Zhongwei Semiconductor VS North Huachuang, who can be the king in the semiconductor equipment industry?

By Micro Commercial Components (MCC)


Micro-Semiconductor Equipment (Shanghai) Co., Ltd. (hereinafter referred to as "China Micro-Company") is sprinting the science and technology board. As a semiconductor equipment company, there is already a leading company in the A-share market, North Huachuang (002371.SZ). In addition, the overseas competitors facing China and Micro are also very strong.

For China Micro, some of the operational data may not be as good as the North China Ventures. Whether it is possible to make breakthroughs in the business by taking advantage of the opportunity to log in to the board, it is extremely crucial for the company that has just turned a profit. Like North China Ventures, government subsidies account for a large proportion of their income and profits.

Customers from TSMC to Sanan Optoelectronics, some products only have a 1.4% global share

Zhongwei is a high-end semiconductor micro-processing equipment company based in China and facing the world. The company is mainly engaged in the research and development, production and sales of semiconductor equipment, providing highly competitive high-end equipment and high-quality services to global integrated circuit and LED chip manufacturers.

Based on the expertise accumulated in the semiconductor manufacturing equipment industry for many years, Zhongwei is involved in the field of high-end equipment for semiconductor integrated circuit manufacturing, advanced packaging, LED production, MEMS manufacturing and other micro-processes. The company's plasma etching equipment has been widely used in international first-line customers from 65 nanometers to 14 nanometers, 7 nanometers and 5 nanometers of integrated circuit processing and advanced packaging. The company's MOCVD equipment has been mass-produced on the production lines of the industry's leading customers. The company has become the world's leading and domestically dominant manufacturer of GaN-based LED equipment.

During the reporting period, the company's top five customers each year included TSMC, SMIC, Hynix, Huali Microelectronics, Lianhua Electronics, Changjiang Storage, Sanan Optoelectronics (600703.SH), Huacan Optoelectronics (300323.SZ), Dry Photoelectric (300102.SZ), Yanyang Optoelectronics, etc., as well as related companies under the same control of the aforementioned customers. In 2016, 2017 and 2018, the total sales of the company's top five customers accounted for 85.74%, 74.52% and 60.55% of the total sales for the current period.

"The company has outstanding market competitiveness in the domestic etching equipment market. Recently, the orders of the number of etching equipment purchased by two well-known domestic memory chip manufacturers are 15% and 17% respectively," but the prospectus did not disclose the two. The customer name does not disclose the market share of the entire market.

In this regard, Southwest Securities electronic industry analyst Chen Hang said that this fully shows that the company's independent research and development of etching equipment is gradually breaking the monopoly of international leading companies in the domestic market, has been accepted by mainstream integration manufacturers at home and abroad.

However, in response to the Shanghai Stock Exchange's enquiry letter, China Micron said: "Based on Gartner's statistics on the global capacitive etching equipment, the company's global market share of capacitive etching equipment is about 1.4%. The company's business scale continues to grow, and the company's global market share of etching equipment is expected to increase."

According to the prospectus, "The company follows capacitive plasma etching equipment, inductive plasma etching equipment, deep silicon etching equipment, MOCVD equipment (Metal-organic Chemical Vapor Deposition, metal organic compound chemical vapor deposition, MOCVD equipment is Different key R&D objects and project products, such as key equipment in the production process of LED chips, constitute a professional R&D team with clear division of labor."

However, in addition to the 1.4% global share of capacitive etching equipment, the market share of other products, the relevant public information has not been disclosed in more detail.

According to the prospectus, “from the supply side analysis, according to the statistics of China Electronics Special Equipment Industry Association, the sales of domestic semiconductor equipment is expected to be 10.9 billion yuan in 2018, and the self-sufficiency rate is about 13%. Statistics of China Electronics Special Equipment Industry Association Including integrated circuits, LEDs, panels, photovoltaics and other equipment, in fact, domestic self-sufficiency rate of domestic integrated circuit equipment is only about 5%, only 1-2% in the global market, the highest level of integrated circuit front-end equipment market self-sufficiency The rate is lower."

