As the second largest generation factory in China’s semiconductor industry, Huahong semiconductor will be landing on the KPC board. If the listing is successful, China’s “foundry industry double male” will be gathered in the KPC board, which is expected to further increase the development of Chinese mainland’s semiconductor manufacturing industry. However, from the perspective of international data, the proportion of China’s local semiconductor manufacturing industry in the global market has not increased in the past decade, which has triggered industry reflection.
semiconductor foundry second brother rushes to Kechuang board
According to the announcement on March 21, the board of directors of Huahong semiconductor approved the possible issuance of RMB shares and the preliminary proposal that the company will be listed on the science and innovation board. It is expected that the scale of shares issued will account for 25% of the share capital after issuance, which will be used for the business development of its main business and general working capital; The follow-up progress of the company will depend on the relevant listing requirements, market conditions, the approval of the general meeting of shareholders and the necessary regulatory approval of the science and innovation board.
Stimulated by this news, Huahong semiconductor once jumped by nearly 10%, and the increase narrowed to 1.81% in the late trading to close at HK $33.8/share, with a P / E ratio of 26.2 times. Since the beginning of this year, the electronics sector has pulled back, and the share price of Huahong semiconductor once fell by nearly 20%.
Huahong semiconductor was merged by Huahong NEC and Hongli semiconductor in 2011. According to the official website, Huahong semiconductor focuses on characteristic processes, including embedded nonvolatile memory, power devices, analog and power management, logic and RF and other differentiated process platforms, which can provide 1.0 micron to 65 / 55 nanotechnology node processes. At present, there are three 8-inch wafer factories in Shanghai Jinqiao and Zhangjiang, with a monthly production capacity of about 180000 chips; At the same time, there is a 12 inch wafer factory built in Wuxi high tech Industrial Development Zone, with a monthly production capacity of 40000 chips. It was officially completed in 2019 and entered the production and operation period.
Benefiting from the high outlook of the semiconductor industry, Huahong semiconductor’s performance reached a new high. In the fourth quarter of last year, the current operating revenue was about US $528 million, with a year-on-year increase of 88.6%. It set a record for six consecutive quarters, with a net profit attributable to the parent company of US $84.1 million, a year-on-year increase of about 90%, and a basic profit of US $0.065 per share.
According to the statistics of China stock market news, in 2021, the total operating revenue of Huahong semiconductor exceeded 10 billion yuan, equivalent to about 10.4 billion yuan (Unaudited), with a year-on-year increase of about 66%, and the net profit attributable to the parent company reached 1.352 billion yuan, a year-on-year increase of 1.08 times. Compared with Semiconductor Manufacturing International Corporation(688981) last year, the unaudited operating revenue of Semiconductor Manufacturing International Corporation(688981) in 2021 was about 35.631 billion yuan, which was more than three times the volume of Huahong semiconductor.
sales revenue continues to grow
Huahong semi guide predicts that the physical sales revenue will reach US $560 million in the first quarter of this year, and the gross profit margin will reach 28% to 29%.
Tang Junjun, President and executive director of Huahong semiconductor, said that from the whole year of 2021, the company’s monthly production capacity equivalent to eight inches increased by about 40% year-on-year, and the sales revenue increased by nearly 70% year-on-year, reaching US $1.631 billion. Each market segment has double-digit growth, especially flash memory and power devices. While the production capacity was significantly expanded, thanks to the steady improvement of the average sales unit price and the continuous high capacity utilization, the gross profit margin still achieved a year-on-year increase of 2.3 percentage points under the pressure of depreciation.
Looking forward to 2022, Tang Junjun pointed out that the company will accelerate the expansion of the total capacity of the 12 inch production line to 94.5k, and is expected to gradually release the capacity in the fourth quarter. At the same time, the company will continue to seize market opportunities and further strengthen the advantages accumulated by long-term deep cultivation on the characteristic process platform; And optimize the business structure and promote more products to enter high value-added fields.
For the performance growth of Huahong semiconductor, Huatai Securities Co.Ltd(601688) comments that the company’s performance growth in the fourth quarter of last year exceeded expectations, but the company expects that the new production capacity will be put into operation in the fourth quarter of this year, slower than previously expected in the first half of this year. In the case of full production of 8-inch and 12 inch wafer factories, Huahong expects revenue to increase by 6% month on month in the first quarter of this year, higher than its global peers, mainly due to the increase of unit price driven by the capacity expansion of Wuxi factory and the improvement of product portfolio. It is expected that the capacity of Huahong’s IGBT, bcdpower, MCU and norflash platforms will remain tight in 2022.
With regard to the trend of core shortage in the industry, Semiconductor Manufacturing International Corporation(688981) joint CEO Zhao Haijun also pointed out in the institutional research that the hot words in the automotive industry, power industry and electronic whole machine industry in 2021 are “core shortage”. The structural increment brought by industrial upgrading, the epidemic has brought more demand related to remote connection, the production preference of transferring the supply chain to local production, and the rapid rise of Internet of things, electric vehicles, new energy and other applications have led to the shortage of supply and the rise of volume and price in the semiconductor industry chain. At the same time, the inventory caused by worries about the security of the supply chain, the integrity problems caused by the structural shortage of products, and the upsurge of production expansion driven by the continuous tension of manufacturing capacity also ran through 2021, which basically defined the pattern of 2022.
Looking forward to 2022, on the premise that the external environment is relatively stable, Semiconductor Manufacturing International Corporation(688981) expects the annual sales revenue growth to be better than the average value of the OEM industry, and the gross profit margin is higher than that of the company in 2021; Capital expenditure is expected to be approximately $5 billion.
global market share remains unchanged
According to the feedback from the downstream market, the peak of short supply in the semiconductor industry may have passed, and there are frequent news from the industrial chain that the consumer electronic chip end is facing huge orders cutting, and the inventory pressure of chip manufacturers is increasing. According to the data of industry consulting institutions, the overall growth rate of wafer foundry is slowing down.
According to the statistics of Jibang consulting, the total output value of the top ten wafer foundries in the fourth quarter of last year reached US $29.55 billion, with a quarterly increase of 8.3%, which has reached a record high for ten consecutive quarters. However, under the background of alleviating the lack of core of some parts and components, the growth rate was slightly narrower than that in the third quarter. It is expected that the output value of the top ten wafer foundry in the first quarter of this year will maintain growth, and the main driving force is still driven by the rise of the average selling price. Considering that some foundry factories enter the annual repair period and the commencement date is short due to the New Year holiday, it is expected that the growth rate in the first quarter will be narrower than that in the fourth quarter.
On the other hand, in recent years, although the local semiconductor industry has invested heavily and achieved certain growth, the proportion of domestic semiconductor OEM industry in the world has not been improved. According to ICInsights data from international consulting firm, the share of China’s foundry (excluding Taiwan, China) in the global wafer foundry market in 2021 accounted for 8.5%, which was the same as that in 2010.
Gu Wenjun, chief analyst of xinmou research, recently issued a document pointing out that in recent years, overseas OEM has entered a period of high integration and continued to become bigger and stronger through merger and integration; In contrast, in China, there is a trend of more and more enterprises and less competitiveness. In recent years, China has added more than 20 semiconductor manufacturing entities, including more and more 12 inch or 8-inch wafer factories. However, its competitiveness is fragmented and loose sand, and its operation efficiency is damaged.
It is suggested that China’s semiconductor industry needs to be strengthened by concentrating its military strength and capital, and that China’s manufacturing industry needs to be strengthened through multiple means, such as policy integration and support.
