Chinese semiconductor industry

I guess here is a Q3 report on Hygon that just came out a couple of days ago

Made 3.82 billion RMB in first 3 quarters including 1.29 billion in Q3. Q3 profit margin was 46.8%.

Hygon CPU product in Hygon 1/2 are used commercially. Hygon 3 has just completed validation and Hygon4 is under development.
In DCU, ShenSuan 1 is used commercially and ShenSuan 2 is under development.

Broad trend in market for localization in high end processor that will benefit Hygon. Back in 2020, 95% of x86 server shipment was by Intel and AMD. Sounds like focusing on high end processors here.

Huahai Qingke: Wafer recycling business plans to expand production capacity to 100K/month by the end of the year or early next year​

Jiwei.com news (article/Bai Yuxuan) Recently, Huahai Qingke said in an agency survey that the products of wafer regeneration are control plates used by integrated circuit manufacturers. The process steps include film removal, rough polishing, fine polishing, and cleaning. , detection, etc. At present, the company's wafer recycling business is progressing smoothly and has passed the verification of many customers. Now it has realized two-line operation, and the production capacity has reached 50K/month. It plans to expand the production capacity to 100K/month by the end of the year or early next year. This business has received bulk orders from several large production lines, and the company is expanding production as planned. The company's wafer regeneration is essentially an OEM service, and the processing fee is charged according to the number of control blocks processed by the OEM, so the gross profit rate is not high, but the net profit rate is relatively good.

Huahai Qingke revealed that the company is positioned as a platform development strategy of "equipment + service". Wafer regeneration is one of the important components of the company's service business. Now wafer regeneration has been mass-produced on a large scale and has won the approval of many customers. For bulk orders, its future capacity planning will reach 100K/month.

It is understood that Huahai Qingke's current products are mainly used in the front-end process of integrated circuits. This year's newly developed advanced packaging, 3D packaging, large silicon wafers, MEMS, Micro LED and third-generation semiconductors currently account for a small proportion. As the company's products have gradually passed customer testing and verification, repeated orders from customers have been obtained in the above-mentioned new development fields, and the proportion will gradually increase.

Regarding the differences between the company's CMP products and foreign competitors, Huahai Qingke said that the company still has a certain gap with foreign competitors such as Applied Materials in the United States in terms of market position, historical accumulation, business scale, and product richness. The company's CMP technology and modular layout have higher upgradeability and iterative flexibility advantages, and also have certain advantages in localized after-sales.

In addition, Huahai Qingke further pointed out that the company first carried out the research and development of 12-inch CMP products, and the 8-inch CMP products were further launched by the company on the basis of mature technologies related to 12-inch machines; The proportion of 8-inch equipment accounts for about 90%, and the proportion of 8-inch and below customers accounts for about 10%. From the perspective of the number of customers, 8-inch and below customers account for a relatively large proportion. Subsequent proportion will gradually increase.

Wanye Enterprise: Nearly 1.1 billion yuan in semiconductor equipment orders from Kaishitong and Jiaxin Semiconductor​

According to news from Jiwei.com, an investor asked a question on the investor interaction platform: Hello, how is your company's order in the semiconductor field? What are the company's semiconductor materials? Is the domestic peer competitor a company like NAURA? Seeing that the company's turnover is relatively low compared to its peers, can it be understood as a low market share? How much does the company invest in R&D?

Wanye Enterprise stated on the investor interaction platform on December 5 that as of the end of the third quarter of 2022, the company's Kaishitong and Jiaxin Semiconductor related semiconductor equipment orders were nearly 1.1 billion yuan. At present, the company has fully expanded from leading integrated circuit ion implanter equipment to more types of front-end equipment tracks, and the "1+N" strategy of semiconductor equipment platforms has gradually emerged. Since this year, Kaishitong has received bulk orders for the first time, and a variety of ion implanter equipment products have been repeatedly purchased by customers; Jiaxin Semiconductor has obtained orders for various types of equipment such as etching, thin film deposition, and rapid heat treatment since its official operation in the fourth quarter of last year. For other relevant information, please refer to the periodic reports or announcements disclosed by the company.

In addition, regarding "when will Jiaxin Semiconductor's subsequent bid-winning equipment be delivered and revenue recognized", Wanye Enterprise replied that in October 2022, Jiaxin Semiconductor's first CVD equipment has been successfully delivered to customers. The company will also strive to recognize more revenue from special equipment manufacturing business this year.

ansy1968 said:

From my mentor @Oldschool , remember a conference summit were the CCP leadership call for a unify effort and to consolidate the gains made. Well Huawei answered the call as the Vanguard leading the campaign, I think the Chinese is preparing itself for a major offensive, transitioning from a guerilla outfit to a regular force, setting the stage for a HuaiHai like campaign that will decide the tech war with the US in 2025.

Oldschool​

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Under Huawei leadership, Alibaba and tencent joined the Huawei alliance. alleged, all of them pitched in total 400 Billion Yuan fund for semiconductor production.

