Xinmou research estimates: if we do not actively expand production, the domestic capacity gap will reach 8 SMIC by 2025 - the current situation and Countermeasures of domestic capacity shortage

Xinmou research estimates:

If not actively expand production, by 2025

Domestic capacity gap is up to 8 SMIC

——Current situation and Countermeasures of domestic capacity shortage

Mobile phone chips are in short supply and make complaints about the shortage of capacity. Lu Weibing, President of the company, lacks the core, but is extremely short. The Qualcomm CEO even failed to sleep because of lack of core. According to common sense, now is the stage of large-scale expansion of China's semiconductor production capacity, but at this time, due to the cautious policies and local governments, domestic demand for expansion may be restricted.

Due to the failure of Hongxin, Deco code and other projects, the media has been bombarded by the industry. Last year, a spokesman for the national development and Reform Commission warned that if such projects happen, who will be responsible for them. Semiconductor projects may be subject to strict control, while local governments will be cautious. If it is not handled properly, it may be a contradiction between production expansion and regulation.

one

Huge demand

Semiconductor is a cyclical industry. The shortage of production capacity may be alleviated next year, and some processes and products may have relative overcapacity in the next year. However, according to the prediction of xinmou research, in the long run, the gap between supply and demand of China's semiconductor production capacity is still large.

picture

Demand of China's local design companies vs capacity of China's local wafers

China is the largest chip market in the world, and the import of chips will reach 380 billion US dollars in 2020! Chip is the undisputed lifeblood of industry. For Chinese industry, chip is more important than other countries. Therefore, we attach great importance to supply chain security and prevent supply chain risks. In a sense, the supply chain security in our eyes is more concerned about the neck project. But for China, where more end products and chips are needed in the middle and low end and mature markets, capacity shortage is also an important concern for supply chain security and risk!

The shortage of small chips leads to the shutdown of the Big Mac auto industry, causing huge losses. The lesson of "losing the big from the small" should make us realize that insufficient production capacity is also a risk. Sufficient capacity supply and even necessary capacity redundancy are also important components of supply chain security.

More importantly, unlike other countries, China's electronic industry is related to the national economy and people's livelihood, and its huge electronic industry is based on chips and production capacity. We have more sufficient and urgent reasons to actively expand production capacity and guard against production capacity risks.

two

It's a rare opportunity to do it now

It's better to prepare umbrellas today than to predict sunny tomorrow. Semiconductor is a cyclical industry. Instead of worrying about overcapacity in the next few years, we should seize the current time window to actively expand production. It's more important to be present than to predict tomorrow!

Although China's equipment industry has made great progress in the past few years, at least for the moment, China's semiconductor industry is inseparable from the international supply chain, especially the capacity expansion needs more international equipment. According to the statistics of xinmou research, the proportion of equipment purchased by Chinese wafer factories in the world is 53% in the United States alone!

In the 12 inch expansion, whether it is mature technology or advanced technology, the expansion of China's semiconductor industry cannot do without us equipment, and the purchase of these equipment needs us government approval. In the later period of trump administration, the United States restricted China's semiconductor supply chain by controlling upstream equipment, which caused tension in the industry. Recently, the United States has relaxed some restrictions on SMIC's international procurement of equipment. Although there may be individual cases or other reasons, it is at least a first-line turnaround. The future political situation is difficult to predict. Our greatest certainty now is to seize today and do it in the present. So the expansion of production is imminent!

The market needs to expand production, but in order to avoid the lessons of uncompleted projects, policy supervision is also necessary. We should not only put an end to unreliable projects, but also ensure the active expansion of production; we should not only avoid the local government's "mischief", but also not dampen the enthusiasm of the local government. We should make a good balance between management and decentralization, and find a balance between "control" and "expansion", which requires accurate implementation of policies, and the wisdom and art of relevant departments.

three

Countermeasures for production expansion

At present, Chinese mainland enterprises are in the 12 inch foundry production line with mass production, only "two" and two "small" in "China", "China", "Guangdong" and "new".

remarks:

1: Changcun and Changxin are memory, not OEM line;

2: Shilan (Xiamen) is IDM, not OEM; 3: China Resources Microelectronics 12 inch has not been started

Under the above background, how to expand production? The suggestions of xinmou research can start from the following four aspects.
▎ 1. Vigorously support "China", "China", "Guangdong" and "new" to actively expand production

Most of China's first-line factories are state-owned enterprises, or there are many state-owned shareholders, which leads to the "mayor"'s assessment of the management is far greater than the "market" demand for the management. Historically, the domestic first-line OEM enterprises have not been active in expanding production. There are many reasons, one of which is the direction of the "mayor" on the management performance evaluation baton.

