Domestic silicon wafer manufacturers usher in a golden period, Zhongjing shares raised funds to produce 10.6 million monocrystalline silicon wafers per year

Since 2017, due to the increase in demand for downstream memory chips, automotive electronics, Internet of Things, cloud computing and other applications, the chip foundry giants have vigorously expanded production, and China has vigorously developed the semiconductor industry and accelerated the construction of new chip factories. The shipment volume and market size of the semiconductor silicon wafer market have both shown rapid growth.

Driven by both the market and policies, the performance of domestic semiconductor silicon wafer companies has greatly improved. As a result, unlisted domestic semiconductor silicon wafer companies represented by Zhejiang Zhongjing Technology Co., Ltd. (hereinafter referred to as "Zhongjing Co., Ltd."), Shengong Semiconductor, Silicon Industry Group, and Lianwei (Jinruihong) are actively planning to go public and seek funds for large-scale expansion of production and extension into the field of larger silicon wafers.

Recently, Zhongjing Co., Ltd. announced its prospectus and plans to be listed on the A-share Growth Enterprise Market. The number of shares to be publicly issued will not exceed 24.947 million shares, accounting for no less than 25% of the total share capital after issuance.

According to the prospectus, Zhongjing Co., Ltd. was established in 2010 with a registered capital of RMB 74.813 million. It is a high-tech enterprise focusing on the research, development, production and sales of semiconductor silicon materials. Its main products are semiconductor silicon wafers and silicon rods, which are widely used in the manufacture of various discrete devices. The product specifications cover 3~6 inches, N-type/P-type, 0.0008Ω·cm~100Ω·cm resistance range of silicon rods and grinding sheets, corrosion-resistant sheets, polishing sheets, etc. The final application areas include consumer electronics, automotive electronics, household appliances, communications and security, green lighting, new energy and other fields.

From 2016 to 2018, Zhongjing Co., Ltd. achieved operating income of RMB 160 million, RMB 237 million, and RMB 253 million, respectively; net profit was RMB 32.7175 million, RMB 48.7983 million, and RMB 66.4815 million, respectively; net profit after deducting non-recurring items was RMB 28.4548 million, RMB 45.6895 million, and RMB 64.1052 million, respectively; gross profit margin of main business was 34.06%, 37.67%, and 44.07%, respectively, showing an increasing trend year by year.

In this initial public offering, Zhongjing shares intends to raise funds to invest in three projects, namely, high-end discrete devices and single crystal silicon wafers for ultra-large-scale integrated circuits, enterprise technology research and development center construction projects and supplementary working capital projects. The total investment amount of the above-mentioned raised funds investment projects is 715 million yuan, and it is planned to use 600 million yuan of raised funds.

Among them, the total investment of the high-end discrete devices and ultra-large-scale integrated circuit monocrystalline silicon wafer project is expected to be 615 million yuan, and 500 million yuan of raised funds are planned to be used. The construction period of this project is 30 months. After full production, it is expected to generate an annual operating income of 706 million yuan and an annual total profit of 181.95 million yuan.

At the same time, Zhongjing Co., Ltd. will add an annual production capacity of 10.6 million monocrystalline silicon wafers, including 6 million 4-6 inch grinding wafers per year, 4 million 4-6 inch polishing wafers per year, and 600,000 8-inch polishing wafers per year.

Zhongjing shares said that the company currently occupies a leading position in the field of silicon materials for semiconductor discrete devices, especially in the silicon polishing pad market segment. In the next two years, the company will raise funds for development through various financing channels including stock financing on the existing basis, realize the expansion of the company's existing product production capacity, and increase investment in the research and development of semiconductor single crystal silicon polishing pads, further enhance product advantages, actively expand the market for semiconductor single crystal silicon polishing pads for high-end discrete devices and integrated circuits, continuously enhance the company's innovation ability and core competitiveness, reduce import dependence in related product application fields, and accelerate the company's development in the field of semiconductor silicon materials.

Judging from the shareholder information, the controlling shareholders and actual controllers of Zhongjing Co., Ltd. are Xu Yijun and Xu Wei. Before this issuance, Xu Yijun held 25.5051 million shares of the company, accounting for 34.09% of the company's total shares, and Xu Wei held 11.96 million shares of the company, accounting for 15.99% of the company's total shares. Xu Wei is Xu Yijun's brother. The two parties hold a total of 37.4651 million shares of the company, accounting for 50.08% of the company's total shares.

The author noticed that Mr. Xu Yajun is the chairman and general manager of Zhongjing Co., Ltd. and has served as the deputy general manager of Hangzhou Haina Semiconductor Co., Ltd. (hereinafter referred to as "Haina Semiconductor").

At the same time, the company's director and deputy general managers Mr. Huang Xiaorong and Mr. Guo Bingjian, the company's supervisory board chairman Mr. He Guojun, supervisor Mr. Zheng Weiliang and the company's core technical personnel Mr. Sun Xinli all worked for Haina Semiconductor and left to join Zhongjing Co., Ltd. in 2010-2011. All of the above-mentioned personnel are core technical personnel of Zhongjing Co., Ltd.

It is understood that Haina Semiconductor is a wholly-owned subsidiary of Zhejiang Zhonghe Technology Co., Ltd., which was established in September 2002. Its predecessor was the Zhejiang University Semiconductor Factory established in 1970. It wholly owns a Japanese factory specializing in the production of 3-8 inch semiconductor polished silicon wafers. Its main products are 3-8 inch semiconductor-grade CZ-type single crystal silicon ingots, 3-8 inch semiconductor single crystal ground silicon wafers and 3-8 inch semiconductor polished silicon wafers.

According to the prospectus, Xu Yijun's brother Xu Wei is a director of the company and also serves as a director or chairman of many companies such as Jiangxi Zhenshiming Pharmaceutical and Zhejiang Kangenbei Pharmaceutical Sales Company. In addition, Xu Yijun's younger brother Xu Yihua is the actual controller of Tianjue Technology, a machine vision company that is about to be listed on the Science and Technology Innovation Board, and serves as chairman and general manager.

In December 2015, Zhongjing Co., Ltd. acquired 100% of the equity of Xi'an Longi Jingyi Semiconductor Materials Co., Ltd. (later renamed "Xi'an Zhongjing") held by LONGi Green Energy Technology Co., Ltd. and Meng Haitao, and at the same time acquired 100% of the equity of Ningxia Longi Semiconductor Materials Co., Ltd. (later renamed "Ningxia Zhongjing") held by LONGi Green Energy Technology Co., Ltd. After the acquisition was completed, LONGi Jingyi and LONGi Semiconductor became wholly-owned subsidiaries of Zhongjing Co., Ltd.

According to the disclosure, the main business of Longi Jingyi and Longi Semiconductor is the production and sales of semiconductor silicon materials. Longi Green Energy Technology Co., Ltd. sold them to Zhongjing Green Energy Technology Co., Ltd. for a transaction price of 9.1252 million yuan and 50.1663 million yuan respectively. The transaction was carried out by issuing shares and paying cash. As of now, Longi Green Energy Technology Co., Ltd. holds 9 million shares of Zhongjing Green Energy Technology Co., Ltd., accounting for 12.03% of the company's total shares, making it the third largest shareholder of Zhongjing Green Energy Technology Co., Ltd.