I heard Fujian Jinhua and it's nearby neighbor a packaging company ShiYang with 2000 employees with 20 soccer field sized sites are hiring people and busy expanding for production. Huawei will be their main customers

Huawei right now are focusing on mature tech chips production for EV Autos.
I think Jinhua is reconfiguring for logic chip production.

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that was the rumor about 2 years ago... they stopped their Dram activities.. JHICC has focused on Logic chip... that's what Huawei needs...

yes, Huawei is focusing on mature nodes and their industry chain is too broad.. they are focusing on huge profits for the car business... before Kirin comes back... car business is their salvation before 2024-2025

至纯科技：抢占先机，提前布局投入14nm和7nm湿法设备

Saw this somewhere on Chinese social media. Not sure how accurate it is

华虹半导体也比较有前途，就像龙芯icon一样光芒四射，华虹的14~28纳米制程发展的也非常快，华虹国产化做的也比较踏实，从EDA，到设备和材料，基本能国产的都用上了国产，可以说是稳稳的发展，相当给力。

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Does anyone know if Huahong is actually using mostly domestic tools and EDA software? I'm waiting for HLMC fab 8 news to come out next year. Even if they can start 14 nm production in existing fab 6, the most they can probably do is 5 to 10 k wpm.

a Q&A with Huahong

Q：鉴于不同技术平台产品的表现，公司是否有更改产能结构的计划？
A：市场形势方面，目前以手机为代表的消费电子形势严峻，但三条 8 英寸线目前基本没有受影响，产能充足。12 英寸确实受到消费电子的影响，逻辑平台的投片量下行。但是前两个月对产能做了一些柔性的安排，MCU 的产能做了一些调整，而且 MCU一些客户的订单仍非常充足，同时对高端的功率器件也做了一些订单来弥补逻辑部分的下行。

我们这几年在加大研发的投入，尤其经过两轮的研发投入以后，新产品、新技术的储备已经达到了一定的量。MCU 新技术带来的新订单。高端功率器件、IGBT等等足以支撑我们后续的产能扩张。同时市场也在关注明年二季度末或者年终可能会有所起色，对整个行业来说也会带来一个指数的增长。

Q：A股上市进展如何？
A：关于IPO的工作进展得非常顺利。11月4日，上海证券交易所正式接受了IPO，公司现在正在接受交易所的正式审查，审批可能需要2到3个月的时间。

Q：新的12英寸产线进展如何?

A：我们期望明年上半年的某个时候开始施工工作。目前正在内部抓紧推进过程中，一旦有成熟的计划出来，会及时跟各位投资人进行说明。第一阶段大约有60000到70000个晶圆的产能。

Q：三万片晶圆的扩产计划在需求旺盛的情况下是否仍有进一步提升的空间？
A：从无锡预期来看，我们完成了当初可研报告设定的建设任务。在推进这个建设任务的过程当中，我们进行了两次的扩产建设。
第一次扩产每月达到 65k 的产能的目标在今年上半年已经完成。目前我们的投片跟产出已经超出了每月 65,000 片。第二次增资扩产的项目已经在抓紧实施过程当中。已经将近有 55% 左右的基台完成了搬入，目前正在抓紧推进搬入和设备的调制工作。
由于工艺的导入和产品设备的关系，这部分产能可能在明年的两季度全部释放出来。而且这部分产能主要聚焦于五大特色公益平台。
按照现在来看，明年每个月产能再增加 3 万片不到，从65000片提升到 94500片。

Q：新增产能是否会根据终端需求的变化在逻辑和功率之间切换？
A：在工艺平台的产能的柔性调配过程当中，逻辑跟功率器件的相融性比例不是很高。我们主要是将逻辑部分的一些工艺平台转到 MCU 的一些平台上，同时有一些可能会转到模拟电路等等。

Q：美国芯片法案对公司有何影响，尤其是扩产计划上?
A：这些新的控制是针对国内开发或生产单一逻辑集成电路的半导体制造设施，采用再规划架构或与生产技术节点，在16/14纳米或以下。Nan存储集成电路，采用120 E层或以上或DRAM集成电路，采用的生产技术节点不在这一范围内。所以没有任何影响。

Q：未来两个季度产能利用率如何？
A：8英寸晶圆厂的利用率会继续在100%以上。12英寸的Fab方面，CIS产品的需求产生了一些影响。但它很快会与其他产品交换，如嵌入式非易失性内存、MCU或其他的一些分配。在射频甚至电源管理中使用了两种逻辑器件，所以12英寸的fab也会继续以100%的利用率运行。我们预计这一趋势将持续到明年。

Q：毛利率预期下降的原因是？
A：在前三个季度，8英寸晶圆厂在Q3达到了47%的毛利率，12英寸的晶圆厂在上个季度达到22%，我们希望这种趋势能继续下去，只要我们能保持根据需求的转换。我们希望确保总体利用率在下个季度和明年都将继续提高。

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Looks like 12-inch fab in Wuxi is hurting more from the demand drop than 8-inch fabs. A lot of MCU demand. Lower profit margin is due to 12-inch fab becoming higher portion of production. Continue to expect 100% utilization in its fabs. Says that the sanctions doesn't affect it. I wouldn't necessarily agree since HLMC is looking to get into 14nm, but it seems to just not discuss HLMC.