The global semiconductor equipment market is currently dominated by foreign manufacturers, and the industry presents a highly monopolistic competitive landscape. According to VLSI Research, sales of semiconductor equipment systems and services in the world in 2018 were 81.1 billion US dollars. Among them, the top five semiconductor equipment manufacturers occupied the world with their advantages in capital, technology, customer resources and brand. The semiconductor device market has a 65% market share. Among the above-mentioned international first-class companies, Asma has formed an oligopoly in lithography equipment. Applied materials, Tokyo Electronics and Fanlin Semiconductor are the top three processors for plasma etching and thin film deposition. Ketian Semiconductor is a leading company in testing equipment.

"Foreign semiconductor equipment companies are large and mature, and the growth rate of revenue is mainly affected by the global industrial expansion cycle. The A shares of the company and the company's product structure are comparable to the listed company North Huachuang. Domestic semiconductor equipment companies are currently relatively small and in a period of rapid development, and there is still room for improvement in market share." In response to the Shanghai Stock Exchange, China and Microelectronics said.

For the standard North Huachuang, the government subsidy is higher

Market share is still limited. In addition to facing strong overseas competitors, North China Ventures, which has been listed on the Shenzhen Stock Exchange, is also an important benchmarking company for China and Microelectronics. In the 330-page document of the inquiry letter to the Shanghai Stock Exchange, Micro-Company also compared its financial status with the financial data of North Huachuang.

Founded in 2001, North Huachuang is principally engaged in the research, development, production, sales and technical services of basic electronic products. The main products include etching machine, physical vapor deposition equipment, chemical vapor deposition equipment, oxidation furnace, diffusion furnace and cleaning machine. And semiconductor equipment and parts such as lithium electrode sheet equipment. In terms of operating income, China National Microelectronics Corporation was 1.639 billion yuan in 2018, and only less than half of the North China Huachuang 3.324 billion yuan.

Chen Hang said, "Northern Huachuang is mainly engaged in silicon etching equipment, and China Micro-Semiconductor specializes in dielectric etching equipment. North Huachuang is a domestic silicon etching equipment manufacturing giant, and its NMC 612D 14nm FinFET etching machine has many key indicators. To reach the international advanced level, deep silicon etching equipment has also successfully entered the Southeast Asian market. Zhongwei Semiconductor has sat in the leading position of China's dielectric etching equipment market, has reached the 7nm process node, and has become one of the 5 suppliers of TSMC 7nm production line etching equipment. The only domestic equipment company."

In the inquiry letter, the Shanghai Stock Exchange requested Zhongwei to “disclose the situation of comparable companies such as North Huachuang, including but not limited to gross profit margin, period expense rate and accounts receivable turnover rate, income composition, technical level, product structure and customer structure. , research and development investment capitalization rate, etc.". Relevant data shows that China Micro's gross profit margin is 35.5%, which is less than the 38.38% of North China Huachuang. Other data have no advantage; on the other hand, both have many government subsidies.

 

The company's prospectus shows that “the company has undertaken a number of major national scientific research projects since its establishment. During the reporting period, the amount of government subsidies included in the current profit and loss was 116 million yuan, 117 million yuan, and 170 million yuan, respectively. This data exceeds 10% of operating income. The operating income of Zhongwei Company increased from 610 million yuan in 2016 to 1.639 billion yuan in 2018, with an average annual compound growth rate of 64%. In 2018, it turned losses into profits and realized a net profit of 90,836,800 yuan.

According to the North China Huan 2018 Annual Report, “the government subsidy included in the current profit and loss is 177 million yuan. Due to the impact of government subsidies on the financial statements, we regard it as a key audit matter.” 2017 and 2016 The government subsidies for current profits and losses were 388 million yuan and 378 million yuan respectively.

In 2018, North Huachuang achieved operating income of 3.324 billion yuan, a year-on-year increase of 49.53%; net profit attributable to shareholders of listed companies was 234 million yuan, an increase of 86.05%. Electronic process equipment realized operating income of 2.521 billion yuan, an increase of 75.68%. Electronic components realized operating income of 788 million yuan, an increase of 3.23%.

It can be seen that government subsidies are crucial to both operating income and net profit.

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