The total investment is about 2.5 billion yuan! Yingtang Zhikong plans to cooperate in the construction of Yingtang Semiconductor Industrial Park project

On December 12, Yingtang Intelligent Control issued an announcement on the signing of the "Cooperation Agreement for Yingtang Semiconductor Industrial Park Project".

The announcement shows that in order to continuously promote the strategic layout of transformation to the upstream semiconductor industry, Shenzhen Yingtang Intelligent Control Co., Ltd. (hereinafter referred to as the "Company") and Zhongtang Air-Rail Industry Development Co., Ltd. (hereinafter referred to as "Zhongtang Development") and Shenzhen Yingmeng System Technology Co., Ltd. (hereinafter referred to as "Yingmeng Technology") signed the "Zhongtang Air-Rail Industry Development Co., Ltd., Shenzhen Yingtang Intelligent Control Co., Ltd., Shenzhen Yingmeng System Technology Co., Ltd. on the Yingtang Semiconductor Industrial Park Project Cooperation Agreement" (hereinafter referred to as the "Yingtang Semiconductor Industrial Park Project Cooperation Agreement"). The three parties plan to establish a joint venture project company Sichuan Yingtang Xin Technology Co., Ltd. (tentative name, subject to final registration) to invest in the construction of the "Yingtang Semiconductor Industrial Park" project in Chengdu.

The registered capital of the project company is tentatively set at RMB 500 million, of which Zhongtang Development will contribute RMB 53 million in cash and hold a 10.6% stake.

Yingtang Zhikong or its subsidiaries within the scope of the consolidated financial statements will invest a total of RMB 125 million in equity and currency, and intend to hold 25% of the equity of the project company. Among them, the company's 25% equity in Shanghai CoreStone Semiconductor Co., Ltd. is valued at RMB 105 million. Shanghai CoreStone is a power device research and development, design and sales company listed on the Shanghai Equity Custody and Trading Center. Its business products mainly cover two categories: silicon and silicon carbide.

Yingmeng Technology invested RMB322 million in semiconductor equipment and intellectual property rights and holds 64.4% of the shares. The equipment and intellectual property rights provided by Yingmeng Technology should be related to the production and operation of this project. The value of the equipment and intellectual property rights shall be based on the appraisal price. If the value of the equipment and intellectual property rights provided is less than RMB322 million, the shortfall shall be supplemented by Yingmeng Technology with semiconductor equipment within 18 months after the establishment of the project company.

The total investment of the "Yingtang Semiconductor Industrial Park" project is about RMB 2.5 billion. It focuses on the semiconductor industry, relies on national and local industrial policies, starts with product types such as sensors, power semiconductors, power management chips, and relies on the industry experience, technology, and equipment accumulation of Party A, Party B, Party C and industry experts and professors. It plans to form a semiconductor full industry chain industrial park from IC design, special FOUNDRY production lines, packaging, testing, solution development and application to various links.

The above-mentioned investment project is divided into three parts for investment and construction. The first part has an investment of approximately RMB 220 million, which will be used to build an optical packaging and testing production line with an annual output of 120 million to 180 million pieces and an IPM packaging and testing production line with an annual output of 1.5 million to 2 million pieces. It is expected to be completed and put into production in October 2022, and reach full production capacity in September 2024; the second part has a planned investment of approximately RMB 1.81 billion, which will be used to build a FAB 6-inch specialty (including SiC) process line with an annual output of 720,000 pieces. It is expected to be completed and put into production in October 2023, and reach full production capacity in January 2025; the third part is to build an advanced packaging and testing production line with an annual production capacity of 2 billion pieces, which will be agreed upon based on the situation after the first and second parts of the project are completed and put into production.

Yingtang Intelligent Control said that in recent years, emerging technologies such as 5G, Internet of Things, and artificial intelligence have continued to develop, and the application markets such as new energy vehicles, photovoltaics, wind power, and industrial control have continued to expand, and the scale of the power semiconductor market has continued to grow. According to IHS statistics, the market size of power semiconductors was US$15.17 billion in 2020, and it is expected that the market size will reach approximately US$15.9 billion in 2021, a year-on-year increase of 4.8%. Although domestic power semiconductors started late overall, under the background of global macroeconomic uncertainty caused by trade frictions, high-tech monopolies, and the continued epidemic, accelerating domestic substitution and achieving independent control of the semiconductor industry has risen to the height of national strategy, and the development of the domestic semiconductor industry has ushered in a historic development opportunity.

Since the company started its strategic transformation to the upstream semiconductor chip field in 2019, it has been committed to building a semiconductor IDM enterprise with a full industry chain based on electronic component channel distribution, with semiconductor design and manufacturing as the core, integrating R&D, manufacturing, packaging and testing, and sales. Through the acquisition and integration of Japanese IDM company Yingtang Micro Technology, power semiconductor device design company Shanghai Core Stone, and external cooperation, it has achieved a certain reserve of processes, technical talents, and production line operations in the fields of photoelectric sensors, silicon-based and silicon carbide-based power semiconductors, and power management chips; through the customer and channel resources accumulated by the original distribution business, it has a relatively obvious market expansion advantage; but in the core manufacturing capacity field, the company currently only has Yingtang Micro Technology to provide a device production capacity of 5,000 6-inch wafers per month, and the overall scale is relatively small. To build an IDM enterprise with a full industry chain with market competitiveness, it is urgent to supplement the corresponding product manufacturing capabilities.

Participating in the "Yingtang Semiconductor Industrial Park Project" is an important decision made to meet the company's demand for semiconductor production capacity. After the project is completed, it will mainly meet the company's manufacturing and packaging and testing needs for products such as optoelectronic sensors, power semiconductors and power management chips.

Yingtang Intelligent Control believes that building a semiconductor IDM enterprise with a full industrial chain of R&D, manufacturing and sales is the company's strategic goal of transformation and upgrading to the semiconductor field. Among them, building a complete and controllable production and manufacturing capability is the core of the overall layout. The company continues to promote the implementation of semiconductor production lines through various channels and methods. This time, through Shanghai Xinshi's equity and its own funds to participate in the "Yingtang Semiconductor Industrial Park Project", it will build device manufacturing and supporting packaging and testing production lines, marking the start of the company's production line construction plan. The comprehensive implementation process will also provide important basic support for the company's further large-scale production and manufacturing in the future. After the completion of the project, the company will become a semiconductor IDM enterprise group with a certain scale, increase its competitive advantages and development potential in the accelerated process of domestic substitution of semiconductor products, and promote the early realization of the company's strategic goals, which is in line with the long-term interests of the company and shareholders.

After the establishment of this project company, the company's direct shareholding in Shanghai Xinsheng will be reduced to 15%, and it will no longer be included in the company's consolidated financial statements. However, as shareholders of Shanghai Xinsheng, the company and the project company will continue to maintain all-round cooperation with it, which will not have an adverse impact on the company's financial and operating results.