New Industry Story Of "The Best Venture Capital City": Invest 10 Billion Yuan To Support BOE, And Crystallographic Integration Plans To Raise 12 Billion Yuan To Conquer 55Nm Or Become A Life And Death Battle

? ? ? Hefei City, Anhui Province, has built up advanced manufacturing industry clusters including panels, chips, new energy vehicles and other advanced manufacturing industry clusters in a few years, and is nicknamed as the "best venture capital city" by netizens.

Recently, Hefei wafer integrated circuit Co., Ltd. (hereinafter referred to as wafer integrated), an IPO enterprise of the science and technology innovation board, replied to the first round of inquiries. The controlling shareholder of the company is Hefei Construction Investment Holding (Group) Co., Ltd. (hereinafter referred to as Hefei Construction Investment), and the actual controller is Hefei state owned assets supervision and Administration Commission.

The IPO of wafer integration plans to raise 12 billion yuan, which is mainly used to invest in the construction of the second 12 inch wafer manufacturing plant. No matter in terms of the scale of fund-raising or industrial ambition, it can be called another big move of Hefei state-owned assets.

? ? ? Behind the big move is the ultra-high positioning of crystal integration since its inception. Founded in 2015, wafer integration is a joint venture between Hefei Construction Investment and Taiwan Lijing Technology Co., Ltd. (hereinafter referred to as Lijing Technology). It is the first enterprise focusing on 12 inch wafer foundry and the first 10 billion yuan integrated circuit project in Anhui Province. The project is regarded as an important step for Hefei to build "China's IC capital". At present, wafer integration has become the third largest pure wafer foundry in mainland China (after SMIC and Huahong semiconductor) and the third largest 12 inch wafer foundry capacity in mainland China.

From the first round of the reply letter of crystallographic integration, we can have a glimpse of how the local governments in the central and western regions can attract enterprises with external advantages to invest in resources through forward-looking industrial thinking and a series of preferential policies, so as to quickly build a competitive advanced manufacturing enterprise from scratch. However, there is also a B side of "express". Under the high degree of overlap of major customers and suppliers, how can the development independence of crystal integration and its actual business as well as the main shareholder be ensured? In the process of continuous breakthrough, can enterprises only passively wait for the technological support of powercrystal technology?

Another precise layout of state owned assets in Hefei

In 2015, BOE has been deeply rooted in Hefei. The 6th generation line and the 8th generation line have been put into operation. The 10th.5th generation line project is about to start construction. The scale of Hefei's new display industry is small.

However, there is still a long way to go with the industrial development strategy of "core screen device integration" proposed by Hefei. How to realize the design, manufacture and use of panel driver chips in Hefei, and end the situation that domestic panel chips are all imported?

At this time, in Taiwan, across the Taiwan Strait, Li Jing technology, which started with DRAM business, transformed into the field of wafer foundry, but the overall business performance was still weak and the debt pressure was not small.

Lijing technology has turned its attention to the mainland of China, with a view to building wafer plants in mainland China by means of technology shares, and to gain a share of the huge market in mainland China.

One is ambitious in the semiconductor industry, the other is eager to enter the mainland of China, and the two sides naturally hit it off.

On April 27, 2015, Hefei and Lijing technology jointly signed the "12 inch wafer manufacturing base project cooperation framework agreement" to cooperate with Lijing technology in the 12 inch wafer manufacturing base project, and Hefei construction investment set up wafer Co., Ltd. as the project company.

According to public reports, the Hefei government has made many "concessions" in order to introduce Lijing technology. Lijing technology said that in view of its own financial situation, Lijing technology will not invest in the first year, and will gradually invest in shares with a small amount of capital and technology from the next year, and the ultimate shareholding will not exceed 50%.

In the end, Hefei state-owned assets and other shareholders undertake most of the actual investment. According to public information, the total investment in the first phase is 12.81 billion yuan. On May 12, 2015, the state owned assets supervision and Administration Commission of Hefei City issued an official reply, agreeing to establish a wholly-owned subsidiary of Hefei Jinghe integrated circuit Co., Ltd.

