Getting rid of the "bottleneck" problem is the first step in localizing chips

On May 31, SMIC, which received the second investment from the Big Fund, announced that Datang and the National Integrated Circuit Fund's affiliates may participate in the proposed RMB share issuance. The reporter noticed that as various funds poured into the semiconductor industry, the semiconductor index, which had been in a dominant position in the early stage, once again entered a period of adjustment, with a two-week drop of more than 10%.

Various capitals enter the market

Tianyancha data shows that as of May 26, this year, my country has added 20,021 companies with business scopes including "chips, integrated circuits, and MCUs (microcontroller units)", and 3,922 companies have been added since May. In addition, in terms of newly added registered capital, since May, 248 domestic semiconductor companies of the above three categories have added registered capital, and many of them have increased their capital by tens of millions of yuan.

At the same time, many listed companies have crossed over into the semiconductor industry, such as Tailong Lighting, Tiantong Holdings, Mulinsen, Zhongqian Holdings, and Zhengye Technology.

As semiconductor companies expand rapidly, various investors have increased their investment in the semiconductor industry. For example, BYD announced at the end of May that its subsidiary BYD Semiconductor has introduced a total of 1.9 billion yuan in strategic investment from Sequoia China Fund and other domestic and foreign investment institutions in the form of capital increase and share expansion, with a post-investment valuation of nearly 10 billion yuan.

It is worth noting that the first phase of the Big Fund has invested in semiconductor material companies such as Shanghai Silicon Industry, Yak Technology, and Anjie Technology. The registered capital of the National Integrated Circuit Industry Investment Phase II Co., Ltd. reached 204.15 billion yuan, which is significantly larger than the investment scale of 132.7 billion yuan in the first phase.

Tianfeng Securities analyzed that from a medium- to long-term perspective, the boundary factors for expanding the growth of the semiconductor industry still exist. The downstream application end is mainly 5G/new energy vehicles/cloud servers. Specifically in the domestic market, the "growth" under "domestic substitution" is better than "cyclicality".

Botong Investment's latest strategic viewpoint believes that from a historical perspective, the development of my country's high-end technology and high-end manufacturing sectors such as semiconductors is expected to be a spiral upward trend. In this context, the best investment strategy for semiconductors and other related sectors should be to buy at relatively low valuations during a recession, and at the same time, to cash out appropriately in an environment of high valuations and high expectations, to follow the "spiral upward" investment logic, and to pay attention to the target company's free cash flow discount.

Guosen Securities reminds that the semiconductor industry involves many aspects, and the first step in localization is to get rid of the "bottleneck" first, and then to achieve full localization.

"The market has a full understanding of chip design and semiconductor equipment. However, there is insufficient understanding of the semiconductor manufacturing link, and the capital market is passively ignoring semiconductor manufacturing," Guosen Securities believes.

In simple terms, the production of the entire chip includes four important steps: design, manufacturing, packaging, and testing. At present, most of the industry believes that in terms of chip design, Huawei HiSilicon and Unisoc have gradually moved to the forefront and can be on par with Qualcomm, MediaTek, etc.

Domestic chip substitution cannot be achieved overnight

The domestic semiconductor industry is self-controlled, which is a major trend, but there is still a long way to go before it can be truly realized. The semiconductor field is a complex, sophisticated industry with a clear division of labor. The so-called four links require the collaboration of many companies around the world. Even among the top ten semiconductor manufacturers in the world mentioned in the above list, not all of them can design and manufacture chips by themselves. It is understood that there are only a few manufacturers in the world that can complete their own design and manufacturing, such as Intel, Texas Instruments and Samsung.

I believe many people have heard of ARM. Most mobile electronic products, such as smartphone chips, use ARM architecture. Major companies such as Qualcomm, Apple, and Huawei must obtain authorization from ARM before making chips. This shows that "nationalization" cannot be achieved by investing in a few devices.

Having said that, China's semiconductor sales account for one-third of the global market, making it the largest market. With the promotion of strategic emerging industries such as 5G, the Internet of Things, and new energy vehicles, the demand for semiconductors continues to grow. This is also the reason why the global chip "giants" cannot lose the Chinese market.