Semiconductor investment and financing hot spots are changing!

From the shortage of cores to the shortage of production capacity, which caused tension in the industrial chain, to the saturation of production capacity, falling chip prices, and reduction of orders, the focus of investment and financing in the primary semiconductor market began to shift to large markets, large tracks, and projects with predictable commercial implementation. Semiconductor equipment/materials, CPU/GPU, automotive chips and other fields have received multiple projects with a financing scale of 1 billion yuan, while the chip design link that was highly sought after in the past has unexpectedly "gone cold", and the scene of large projects no longer clusters together.

Between the succession and transition, the popular tracks and market opportunities in 2023 are also present, waiting to explode. At the same time, the policies, supply and demand, and investment practices surrounding the semiconductor industry in the past period will also profoundly affect the semiconductor investment logic in 2023.

Industry insiders predict that as inventory is gradually digested in the first half of 2023, there may not be room for the development of some subdivisions until the second half of the year. At the same time, low-end chips, which have been popular in the consumer market in the past few years, are unlikely to return to their previous financing splendor in 2023. Opportunities lie more in high-end chips, semiconductor equipment and components, materials, etc.

"After researching some listed semiconductor companies, it is sad to see batches of newly purchased equipment being idle." In an interview, Zhou Di, an expert at the Whale Platform think tank and senior engineer at Fangrong Technology, described the ups and downs of the semiconductor industry that he had experienced and witnessed in the past.

As the global macroeconomic chill is transmitted to the semiconductor industry, demand in the downstream consumer market is sluggish, and sales of mobile phones, computers, TVs, home appliances and other products continue to decline sharply. " Both domestic and overseas markets are in recession ."

Even the new energy vehicle market, which was at its peak last year, is not as hot as expected. A semiconductor investor said that in communicating with some companies, some leading new energy vehicle manufacturers have already begun to significantly lower their sales expectations for the next few quarters in the fourth quarter of 2022.

"The decline in overall consumer and automotive demand has led to a sharp decline in the shipments of upstream chip design companies. The chip shipments of most companies in 2022 will be less than 50% of that in 2021."

From the initial tension in the industry chain caused by the "core shortage wave" and production capacity shortage, to the cold wave of saturated production capacity, falling chip prices, evaporation of market value, and reduction of orders, Zhou Di, an industry practitioner, said bluntly, " The semiconductor industry has experienced more than Hollywood. It’s also been a thrilling year for movies .”

以上行情迅速传导到了同期一级市场的投资决策当中。转折、分化，也成为密切关注半导体行业发展的投资人或分析人士，对去年行情整体观感的关键词。2022年半导体投资热点和风格，均与以往发生了显著变化。

According to data from Cailianshe Venture Capital, in the domestic primary market investment and financing trends in the semiconductor field in 2022, projects with financing amounts of around 1 billion yuan or more are mainly concentrated in semiconductor materials, semiconductor equipment, CPUs, and GPUs. field, has received extremely high attention and enthusiasm from the market. Take Xinxin Semiconductor, Lihao Semiconductor, Biren Technology, Dongfang Jingyuan, Xinchi Technology and other start-up companies as examples, they have easily obtained 1 billion yuan in financing in the Series B and even Series A stages.

The chip design link, which was highly sought after in the past, has unexpectedly "gone cold", and the scene of large projects no longer gathering together.

Zhang Jinwei, executive director of Tianying Capital, said that chip design, which was very hot in 2020 and 2021, will be almost completely "frozen" in 2022 and will no longer be as hot as the previous two years. "No matter how good the company is, it will face the coming and going of institutions." Talk about the situation of not investing."

But he also found that even if semiconductors enter a down cycle in 2022, companies with relatively strong technologies in equipment, core components, materials, etc. will still receive a lot of policy support and capital support. Therefore, these high-tech barriers will remain in the long term. The project has also been favored by him.

"The investment focus of the semiconductor industry has gradually shifted from the design field to the field of semiconductor equipment and materials, which corresponds to the core chip manufacturing link. The driving force is mainly the market's focus on technological independence. " Bu Rixin, a partner of Chuangdao Consulting, also said He said that only large tracks can give birth to unicorns. "The technical barriers for semiconductor equipment/materials, CPU/GPU, and automotive chips are relatively high, which represent the future growth space of the company, so it is reasonable to give high valuations." .

In addition, investors are also paying more attention to the commercial implementation of the project, instead of blindly chasing trends and concepts like before, and are beginning to return to business logic.