For the mainstream semiconductor enterprise management assessment, there are mainly operating profit, technology improvement and capacity expansion indicators. But because of depreciation and other industrial laws, if large-scale expansion, it is bound to lead to short-term losses of enterprises, even the decline of stock prices, and even play a role in the assessment of management. Perhaps the previous profit index accounted for a relatively high proportion, resulting in relatively slow production expansion.

It's time to take capacity expansion as an important indicator for the board of directors to assess the management of domestic first-line factories. Similarly, relevant policies and measures should be introduced to loosen the management of relevant enterprises and mobilize the enthusiasm of enterprises to expand production. Instead of worrying about temporary losses and short-term stock prices, the management should concentrate on actively expanding production and layout in the long run!

For enterprises, expansion of production is a huge expenditure. It is suggested to make full use of various investment, fiscal and tax support measures to reduce the capital pressure of expansion of production, and better help enterprises balance "mayor" and "market", "today" and "tomorrow".

▎ under the second and new third line thinking, new entities should be added appropriately

There are more rotten ones and less successful ones. Over the past few years, 12 inch new OEM factories, such as Huahong Wuxi and Guangzhou Yuexin, have made good progress and reached production capacity on schedule, which has made a lot of contributions to easing the shortage of domestic production capacity. It is suggested to give encouragement and support and actively expand production.

At the same time, we should also have a new third line consciousness of thinking of danger in times of peace. In the current international situation, in view of the sensitivity and importance of semiconductors, "industry front-line" enterprises have been highly concerned by the United States, and are all within the scope of "targeting" of "entity list". SMIC has even been included in "entity list". If the "first-line enterprises" are sanctioned, it will be a drastic blow to China's semiconductor and high-tech industries. Considering thousands of design, equipment and material companies in China, as well as China's semiconductor supply chain and ecological chain, we should support the existing mass production enterprises to actively expand production, add new related entities, make preparations for the "third line of industry" of semiconductor (not the third line of region, but the main third line of industry, that is, moderately increase the entities and reduce the risks of mainstream enterprises), and lay out the semiconductor foundry industry in multiple echelons. Tactically, it provides more production capacity support for the development of China's semiconductor industry, and strategically, it provides guarantee for continuously enhancing the ecological security of China's semiconductor industry.

In addition, new entities will be treated equally to solve the problem of uncovering China's semiconductor production capacity, enhance industry competition and stimulate industry vitality.

▎ 3. The support mechanism for joint ventures / overseas enterprises should keep pace with the times and increase the proportion of mainland customers

Some overseas enterprises have built factories in the mainland, spent the most difficult period with the capital and government subsidies of the mainland, consumed the resources and energy consumption of the mainland, and are also preparing to go public in the mainland, taking advantage of the capital advantages of the mainland to go further.

Should China support the Chinese core by taking advantage of China's interests, using China's land and taking advantage of China's potential? However, when mainland enterprises are in urgent need of production capacity, almost all the customers of some overseas OEM factories in mainland China are overseas enterprises. They sell their production capacity to overseas companies at a low price, which in turn attacks local design companies at a low price. So what is the significance of such companies to the mainland industry? When these enterprises enjoy the national treatment of policy support, should they also bear the corresponding responsibilities of national enterprises?

At the moment of tight production capacity and at the critical moment when the local foundry actively supports the development of Chinese chips, it is suggested that the relevant parties consider the application of these enterprises who enjoy national treatment but do not fulfill their national responsibilities to continue to receive support. It is suggested that the utilization rate of domestic equipment and materials of such enterprises should be assessed, and the occupancy rate of their local customers should be assessed, so that they can take the minimum responsibility for the shortage of local production capacity.

Fourth, expand opening up, increase the introduction of foreign capital, and attract foreign enterprises to build factories in China

It is suggested that we should make use of the precious window period, the domestic market, the international board and other financial means to attract overseas enterprises to the mainland, deeply integrate the overseas supply chain with the domestic market and domestic capital, and increase the ability to resist uncertain risks. Foreign enterprises that meet the relevant conditions should be regarded as local enterprises, so that they can enjoy national treatment and domestic capital dividends, and make progress with Chinese industry.

Spring planting and autumn harvest, now is the critical moment, I hope that the relevant departments will raise the production capacity shortage to the height of supply chain safety, long-term tightening the bottom line thinking that chips determine the normal operation of the national economy, and take various measures to mobilize enterprises to actively fulfill the responsibility of enterprise citizens to expand production and protect the economy. If you miss a good opportunity, if the climate changes, or even the cold wind rises again, you can only sigh empty swallow building, where is the beauty.