The global core shortage is escalating. SMIC's 2020 return to mother profits soars by 204%, and Weilai Renesas is forced to suspend production

The global core shortage is escalating. SMIC’s 2020 return to mother profits soars by 204%, and Weilai Renesas is forced to suspend production

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Today, SMIC officially released its 2020 financial report after the market. As of December 31, 2020, the company’s annual revenue was US$3.907 billion, an increase of 25.4%; gross profit was US$921 million, an increase of 43.3%;Attributable to the company’s profit attributable to 716 million US dollars, an increase of 204.9%.

Prior to February, SMIC had released its Q4 quarterly report and announced the company’s unaudited earnings data for 2020.

SMIC’s revenue and profit changes 36 krypton charting

In 2019, under the double uncertainties of the epidemic and trade frictions, SMIC’s revenue and profits have declined to a certain extent; in 2020, due to the global “core shortage” wave, the U-turn will rise.

It is worth mentioning that since SMIC’s non-net profit in 2019 was -522 million yuan, which was an unprofitable company at the time of A-share listing, the stock identification abbreviation was “SMIC-U”. After the release of this financial report, the abbreviation of SMIC’s A shares can also be officially removed from the “U” hat and become “SMIC”.

In recent days, the problem of “core shortage” in the upstream of the automotive, electronics, and mobile phone industry chains has continued to ferment, and shortages, price increases, and production capacity grabbing have become the norm in the industry. In response to this situation, 36 krypton has also conducted an in-depth investigation before (Industry Observation | Real Price Increase vs. Fake Out of Stock: Big factories are hoarding chips, and small companies are struggling to survive).

In this round of price increases, the surge in packaging and testing stems from the short supply of IC substrates. Car companies are most affected by the “zero inventory” management. Although emerging industries such as AR have a weak voice in the industry, the top players will get chips. The factory’s “opening a small stove” has reduced the burden.

Just a few days ago, on March 26,Weilai Automobile announced that the Hefei Jianghuai Automobile Plant had to suspend production for 5 days due to a shortage of chips.Since the beginning of this year, auto companies such as Volkswagen, Toyota, Honda, Ford, and General Motors have temporarily stopped production due to chip shortages.

Misfortunes never come singly, the main factory of global automotive chip giant Renesas Electronics also suffered a major fire on March 19, causing its 12-inch plant to be forced to shut down. It is expected that it will take 3-4 months to resume normal supply levels.Renesas President Yingli Shibata said at a press conference held on March 30 that Renesas’ inventory of automotive chips will be exhausted in late April and the supply of automotive chips will cease.

With the continuous shortage of chips, the global semiconductor prices are rising rapidly, chip foundry giants such as TSMC and SMIC are also working overtime to expand production capacity.

On the 17th of this month, SMIC announced that the company will cooperate with the Shenzhen government to develop SMIC Shenzhen, focusing on the production of new product processes of 28nm and above. The goal is to achieve a monthly production capacity of 40,000 12-inch wafers. Production will start in 2022. The estimated new investment in the project is US$2.35 billion, equivalent to approximately RMB 15.3 billion.

In the three major links of chip design, manufacturing, and packaging and testing, “manufacturing foundry” has always been an industry shortcoming in the mainland. According to the research data of Ximou, in 2020, the output value of China’s chip design industry will reach 44.2 billion U.S. dollars, and this figure will exceed 100 billion U.S. dollars in 2025, with a compound annual growth rate of more than 20%.

However, in the field of chip manufacturing foundry, China’s capacity demand in 2020 is equivalent to about 2 million 8-inch wafers per month, while the capacity supply is only 1.5 million per month, and the gap is still expanding.

According to IC insight data,Compared with the global chip manufacturing foundry giant TSMC’s production capacity of 2.7 million pieces/month, SMIC’s monthly production capacity is only about 400,000 pieces., China’s second-ranked Hua Hong Semiconductor has only about 220,000 pieces, and expansion of production capacity is a top priority.

In addition to the capacity gap, advanced manufacturing processes are a greater challenge.

With the gradual failure of Moore’s Law, the manpower and material resources required for the research and development of advanced chip processes have increased exponentially. For example, in January this year, TSMC announced that the company’s capital expenditure will increase to 28 billion US dollars in 2021, a record high. Of this 28 billion US dollars, about 80% of the capital budget will be allocated to advanced process technologies, including 3nm, 5nm, and 7nm.

The skyrocketing R&D investment has also led to more and more foundry companies announcing their withdrawal from the competition track. As early as 2018, GlobalFoundries, the world’s second-largest chip foundry, announced its withdrawal from 7nm process development and shifted resources to more mature 14nm and 12nm processes. In recent years, Intel has continued to encounter many challenges in the advancement of 7nm technology.

At present, only TSMC, Intel, and Samsung are still working on the advanced technology track in the world.

SMIC’s 28nm, 14nm and other technologies are already relatively mature, but since being added to the list of entities by the United States, the development of 10nm, 7nm, and more advanced process nodes has been significantly hindered.

However, even if the United States relaxes technical restrictions, the progress of the domestic chip manufacturing process cannot be controlled by a single company SMIC.The research and development of advanced chip technology requires the cooperation of the entire industry chain such as semiconductor equipment, materials, and EDA tools. At present, there are still many gaps in these fields in my country., The road of domestic substitution is a long way to go.

Whether it is global or domestic, the current industry capacity gaps are mostly concentrated in mature processes such as 28nm. For advanced processes such as 7nm and 5nm, only mobile phones, GPUs and other consumer electronics or cloud server chips are in greater demand.

Chen Hang, chief analyst of Founder Securities’ technology industry, believes that SMIC’s first priority is to ensure the safe and controllable supply of domestic chip production capacity. The second city maintains the normal operation of stock production capacity. As for the breakthrough of advanced technology, it is not the company’s individual ability. And, it is necessary to work together with the semiconductor equipment, materials, and IP/EDA manufacturers in the United Nations to jointly break through the systematic engineering.

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