The 4.1 billion support policy is expected to be officially announced, and the expected benefit is far greater than the IC card sector.
The central level and Shanghai's support policies are expected to be introduced one after another.
In November 2013, the media reported that Xu Xiaotian, executive vice president of China Semiconductor Industry Association, said that the country has already confirmed that it will introduce an integrated circuit chip industry support policy. The plan is led by the Ministry of Industry and Information Technology and has entered the stage of tackling the hardship. The fourth quarter plan is expected to be finalized. And sent to the top for approval, the official release time may be later.
As we have analyzed before, after Beijing's industrial support fund, the central level and Shanghai's support policies can be expected, especially at the central level, the possibility of introduction in the first half of 2014 is relatively large.
Beijing Industry Support Fund is expected to begin its substantive operation
The Beijing Industrial Investment Fund is currently in the stage of selecting a fund management company, and may start a series of substantial actions such as financing and project investment. At present, a core investment project has been identified, namely the SMIC North 45nm fab project. After the completion of fund management companies and financing, this confirmed investment is expected to land soon.
The policy support benefits are far greater than the smart IC card section.
In the fields of financial IC cards, social security cards, NFCsim cards, etc., the state's intention to support domestic manufacturers has become more obvious, and related listed companies are also sought after by the capital market. However, we believe that smart IC card chips are only the tip of the iceberg of the integrated circuit industry. The annual investment of hundreds of billions of dollars in the country cannot be invested in an IC card chip field with a scale of only several billions per year. %%^&*(()~@#%^&
We expect that the future government's support focus must be a key area and key link that has strategic value and can play an important role in the development of China's integrated circuit industry:
From the perspective of the industry chain, the support focus is expected to be the wafer manufacturing process, and the wafer manufacturing process has an outline for the entire integrated circuit industry. If China has several 12-inch wafer fabs with the most advanced process capabilities, the status of the entire Chinese IC industry is completely different. In the era of rapid process improvement, the wafer manufacturing process has a strong influence on upstream chip design and downstream package testing. If China does not have a world-class fab, it is difficult to rely on people in the wafer manufacturing process. Has a world-class chip design and packaging test industry.
The two examples clearly illustrate the influence of wafer fabs on upstream and downstream:
TSMC's 28nm capacity shortage in the early stage, he will give priority to the supply of close cooperation with Apple, Qualcomm, MediaTek and other customers, and the mainland small and medium chip design company is difficult to obtain capacity. The 4G chip and the 4-core chip all require a process of 28nm or less to solve the power consumption problem, which makes these small and medium chip design companies unable to enter the field.
In the second example, the WLCSP packaging technology of the fine material technology is the strongest in the world. After the wafers are made by TSMC, the fingerprint sensor is delivered to the fine technology package. However, the latest news shows that because WLCSP is close to the wafer manufacturing process, TSMC can complete the WLCSP package at the fab, so that it does not need to be handed over to the fine material technology. The order of the fine technology is lost. In fact, current advanced packaging technologies are getting closer to the front-end processes of wafer fabrication, and fabs are increasingly having an impact on package testing.
Finally, the investment in the first phase of the Beijing IC Industry Fund also clearly illustrates this: its design and packaging and testing fund has a total scale of 2 billion in the first phase, while the equipment manufacturing fund has reached 6 billion in the first phase and 75% in the equipment manufacturing sector. .
From the application field, the support should focus on tens of billions of dollars of mobile terminal processors and RF chips every year. In this field, the mainland has initially had a technical foundation, but it still costs tens of billions of dollars to import overseas products every year. The mobile terminal chip has strong control over the entire mobile terminal industry and is a global market. Unlike smart IC cards, which are mainly played in China, once the industry rises, it directly faces the tens of billions of dollars in the global market. It is truly worth investing. Strategic industry.
Therefore, we believe that after the support policy at the national level comes out, the benefit will be the real core of the entire industry, far greater than the limited domestic market of smart IC card chips.
Capital integration, mergers and acquisitions, or continuous performance
In December 2013, Chen Datong, founder of Spreadtrum, said that after the acquisition of Ziguang Group, Spreadtrum may be listed on A-shares, and the market value will reach tens of billions of yuan. At present, Ziguang's acquisition of Spreadtrum has been completed, and the acquisition of RDA is also underway.
We believe that due to the fact that the Sino-US capital market has several times the valuation difference in the semiconductor industry, Spreadtrum will first bring a rich financial return to the AIG Group, making it an attractive investment case. Our industry visits have learned that the IC industry has recently begun to gain funding, and many funds are looking for high-quality semiconductor companies to invest. The rich financial returns and the strong support of national policies, the capital integration of the integrated circuit industry may continue to be staged in 2014.
The characteristics of the integrated circuit industry also determine that catching up from zero is almost impossible, and integration at the capital level is particularly important. Taking Beijing's integrated circuit industry fund as an example, it clearly defines “to promote mergers and acquisitions of key enterprises through capital operation, and to conduct overseas acquisitions when conditions permit, to support and cultivate a group of leading enterprises with core competitiveness” as an investment. One of the directions.
At present, most A-share chip design companies are engaged in relatively simple smart IC card chip business, and most of them are mainly domestic semi-market-oriented public security, banking, and operator markets. Under the demonstration effect of Spreadtrum and RDA returning to A-share “multi-party win-win”, high-quality non-listed companies and overseas listed companies with global competitiveness are expected to join A-shares one after another, and continue to bring new investment opportunities.