Just a year and a half later, Anhui's first 12 inch wafer factory has sprung up in Hefei Xinzhan hi tech Zone. At the completion of the project, Huang Chongren, founder and CEO of Lijing technology, said that it usually takes two-and-a-half to three years to build a plant in advanced countries, and it only takes one and a half years for the crystal integration to complete its production, which is not easy.

In addition to providing financial and policy support, Hefei government has provided very loose conditions for Lijing technology in terms of operation and technology.

Hefei municipal government signed the cooperation framework agreement and technology transfer agreement with Lijing technology, and introduced 58 kinds of patent technologies to the crystal integration, with a technology investment value of 2 billion yuan. At that time, Li Xiange, general manager of wafer integration, said that at present, there were about 800 employees in the total, of which 250 technical talents from Taiwan were recruited with Lijing technology as the backbone, and both of them also sent personnel support or training to each other, which was one of the largest technical exchanges in the history of both sides of the Taiwan Strait.

The early operation and management of crystal integration was directly entrusted to Li Jing technology. Crystallography and powercrystal technology signed the contract of entrusted operation and management (hereinafter referred to as the contract). According to the agreement, Lijing technology should regard the company as an extension of its factory, fully support the company's operation and management, so that the company can make profits quickly, expand production capacity and achieve the IPO goal. In the contract, both parties agree that Lijing technology shall appoint auditors, deputy chief accountants and other management teams, and transfer and authorize technology and experience management to crystal integration.

The entrusted operation will not be terminated until December 25, 2019. Prior to that, there were nine directors on the board of directors of the highest authority of the company. According to the articles of association of the company, the approval of 2 / 3 directors is required for major business, financial and personnel matters, while Hefei Construction Investment Group has 5 seats, less than 2 / 3《 The contract will not be terminated until January 2020.

With the full support of Hefei state-owned assets and the "help" of Lijing technology, the growth of crystal integration is rapid. In particular, in 2015, Lijing technology provided the basic technical documents and specification documents related to the 90nm / 110Nm / 150nm process related to chip foundry to the crystallographic integration, which directly laid the foundation for the company's business start.

From the performance point of view, in recent three years, with the help of the industry development opportunities, the revenue of crystal integration has increased rapidly. According to Frost & Sullivan's statistics, wafer integration has become the third largest pure wafer foundry enterprise in mainland China with the third largest revenue and the third largest 12 inch wafer foundry capacity in mainland China (excluding foreign holding enterprises), which has effectively improved the independent level of the foundry industry in mainland China.

Back to the original intention of the establishment of the crystal integration, from a higher position, is the implementation of the Hefei government's "core screen device integration" strategy. To a small extent, it was established in a joint venture for the purpose of "supporting the main customer BOE". Huang Chongren has cooperated in the public opening several times to express this expression.

In July 2017, the first batch of wafers produced by wafer integration was officially offline. The local official media commented that "wafer integration is expected to become the world's largest manufacturer focusing on panel driver chips." After the wafer project is put into operation, the problem of combining "core" and "screen" has been solved. It is expected that the localization rate of Hefei's panel drive chips will be increased to 30% within five years, breaking the situation that domestic panel chips almost rely on imports.

However, since the disclosure of the prospectus, the market has found that the main customers of Jinghe are not the expected BOE. From 2018 to 2020, the overseas business of the company accounted for 98.59%, 87.69% and 83.51% respectively. In 2020, the company's largest customer Lianyong Technology Co., Ltd. sales revenue accounted for 51%.

On this basis, some voices think that the integration of the crystal seems to be deviated from the original intention.

It's not.

Lin Zhi, chief analyst of witdisplay, explained to the reporter of 21st century economic report that "the establishment of wafer integration is indeed a supporting manufacturer of BOE. The reason for the above situation is related to the division of chip design and wafer manufacturing. BOE generally puts forward the demand to the driver chip design company, and then the design company designs the chip according to the demand, and finally the wafer is produced on behalf of the factory, and the driving chip is the main product of Lianyong. "

With regard to the cooperative relationship with BOE, the 21st century economic news reporter has repeatedly called the Securities Department of crystal integration. After the reporter was asked to leave contact information, there was no reply up to the time of publication.

Is it independent of powercrystal technology?

