Domestic silicon wafer to usher in breakthrough growth

Thanks to the innovation of semiconductor technology and the increase of consumer electronics, the demand for semiconductor raw materials is also on the rise. Under the background of large-scale expansion of domestic chip manufacturers, domestic semiconductor materials, especially large silicon wafer manufacturers will also usher in development opportunities.

According to Shanghai Silicon Industry, the increase in revenue was mainly due to the acquisition of Xinao Technology at the end of March 2019, and the continued increase in the sales volume of its subsidiary Shanghai Xinsheng 300mm wafers; The decline in profit was mainly due to the continued increase in research and development investment, as well as the impact of market prices, resulting in an increase in the provision for inventory declines.

Semiconductor materials include semiconductor manufacturing materials and sealing materials. According to SEMI, the global semiconductor materials market reached a record high of $51.9 billion in 2018, up 10.6% year on year and surpassing the $47.1 billion market in 2011. Of that, semiconductor manufacturing materials generated $32.2 billion in revenue.

Semiconductor manufacturing materials mainly include silicon wafers, electronic gases, photomasks, photoresist supporting chemicals, polishing materials, photoresist, wet chemicals and sputtering targets, etc. Among them, semiconductor silicon wafer is the core material of semiconductor manufacturing, is the cornerstone of the semiconductor industry, accounting for about one third of the semiconductor manufacturing materials. At present, more than 90% of semiconductor products are made of silicon-based materials.

Benefiting from the strong demand of the semiconductor terminal market, the semiconductor silicon wafer market has been growing since 2017, and exceeded the $10 billion mark in 2018. According to SEMI statistics, from 2016 to 2018, the global sales volume of semiconductor wafers increased from US $7.209 billion to US $11.4 billion, with an annual compound growth rate of 25.65%. The unit price increased from $0.67 per inch to $0.90 per inch, representing a compound annual growth rate of 15.49%.

Wafers used in semiconductor manufacturing can be divided into 50mm (2 inches), 75mm (3 inches), 100mm (4 inches), 150mm (6 inches), 200mm (8 inches), and 300mm (12 inches) according to different sizes. The larger the size of semiconductor silicon wafer, the more difficult its production technology. Under the influence of Moore's Law, semiconductor silicon wafers are moving towards larger sizes.

At present, the mainstream product specifications of the global semiconductor wafer market are 300mm silicon wafer and 200mm silicon wafer, and the proportion of 300mm large silicon wafer continues to rise. In 2018, the share of 300mm silicon wafer reached 63.31%.

300mm silicon wafers are mainly used for integrated circuit chips with processes below 90nm. The introduction of 5G, IoT (Internet of Things), artificial intelligence, cloud computing, big data and other technologies will accelerate the upgrading of semiconductor technology, which will drive the demand for 300mm silicon wafers.

The output and quality of silicon wafers directly affect the development of chip making, as well as many applications further downstream, such as communications, automobiles and computers.

At present, the global semiconductor silicon wafer market is highly concentrated, mainly occupied by Japan, Germany, South Korea and Taiwan, China and other countries and regions. More than half of the world's semiconductor silicon production is concentrated in Japan, and the bigger the size, the worse the monopoly.

From 2016 to 2018, industry concentration continued to increase, with the combined market share of the top five semiconductor wafers -- Japan's Shinetsu Chemical, Japan's Sumco, Germany's Siltronic, China's Taiwan Global Wafer and South Korea's LGSiltron -- rising from 85% to 93%.

As the largest terminal market for semiconductor products, the scale of China's semiconductor wafer market is growing rapidly with the expansion of domestic semiconductor production lines.

According to SEMI data, from 2016 to 2018, semiconductor wafer sales in the Chinese mainland increased from US $500 million to US $996 million, with an annual compound growth rate of 41.17%, much higher than the global semiconductor wafer market of 25.75% in the same period.

At present, our country gradually spans from the construction peak period to the expansion period. According to SEMI data, the number of new FABs planned to be built in China from 2017 to 2020 will account for 42% of the world. From 2020, as the construction is gradually completed and the equipment is moved into the production line, the fab will enter the stage of trial production to expansion production. In the next five years, China's wafer production capacity will experience a breakthrough and rapid increase. From 2017 to 2020, China's chip production capacity will increase from 2.76 million chips per month to 4.6 million chips per month, with a compound annual growth rate of 18.5%, higher than the global average.

At the same time, overseas silicon chip giants are expanding production on a smaller scale. According to SUMCO's forecast, the global 12-inch wafer production capacity will increase slightly in 2020, and there will be almost no expansion plan for 8-inch wafer production. Combined with the global 8-inch wafer production capacity reduction in 2019, the supply and demand pattern of silicon wafer is expected to remain tight in 2020

In addition to new production lines across the country, foundry leader Taiwan Semiconductor Manufacturing Co LTD and China's SMIC Corp have also boosted capital spending this year, boosting sales of semiconductor equipment and materials.

Smic posted another quarterly high in net profit in the second quarter. On August 7, SMIC raised its full-year capital expenditure to $6.7 billion, following an additional $1.1 billion to $4.3 billion in the first quarter, due to strong demand.

Semiconductor silicon wafer is also one of the links with the largest gap between China's semiconductor industry chain and the international advanced level. At present, the domestic semiconductor silicon wafer enterprises represented by Shanghai Silicon Industry and CMC Holdings are struggling to catch up.

At present, the domestic share only accounts for er market about 3% of the global wafshare, and the Chinese mainland mainly produces semiconductor wafers of 200mm and below. Before 2017, 300mm semiconductor silicon wafers almost all rely on imports; In 2018, Shanghai Xinsheng, a subsidiary of Shanghai Silicon Industry, took the lead in achieving large-scale sales of 300mm silicon wafers, breaking the situation that the localization rate of 300mm semiconductor wafers was almost zero.

Some of the 300mm semiconductor silicon wafers of Shanghai Silicon Industry have been certified by SMIC, Huali Microelectronics and other chip manufacturing enterprises, and some target customers are still in the product certification stage.

Shanghai Silicon Industry said that Shanghai Xinsheng is carrying out the second phase of the project, namely the research and development and industrialization of 300mm silicon wafer technology for integrated circuit manufacturing. The production capacity of 300mm silicon wafer production line has been further increased from 150,000 wafer per month in 2019. Although there was a delay in the installation of equipment in the first half of the year due to the impact of the pandemic, the plan to reach 200,000 tablets per month by the end of 2020 remains unchanged through subsequent acceleration.

CMC CMC issued an announcement on the evening of July 15, announcing the progress made by Tianjin CMC CMC Electronic Information Group Co., LTD. (hereinafter referred to as "CMC CMC Group"), its controlling shareholder, on the mixed-ownership reform of CMC. Through bidding, TCL Technology became the final transferee of the Central mixed-use reform project. CMC's main products include semiconductor materials, semiconductor devices, new energy materials, manufacturing and sales of new materials, financial leasing business, and development and operation of high-efficiency photovoltaic power station projects.

Through the Central mixed-use reform project, TCL Technology has further enriched the industrial chain layout of semiconductor display, and extended to the upstream core fields of materials, equipment and so on. Fang Jing, chief electronics analyst at Cinda Securities, said the project will be a win-win for both the city and TCL Technology.

CMC said that the group will orderly promote the company's products to IGBT, MEMS, Sensor, BCD, PMIC, CIS, Logic, Memory and other types of chip coverage, and develop business cooperation with more than 10 of the world's top 25 chip customers.