For Wuxi fab, their first expansion to 65k wpm has been completed and now they are producing more than that per month. The second expansion to 94.5k wpm is ongoing. Nearly 55% of base is moved in and they are moving in equipment and such. Should complete the work by Q2 of next year.

the new Wuxi 12-inch fab (fab 9) will start construction in first half of next year. First phase to have production capacity of 60 to 70k wpm. So, I think there is going to be sort of a pause in their capacity expansion from 2023 to 2024. My guess is that fab 9 won't start production until 2nd half of 2024.

WarAndPeace said:

I think rather than going at it alone, China should partner with Russia, Belarus, Iran. The US has a 4 chip alliance, so should China.

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Help is welcome, but it is not required...

Franklin said:

This guy gets it.

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No, he does not. He is just rehearsing what the US gov has been saying about its sanctions on semi exports to China.

The most glaring error on all those claims or assertions is that, vast majority of the software work (including algorithms) will move forward without top bins of similar ASICs. Top CPUs are usually for bragging rights such as TOP500 listing. All those semi sanctions combined would have little effects on software (applications and algorithms) development.

Among the sanctions on exporting enabling technologies, EDA tools are probably more important than lithography equipments. It takes very long time to develop, test and validate advanced EDA tools for cutting edge ASIC design and fabrication.

From this point on, even if the US gov enforce a total ban of anything semi export to China (including human factors), China would still be able to crawl forward, at a slower pace for sure, but nonetheless crawling forward, until it reaches a inflection point.

The single biggest factor, IIHO in this US gov gambling, is that those politicians in the US gov are probably not proficient enough in understanding what if, WHAT IF that inflection point comes earlier than their calculation. My hunch is that, un-sanctionable domestic-supplied 14nm would be qualified as such a turning point, for there would not make any sense out of those sanctions after that point.

This is arguably the single biggest gambling on the part of US in particular and world in general. Millions of high tech jobs and trillions of dollars are at stake.

A little more on domestic CPUs being used in procurement. this is worth keeping an eye on. How much of the new server CPU procurement will be using Chinese chips.
A total of 600 million RMB awarded here by China construction bank. 74 million awarded to Phytium, 364 million awarded to Kunpeng and 158 million to Hygon. I'm continuously shocked that Kunpeng wins this many orders. I would've expected them to have run out of their stock by now. Looks like Inspur and Unisyue short listed Phytium and Hygon chips here and they build the boxes from China construction bank. Also interesting that Lenovo, ZTE and HikVision did not win in their bids.

There does seems to be a general directive to go domestic with CPUs and OS. This particular order was awarded to just Chinese CPU companies because China construction bank made the decision to go with Kylin OS and paid 99 million RMB for it as you can see below.
Looks like Tongxin's UOS lost the bid, so they are only considering Chinese OS in the procurement.

麒麟软件旗下产品包括银河麒麟服务器操作系统、桌面操作系统、嵌入式操作系统、麒麟云、操作系统增值产品等，支持飞腾、鲲鹏、龙芯、兆芯、海光、申威等主流国产CPU，在中国空间站、火星探测器、远望六号测量船、中国铁总数据中心等领域得到应用

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From the last part here, you can see that the major Chinese military/science/infastructure procurements are now going for Kylin. It's unclear to me if there has been any additional directive for large SOEs to only use Kylin/UOS for future procurement. I suspect there is. Up until this point, these major procurement items were always using about domestic CPU around 40% of time.

From this, UOS has been installed on 600k machines and Kylin on over 1 million. If you consider the population size, that's still a really small number. There should be a demand there for 50 million machines.

And if you look at this, a lot of work by Phytium (and presumably Kunpeng and Hygon) to make sure their CPUs work well with Kylin OS.

According to Phytium CEO, domestic CPU makers are 4 to 5 years behind and they need 3 to 5 years to narrow that down to 2 years gap. Also, Phytium itself has permanent authorization of the Arm instruction set. And based on the instruction set, it independently designs the core and develops CPUs with its own IP.

olalavn said:

that was the rumor about 2 years ago... they stopped their Dram activities.. JHICC has focused on Logic chip... that's what Huawei needs...

yes, Huawei is focusing on mature nodes and their industry chain is too broad.. they are focusing on huge profits for the car business... before Kirin comes back... car business is their salvation before 2024-2025

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I think they are still doing DRAM and Huawei has been investing a lot in the R&D of 3D DRAM, so make sense that they will take on the experience JHICC has on DRAM. Their logic chips I think are going to be made in Shenzhen.