The so-called business logic regression is to achieve commercial implementation and be driven by solid downstream demand. Bu Rixin bluntly said that the cyclicality of the chip industry has always been driven by downstream demand. As investment and financing return to rationality, the investment and financing industry will also fluctuate cyclically with the chip industry. "If any segment will attract the attention of investment institutions in 2023, it will definitely be because the downstream demand for this track has been activated."

Zhang Jinwei also expressed a similar view. For chip design companies that have been neglected in the past period, if there is no certain scale and scale of revenue in 2023, it is "basically unlikely to obtain large amounts of financing."

At present, it seems that the automotive application has the highest degree of discussion and is also the most promising to use downstream demand to drive the reshaping of the upstream industrial structure and form a radiating effect on the high-quality development of the industry.

Take Hangshun Chip, Xinqing Technology, Xinchi Technology and other companies as examples. They have all received large investments of 1 billion yuan in 2022, including Sequoia China, SMIC Juyuan, Shenzhen Venture Capital, Zhangjiang Hi-Tech, etc. Institutional figure.

Not only that, there are currently several semiconductor companies such as Yutai Micro, Ruicheng Micro, Penang Electronics, Anxin Electronics, Deyi Micro, Aola Technology, Huahong Grace, etc., or they may develop their main business for automotive applications. Or the investment projects are directly related to automotive chips and are launching an impact on the Science and Technology Innovation Board.

"The increase in the 'silicon content' of new energy vehicles itself can bring about industry growth. This is one of the reasons why the automotive chip direction is so popular." Zhang Jinwei said, and secondly, there are also reasons for industrial rules, which have led to the replacement of automotive chip supply chains. The moat is relatively higher than that of consumer chips. In addition, the rise of domestically produced automobiles has taken advantage of the new energy trend, which has brought opportunities for industrial transfer. "Sky Eagle Capital has also been paying close attention to suitable investment opportunities."

"All subdivisions of the semiconductor industry have been explored by investment institutions. The hot spot rotation in 2023 will be 'commercial implementation.'" Bu Rixin said that in the past few years, due to their popularity and concepts, they have been sought after by capital. The track and corresponding projects , whether their development meets expectations and whether the products can truly achieve commercial implementation, will be the focus of investment institutions in the next step .

Currently, the semiconductor industry has generally entered a period of inventory adjustment. The industry predicts that the first half of 2023 will be in a destocking cycle, after which it is expected to usher in an industry-wide demand recovery and accelerate the commercialization of upstream projects.

Zhou Di said that for the technological development of some subdivided areas, it is estimated that there may not be room until the second half of the year.

Before this happens, it means that the entire investment and financing industry will face a turning point, "and it will be a relatively painful turning point." Burixin predicts that investment institutions will be more cautious and consider the business logic of projects. Projects will also face cash flow problems and valuation expectations will be significantly reduced.

Zhang Jinwei predicts that most corporate inventories will be gradually digested in the first half of 2023, and the gross profit margin and revenue growth of some high-quality companies are also expected to improve, which will be helpful for financing.

Even so, "the low-end chips that were popular in the consumer market in the past few years are now unlikely to return to their previous financing splendor."

Zhang Jinwei believes that chip design companies in the current market are generally concentrated in the mid- to low-end, and homogeneous competition is serious. Such companies will become increasingly difficult and face the most direct pressure to be eliminated. Design companies that focus on high-end chips will still be in the future. There is a certain market and it will have relatively large growth value in the long term.

" Currently, the risks of overseas foundry of advanced process digital chips are increasing year by year, while the risks of analog chip foundry are relatively less prominent. The pressure still lies on the company's own chip design capabilities. " Zhang Jinwei said that for analog chip companies, they will pay more attention to technology and The market understands dual capabilities, and some high-end analog chips will also have better opportunities.

In addition, Zhang Jinwei predicts that the popularity of semiconductor equipment, components, and materials will continue in 2023, "because there are still many links in this field that have not been broken through, and there are still some opportunities."

However, Zhang Jinwei's attitude towards CPU and GPU seems more cautious. In 2022, Noling Technology and Qilingxin, two domestic companies that specialize in CPU products, "collapsed" one after another, which once made industry insiders and the market sigh.

"Many people ignore that CPU and GPU are essentially capital-intensive and 'eco-intensive' industries. They are 'marathon' industries that require continuous large-scale investment and continuous war of attrition. Conventional startups are basically unlikely to succeed. No matter how impressive the founding team’s track record is, it will be impossible to succeed without the ability to fight for a long time.”

"Tianying basically looked at all the reliable teams in the market before finally selecting the only company that met our requirements. Zhang Jinwei said that this industry started in the second half of last year, and it is expected that the industry will be re-opened by 2023. Back to a very calm state.”