construction during a semiconductor boom cycle.

However, semiconductor equipment cannot develop independently and requires collaborative development with wafer fabs. Due to the lack of verification and import opportunities, mainland semiconductor equipment companies have stagnated for a long time.

The Sino-US trade friction is an important turning point. Domestic wafer factories represented by SMIC are facing increasing risks of supply interruption in the fields of equipment and raw materials, forcing related companies to begin supporting local suppliers, and large-scale domestic substitution has officially started.

Today, domestic semiconductor equipment companies have achieved great results in all segments .

In the thin film deposition equipment segment, North Huachuang and Tuojing Technology are the two major leading companies. Among them, North Huachuang has achieved a breakthrough in 28nm/14nm technology, covering all fields such as PVD, CVD and ALD.

In the etching equipment segment, major domestic players include AMEC, North Huachuang and Yitong. AMEC's etching equipment includes CCP and ICP. Currently, CCP has broken through 7-5nm and is also progressing smoothly below 5nm. Last year, the company produced and delivered a total of 298 chambers of CCP etching equipment, with a year-on-year increase of 40%.

In the lithography segment, Shanghai Microelectronics is leading the way and has fully realized localization in 90nm, 110nm, 280nm and other processes. In February this year, Shanghai Microelectronics delivered the first 2.5D\3D advanced packaging lithography machine. According to previous plans, the 28nm lithography machine will also be delivered within the year.

The main domestic participants in the CMP equipment field are Huahai Qingke and Beijing Shuoke Precision Electronics. Among them, Huahai Qingke is the only company in China that has achieved mass production of 12-inch CMP equipment. The company's 12-inch series CMP equipment products have completed mass application, and the process has also begun to advance to 14nm, and has now entered the verification stage.

The “Made in China 2025” plan points out that by 2025, domestic semiconductor core basic components and key basic materials should achieve 70% self-guarantee. Compared with the localization rate of less than 30% last year, there is still a lot of room for improvement. As long as domestic companies can achieve technological breakthroughs, orders are fully guaranteed.

However, compared with the replacement of the existing market, the incremental market brought about by the chip boom cycle is more worthy of attention.

The economy remains prosperous and growth is expected

Since 2020, due to the significant increase in downstream demand for smartphones, data centers, artificial intelligence, new energy vehicles, etc., a "chip shortage" has been set off worldwide. Not only has it not eased, but it has become more and more serious, and various indicators can confirm this.

For example, in terms of inventory levels, the median inventory of semiconductor products was about 40 days in 2019, but by 2021 it was less than 5 days.

Another example is the delivery cycle. By February this year, the average delivery cycle of general-purpose 16-bit processor products had increased by 44 weeks, an increase of 15 weeks compared to October last year.

At present, there is no solution to the chip shortage problem in the short term. According to data from the "2022 Global Semiconductor Industry Survey", nearly 60% of chip company executives believe that the chip shortage will not be resolved until 2023.

During the high-prosperity cycle, wafer fabs have expanded production to lock in profits, and capital expenditures have continued to rise.

In 2021, the capital expenditure of TSMC, the world's leading foundry, reached US$30 billion, and the capital expenditure of SMIC also increased to US$4.5 billion.

In 2022, wafer fabs continue to increase their investment, with TSMC increasing its capital expenditure to US$40-44 billion and SMIC increasing it to US$5 billion.

IC Insights predicts that the global semiconductor industry's capital expenditure will exceed US$190.4 billion in 2022, a year-on-year increase of 24% .

According to previous industry statistics, 70%-80% of wafer fab capital expenditures are used to purchase equipment. In other words, the order volume of semiconductor equipment companies still has a lot of room for growth in 2022.

Overall, domestic semiconductor equipment has broken the monopoly in mature processes. Under the resonance of stock replacement and incremental expansion, it will most likely enter a stage of rapid commercialization.

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