Market Source: Fortune Securities
SMIC's 28nm wafer production capacity and expansion is the most concerned about the progress of investors, and the company's core SMIC 28nm and 40nm wafer production, is the focus of investor attention.
In the recent announcement of SMIC, the demand or increase in capital of SMIC Northern. On November 29, 2017, SMIC announced the placing of new shares, the net proceeds of placement of 25.5 billion Hong Kong dollars, while the company The company also issues $ 65 million of perpetual subordinated convertible bonds. The funds raised above will be mainly used for the expansion of capital expenditures, while most of SMIC's capital expenditures will be used for the expansion of 28 nanometers.
On December 6, 2017, SMIC announced the completion of the allotment of new shares and the announcement of the cooperation framework agreement with North China Central Bank on the next day. The cooperation has an important element over last year's cooperation framework in that the company or Subsidiary to guarantee financing activities in the north of CSIC SMIC this series of financing and Shun Cheng relations, both seem to prove that SMIC's high emphasis on North Central SMC.
Cooperation framework agreement What are the mystery?
We first look at the framework of cooperation agreement between SMIC and the center of the North, SMIC holds a 51% stake in SMIC North, the National IC Fund holds a 32% stake, so this cooperation more than the financing guarantee is SMIC to finance the expansion of subsidiaries to provide a way of doing things.This cooperation has six elements, the first five continued the agreement expired in the project last year.
It is noteworthy that among the projects SMIC and SMIC co-operate with last year, the first type of transaction volume was the largest. The continuing connected transactions in 2016 were US $ 168.7 million, accounting for 64.4% of the five related-party transactions, followed by the fifth Trading volume of 669 million US dollars, accounting for 26.4% .While North Central SME transactions of five related transactions accounted for 59.9% of the total transactions, the two accounted for 54.4% of the total, we can see that the cooperation is mainly concentrated in the first category And the fifth type of cooperation.
And this year's cooperation or major changes, ZTF learned that the transaction in the annual caps, the sixth transaction in 2018 exceeded the first transaction $ 100000000, but in addition to the first type of change, The other five categories remain the same ceiling.
If we compare this cooperation with that of last year, we can see that the demand for the first type of transaction ceiling soars. The 2016 ceiling for the agreement last year was 400 million U.S. dollars, up from 650 million U.S. dollars in 2017, and this year the agreement will reach 900 million U.S. dollars by 2018 And will reach 1.5 billion U.S. dollars by 2020. The emergence of the sixth type of transaction, or the key to the release of SMIC's capacity in North China,
SMIC's capacity expansion strategy is obvious, but the rapid expansion requires financial support, SMIC spare no effort to support the expansion of SMIC North in 2017 SMIC's capital expenditure of 23 billion yuan, 900 million The share-based expansion of production capacity in Beijing with a majority stake of 39.1%, was recently announced by SMIC through the placement of new shares, issuance of convertible bonds and more secured financing projects under the cooperation or may indicate the input of CSIC North Project Greatly increased.
28 nm is still expected to double-digit high growth
28nm and 40nm SMIC is the focus of products, but the company's 28nm HKMG process yield less than expected, currently around 40%, but market analysts generally believe that the chip-level figure Liang Mingsong will quickly improve the 28nm Process technology, and the company is also developing its own 14nm process technology, where Matsunaga had a similar history at Samsung or could reverse SMIC's competitiveness.
Not to mention what might happen in the future, for the first three quarters of 2017, SMIC's 28nm and 40nm revenue increased by more than 30% YoY in 2016 and exceeded 90% in 2016, of which 28nm revenue in the third quarter Up 38.9% MoM, accounting for 8.8%, while only 1.4% of the same period last year, accounting for 5.3% increase in revenue.
In the third quarter of 2017, the chip production capacity of SMIC saw 447,950 pieces, an increase of 2.2% from the previous quarter. Among which, the majority ownership of Beijing 300mm foundries was 61,875 pieces, up by 19.6% from the previous quarter, It is no wonder that SMIC's focus on capital expenditure is biased toward this, but SMIC's capacity utilization rate is not as expected, up 84% in Q3 2017 from 97.2% in the same period of last year, which of course is too much for capacity expansion Related to the factors.
It is noteworthy that, investors target too focused on SMIC 28-nanometer process and capacity utilization situation, but may ignore the company's financial operations data.Zitong Finance learned that in the third quarter of 2017, SMIC's working capital Change was $ 147 million, compared with $ -0314 million in the second quarter. Operating conditions improved significantly, mainly due to a 27.7% increase in cash and equivalents and a decrease of 16% in accounts receivables.
We return to SMIC North, the company has greatly increased demand for funds there are three major situations, one is the operating pressure of funds, capital demand is tight, the second is the demand for orders, the need to increase expenditure on expansion, the third is capacity expansion. The current situation, the loss for three consecutive years, 2016 loss of $ 115.7 million for the year, but no debt pressure, debt-to-asset ratio was only 25.4%, the current ratio was only 0.37.
However, in view of the changes in SMIC's operating funds, the operating conditions in North China Semiconductor or the possible reversal of the cooperation framework agreement between the two companies also showed strong demand for orders from SMIC. Core International's main operating carrier at 28nm and 40nm, the carrier's operational status directly reflects the demand of 28nm and 40nm.
To sum up, this cooperation arrangement between SMIC and SMIC not only includes more type 6 financing arrangements, but also greatly increases the upper limit of the first type of purchase and sale of goods, are likely to show 28 nm Wafer demand is strong, the wafer revenue growth situation, the fourth quarter is still expected to maintain high double-digit growth.Currently SMIC valuation has dropped a lot, but it is an opportunity to see how investors select.