4G terminal penetration rate exceeds expectations, improve chip market space and improve the profitability of leading companies
4G terminal popularity is likely to exceed expectations
China Mobile announced at the Global Partner Conference in December that the TD terminal sales target for 2014 is 1.9 to 220 million units, of which LTE is no less than 100 million units. We learned from the industry that the internal KPI assessment indicator of mobile companies may be about 70 million LTE mobile phones. However, we believe that 4G mobile phone shipments in 2014 are likely to exceed this target for the following reasons:
1, 4G unit flow tariffs are very significant, plus Internet speed is significantly faster than 3G, users are expected to have strong demand for 4G services.
Although the mobile package voice call duration is less than Unicom, we believe that data is the more important factor in determining user choice. After the VOLTE technology matures, the voice duration problem will no longer exist.
In the 158 yuan file, the mobile unit flow rate is only half of China Unicom; in the 268 yuan file, it is only 1/6 of China Unicom, which will be very attractive to users.
2. Unlike the market, 4G is expected to infiltrate from high-end users. 4G mobile phones below 1,000 yuan may burst with high-end mobile phones at the same time, making the speed of 4G terminals much higher than expected. Coolpad has launched the mature thousand yuan 4G mobile phone 8720L in December 2013.
At the same time, domestic Lianxin Technology and other chip manufacturers are also about to launch a low-cost AP/BB single-chip solution for 4G mobile phones below 1,000 yuan, which will accelerate the popularization of 4G mobile phones in the low-end market.
3. The enthusiasm of terminal manufacturers to push 4G mobile phones may exceed expectations. The competition among domestic mobile phone manufacturers has become more and more hot. In 2013, although the shipments of major manufacturers increased significantly, the profit was not good. In 2014, terminal manufacturers are eager to get rid of homogenous competition by 4G differentiation. Coolpad announced that it will ship 40 million 4G mobile phones in 2014. Starting from the second quarter, Cool 4G mobile phones will cover 799 yuan. Together with ZTE, Huawei, Lenovo and other major manufacturers, as well as Apple's 17 million, China's 4G mobile phone shipments exceeded 100 million is a high probability event.
In summary, we believe that 4G terminal penetration may be ahead of network coverage and achieved more-than-expected growth in 2014.
From 3G to 4G, the profitability of the chip industry will be greatly improved
From the 3G era to the 4G era, the complexity of mobile terminal chips has been greatly improved, especially for core chips such as APs and BBs for smartphones and tablet PCs. In order to control the standby time of power consumption, 28nm or more advanced processes are required. BB chips need to support at least 3 or even 5 modes. What impact will these changes have on the industry and the company? The ASP of baseband, AP, RF and other mobile terminal chips is expected to double, driving the market scale to expand significantly, and technical barriers will be further improved. For leading manufacturers, it will bring significant improvement in profitability.
In the wafer manufacturing sector: technology upgrades have led to double revenue and gross margins. From 65nm to 40nm, then to 28nm, 20nm, each process upgrade will bring significant improvement of ASP. Take TSMC as an example. The average price of 8-inch wafers in 28nm process is 3100 US dollars, which is much higher than the company's entire wafer. At an average price of 1,300 US dollars, at the same time, due to the relatively large advanced process, TSMC's wafer ASP is significantly higher than the relatively backward competitors such as Taiwan UMC and SMIC.
At the same time, with the advancement of technology and the performance of mobile phone chips (such as multi-mode multi-core), the contribution of each smart phone to TSMC is expected to increase all the way, from $6 in 2012 and $8 in 2013 to 2014. The year is expected to reach $11.
In the package testing process: technology upgrades also bring significant improvements in profitability. The traditional WireBonding packaging technology is basically mature. It is the Red Sea of competition. The gross profit margin is only 20%. Most of the competition strategies between companies are to obtain the relative cost advantage by transferring to low-cost regions, and barely maintain breakeven.
The increasing complexity of the chip, the increasing number of pins, and the increasingly thinner process will inevitably require more advanced packaging technologies, such as the cupillar flip-chip technology for RF and BB. The technical threshold for these upgrades is higher. Interest rates are currently up to 30%.
For WLCSP packaging technology with both technology and market barriers, the gross profit margin of the company's crystal technology (market, inquiry) can reach 57%.
In 2014, the rapid increase of 4G penetration rate will significantly improve the profitability of the packaging industry. At the same time, the thinner, more powerful computing power and longer standby time are the continuous pursuit of smart terminals, which rely on more advanced chip manufacturing. And packaging process to complete. In the medium term, as the continuation of Moore's Law becomes more and more difficult, the importance of technological innovation in packaging will rise, driving the packaging industry to continue to upgrade and profitability will continue to improve.
In the chip design process: As we have previously analyzed the value chain of the Nvidia Tegra4 chip, the chip design company is the most profitable link in the entire industry chain, and also benefits from the ASP upgrade brought by the 3G to 4G performance. At the same time, continuous improvement in manufacturing technology will also challenge chip design. The more advanced the process, the higher the design level requirements, the fewer design companies that can enter the relevant field, and the higher the ASP and gross margin of the product.
It can be seen that from 2G to 3G, from function machines to smart phones, the mobile terminal chip ASP has been improved several times. Spreadtrum is taking the opportunity to achieve several times the growth of revenue. From 3G to 4G, the chip ASP has doubled, providing another opportunity for chip design companies.
We simply estimate that the market size of tds+lte's main chip in 2014 will increase from 2.8 billion US dollars in 2013 to 7 billion US dollars, which provides a huge incremental cake for related chip design companies.