The rise of wafer integration is inseparable from powercrystal technology. However, a series of "loose" cooperation conditions and a large number of overlaps in procurement and sales between the two enterprises in the early stage make the market generally pay attention to the independence of crystal integration.

The above-mentioned entrusted business matters, the technology investment of powercrystal technology and the harsh conditions for new shareholders in the early stage are all the basis for the outside world to question the lack of independence of crystal integration.

In the first round of inquiry recently disclosed by the Shanghai Stock Exchange, the first question directly asked the identification of the company's actual controller. The Shanghai Stock Exchange also focused on the issues such as the entrusted operation of crystal integration, core technology, coincidence with shareholders' power crystal technology business and customers, and the focus directly pointed to the independence of the company.

In this regard, the reply to the Shanghai Stock Exchange in terms of wafer integration is mainly due to the fact that Lijing technology is an internationally renowned wafer manufacturing enterprise with mature experience in project operation and management, and the cooperation between the two sides can cooperate with technology introduction and accelerate the overall development of the company. At the same time, crystal integration stressed that in January 2020, both parties terminated the "contract" for the reason of completing the cooperation content.

Supplier overlap is also a historical legacy of entrusted operation. Crystallographic integration explains that in the early stage of production and operation, in order to ensure the success of technology transformation and stable quality, the company mainly purchased from the suppliers listed in the list of qualified suppliers provided by Lijing technology in combination with the past industry experience and the actual needs of production and operation. Therefore, it is reasonable to overlap with the suppliers of powercrystal technology and its subordinate enterprise, Powerchip.

Technology dependence is just as serious. According to the prospectus, by the end of 2020, there have been 71 invention patents related to the main business income. Among them, there are 44 invention patents transferred by Lijing technology, accounting for 62%. In addition, four of the five key technical personnel listed in the company's Prospectus have worked in Lijing technology. Another key technical personnel has worked in Lianhua electronics and SMIC international, and joined the crystal integration in 2019.

In terms of customers, the two overlapping customers are Lianyong technology, Qijing optoelectronics, Jichuang north and Tianyu Technology. However, this part of the question is well explained. According to Jicheng, these companies are the design companies with the highest market share, and it is reasonable to place orders from different foundry companies.

In addition to the high degree of customer overlap caused by upstream customer concentration, in the view of some industry insiders, customer overlap is also the continuation of the order complementary support formed by the two companies in history.

In a recent interview with the media, Cai Guozhi, chairman of wafer integration, once talked about the separation and cooperation between Taiwan's powercrystal and SCMC, "as a holding company, Lijing technology does not engage in wafer foundry business. The two companies have their own R & D process and corporate planning. ".

In addition to the question of independence, wafer integration also faces the challenges of poor performance and actual competitiveness.

First of all, although the crystallographic integration is the third in mainland China, there is a huge gap with the top two.

An image comparison is that in 2020, the revenue of Huahong semiconductor is 6.272 billion yuan, while that of the same period is only 1.512 billion yuan, less than 30% of the former.

In the past three years, the company is still in a huge loss. During the reporting period, the attributable net profits were - 1.19 billion yuan, - 1.24 billion yuan and - 1.26 billion yuan, respectively, with an accumulated unrecovered loss of 4.369 billion yuan.

Linzhi analysis, this is mainly due to the large investment in the early stage of wafer production“ At present, the production capacity of crystallographic integration is not large, and there is no scale effect. However, the 12 inch equipment is very expensive. The total investment is more than 10 billion yuan, and the early amortization cost is high, so it is generally not profitable. In the future, with the increase of business, production capacity and profits, it is possible to cover costs and amortization and turn losses into profits. " Lin Zhi told reporters.

Win 55nm and below process

Depreciation and amortization are only one reason for the company's huge losses. The other reason is that the company has not yet broken through the "key product" of 55nm, which makes it impossible to share this rather fat "cake". Whether the 55nm process can break through the large volume in a short time or is the key point to improve the profitability of the wafer integration.

At present, wafer fabrication mainly provides 150 nm to 90 nm wafer foundry services. The main products of the OEM are panel display driver chips, which are applied in the LCD panel field. We are developing a 12 inch wafer foundry platform with 55nm process nodes.

