Over $40 billion, with a CAGR of 5%, the industry pattern is stable
1) over $40 billion competition: in 2020, the market scale of “power chain + signal chain” reached $42.8 billion, including two categories: ① signal chain – a bridge connecting the real world and the digital world. In 2020, the market scale ranked linear products (US $3.8 billion), data converters (US $3.7 billion) and interface products (US $2.7 billion). ② Power chain – manage and distribute power supply, mainly including ACDC, battery management, DCDC, and LED drive products. In 2020, the total market size exceeded US $30 billion, of which the market size of DCDC chip was about US $10 billion.
2) the industry structure is stable, and Ti and Adi are double leaders: due to the scattered downstream applications and many product types, the industry concentration is lower than that of digital chips, Cr6 = 52% in 2020, of which Ti (stronger than power chain) and Adi (stronger than signal chain) are double leaders in the analog market, accounting for 19% and 9% of the analog market respectively in 2020. In addition, the product life cycle of the simulation industry is long, so customers do not easily replace suppliers, and the downstream viscosity is very strong. Therefore, the industry pattern is stable, and most of the changes in the internal pattern of the industry come from mergers and acquisitions.
The three barriers of the simulation industry were broken one by one, and the mainland ushered in a golden period of development
1) supply chain barriers: the window period provided by “trade friction + core shortage tide”. Analog chips have the characteristics of “evergreen tree”, with slow product iteration and long supply cycle, so downstream customers are not willing to replace them. The “trade friction + core shortage tide” broke the closed supply chain and brought a window period for the mainland chip industry.
2) manufacturing barriers: local OEM factories are becoming mature and help them to be independent and controllable. Unlike digital chips, large overseas analog chip manufacturers usually adopt IDM mode. First, there is no standardized IP module in analog chip production, and each generation factory has a special process; Second, the simulation effect of the design is limited, and the probability of success of one-time streamer is low, which needs to be optimized by adjusting the parameters of multiple streamers. With the mature supply chain of Huahong and BCD in mainland China, it is expected to be further improved.
3) technical barriers: the return of talents from large overseas factories is different from that of logic chips. The mode of Legion operation is different. Analog chips rely on the personal ability of engineers every quarter, and the learning curve is usually more than ten years. This is because: ① the key indicators to be considered are diverse; ② Ead and IP play a limited role in assisting design in the design process; ③ The simulation effect is limited and depends on the streaming experience of engineers. With the return of a large number of engineers with working experience in large overseas factories, a number of analog semiconductor companies have completed preliminary technology accumulation in the past few years.
Growth path choice of potential simulation leaders in mainland China: guangtuo general material number or customized large material number
The three barriers of “supply chain + manufacturing + technology” were gradually broken by mainland manufacturers, and the mainland ushered in a golden period of development. And what kind of company has the ability to grow into a leader? From the growth path of overseas simulation companies, “endogenous growth + epitaxial M & a” is undoubtedly the standard model.
1) the first step of growth: endogenous growth. From the growth path of large overseas factories for many years, there are usually two types of development paths in product strategy:
① path 1: represented by Ti, expand the general type material number, form a pedigree, and finally provide a solution. At present, there are many mainland manufacturers who follow this route, and their most intuitive competitiveness is the number of item numbers. It is recommended to pay attention to Sg Micro Corp(300661) , 3Peak Incorporated(688536) , Shanghai Awinic Technology Co.Ltd(688798) , NSM (to be listed), Wuxi Chipown Micro-Electronics Limited(688508) , Wuxi Etek Microelectronics Co.Ltd(688601) .
② Route 2: represented by Maxim and linear, it mainly focuses on customized large material numbers. At present, mainland manufacturers take this path. Typical manufacturers such as xidiwei are most intuitively reflected in their competitiveness, that is, ASP and gross profit margin. Unlike the general item number, large-scale shipment usually starts within 2-3 years after mass production. In this mode, its manufacturers participate in the early “product definition” and can quickly form revenue after shipment.
2) the second step of growth: extension M & A. From the development experience of overseas leaders, both Ti and Adi have carried out several large-scale mergers and acquisitions, realized the rapid expansion of products, personnel and customers, and completed the leap from a medium-sized company to a leader. We believe that when the number of mainland simulation manufacturers gradually increases and there is a certain amount of cash wealth, they will gradually start the journey of M & A. at present, zhongshengbang has become a number of M & A among mainland manufacturers.
Investment advice
We believe that in the “window period of downstream supply chain entry + maturity of local supply chain” β Under the catalysis, “R & D strength”, that is, “talent” is the first element of the simulation company. Companies with excellent strength can rely on themselves α Rapid horse racing enclosure will further clarify the differentiation of the first and second echelons of mainland simulation companies in three to five years. We recommend simulation companies with R & D strength belonging to the first echelon.
From the perspective of the development path of large overseas simulation plants, there are two options:
1) expand the general type material number to form a pedigree and finally provide a solution. At present, there are many mainland manufacturers taking this route, and its most intuitive competitiveness is the number of item numbers. It is suggested to pay attention to Sg Micro Corp(300661) (balanced development of power chain and signal chain, leading the mainland in the number of item numbers), 3Peak Incorporated(688536) (specializing in industrial signal chain products, and starting from 2021, the power chain will be in large quantity), Shanghai Awinic Technology Co.Ltd(688798) (focusing on consumer electronics, with the layout of signal chain linear products and power chain), nano chip micro (to be listed, leading the strength of mainland signal chain interface products) Wuxi Chipown Micro-Electronics Limited(688508) (a large number of ACDC products), Wuxi Etek Microelectronics Co.Ltd(688601) (a large number of LDO products).
2) represented by Maxim and linear, it mainly focuses on customized large material numbers, and the most intuitive embodiment of competitiveness is ASP and gross profit margin. Unlike the general item number, large-scale shipment usually starts within 2-3 years after mass production. In this mode, its manufacturers participate in the early “product definition” and can quickly form revenue after shipment. It is recommended to pay attention to Xidi micro (focus on the power chain and in-depth cooperation with Qualcomm, MTK and Android brand manufacturers), etc.
Risk tips: the demand is less than expected, the constraints of capacity bottleneck, the technological progress of mainland manufacturers is less than expected, the Sino US trade friction is intensified, the information used in the research report is not updated in time, and the risk of statistical deviation