The process node is one of the most widely used nodes in panel display driver chip. In an interview with the media, Wu Hanming, academician of the Chinese Academy of engineering, said, "compared with 5nm chips, it is more meaningful to master 55nm chips, because many electronic products can not use chips with advanced process technology such as 5nm."

SMIC's revenue structure also confirms this point. In the second quarter of this year, its 55 / 65nm process accounted for the highest proportion of revenue, 29.9%.

"Judging from the current product line of wafer integration, there is no need for advanced process, and mature technology is used for manufacturing ordinary LCD panel driver chips." Lin said.

In view of the 55nm process is a key resource, prior to the market news, powercrystal technology once hesitated to transfer the 55nm technology.

The game was once very intense. Fortunately, however, under the background that domestic panel manufacturers occupy absolute capacity advantage and wafer manufacturers generally "cold pair" display driver chip orders under the "core shortage tide", the industrial influence and bargaining power focused on the wafer integration of display driver chips have gradually increased. Some domestic display driver chip design companies have also begun to seek deep binding with wafer integration. According to the prospectus, Jichuang north and other enterprises have signed letters of intent with the company, so the two sides will certainly establish a more stable supply relationship in the future.

According to the industry chain source, the company is expected to increase the monthly production capacity of 50000 tablets in 2021 according to the new production capacity planning of the company. In the face of massive market demand, the customers of crystal integration are "settling down" to pursue production capacity for a long time.

Under the temptation of huge market scale, although crystal integration is breathtaking, it has successfully obtained the transfer technology.

From the perspective of progress, the development of 55nm is relatively smooth. It is planned to roll out the products from customers in May 2021 and mass produce them in October of the same year; The development of 55nm logic chip platform is expected to be completed in December 2021, and will be imported into client's streaming.

After the completion of the project, the crystal integration will realize the rapid expansion of production capacity, which is also an opportunity to realize scale effect.

According to the prospectus, the 12 inch wafer manufacturing plant 2 project will build a 12 inch wafer foundry production line with a capacity of 40000 pieces / month. The main products include power management chip (PMIC), display driver integrated chip (DDIC) and CMOS image sensing chip (CIS). In addition, a micro production line will be built for the development and trial production of OLED display driver and logic technology. The total investment of the project is about 16.5 billion yuan.

Cai Guozhi once talked about the company's profit schedule: "the goal of 2021 is to double the revenue to 3 billion yuan, and the company must start to make profits. In addition, we also need to complete the N2 plant construction and product diversification, including the expansion of CIS products in mass production, and the completion of 55nm development and mass production. Secondly, the IPO of the science and technology innovation board was successful. "

According to Cai Guozhi's plan, the second factory will officially enter the mass production stage in 2022, and the company's revenue will reach 5 billion yuan and maintain stable profits.

Crystallography also said that a 40 nm micro production line will be built for the development and trial production of OLED display drive and logic technology, and the advanced technology will be promoted to 40 nm.

According to cinno research data, in 2020, the capacity share of Taiwan in China is about 61%, and that of mainland China is about 13%. With the expansion of wafer integration and SMIC international capacity, it is estimated that the capacity share of Taiwan will drop slightly to 56% in 2021, and the capacity share of mainland China will increase to 20%, and the market share of enterprises in mainland China will continue to increase.

However, the technical challenges ahead remain daunting. Nyingchi said that with the increase of product lines, the demand for flexible OLEDs and high-resolution display driver chips is increasing. Only by breaking through 55nm, 40nm and 28nm processes can we seize greater market opportunities.

Zhang Xiaorong, President of the Institute of deep science and technology, also said, "it is not technically difficult to overcome 55nm. At present, the market share of the process is large, and the next step will be 28nm."

Zhang Junfu, vice president of North China operations, once pointed out that the domestic wafer foundry needs to expand the production of high-pressure process with 55 / 40 / 28 nm process nodes and below to meet the chip supply demand of OLED drive panel factories in the future. In addition, the production capacity of driving packaging and testing and raw materials in China is also very short, so it is necessary to expand this part of production capacity to improve the whole ecological chain of driving chips.

As the market position of both sides is changing and technology dependence coexists, will the next technological breakthrough depend on technology transfer? Can it be so lucky and smooth?

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