1. SMIC: Settlement this year, take off next year?
On March 29th, as the world's leading integrated circuit foundry company and the largest and most technologically advanced integrated circuit foundry in Mainland China, SMIC (0981.HK) released its 2017 annual results. .
Profit dropped sharply during the year
Revenue hit a new high, rising from 6.918 billion U.S. dollars in 2016 to 3.101 billion U.S. dollars, an increase of 6.4%, but profit for the year recorded 126 million, down 60.13% from 316 million in 2016, mainly due to the cost of sales, net R&D expenditures. Rising. Cost of sales increased by 14.34% compared to 2016, resulting in a decrease in gross profit from US$850 million to US$7.4 billion, a decrease of 12.94%, plus net R&D spending increased by 34.28% to 427 million in 2016 from US$318 million in 2016, making profit for the year Sharply slide.
Revenue hit a record high mainly because of the increase in the number of wafers shipped. In 2017, SMIC's wafer shipments amounted to 4.31 million 8-inch equivalent wafers, which was 8.9% higher than 2016's 395.77 million. The increase was due to the increase in depreciation expenses and the increase in shipments of wafers. In 2016, depreciation and amortization expenses were US$584 million, which increased by 32.53% in 2017 to US$774 million, which also led to the SGM’s gross profit margin. 29.2% in 2016 dropped to 23.9% in 2017.
18-year capital expenditure plan
Wafer foundry belongs to the heavy capital industry. The scale of the production line and the advanced manufacturing process are the company's moats. The mastery of the latest process wafer technology will give the company first-mover advantages and price advantages. A large amount of capital investment in R&D will be realized. The expansion of new production capacity will also bring depreciation expenses and pressure the performance of the company. For SMIC, the profit before tax depreciation and amortization was approximately US$1.12 billion in 2017, a year-on-year increase. 5.2%, set a new historical high. However, in order to seize technological heights and market share, the expansion of production capacity and R&D investment will be imperative. Abandoning these two inputs will also give up the future.
In 2018, the company made detailed plans for major capital expenditures. It is estimated that the capital expenditure will be approximately US$1.9 billion. It is mainly used to: 1. Expand Beijing 300mm wafer fab, Beijing 300mm fab, Shanghai 200mm wafer Yuanyuan, Shanghai 300mm fab and Jiangyin bump factory; 2. New project in Tianjin; 3. Most-owned subsidiary will focus on R&D of 14nm FinFET technology. SMIC is expected to have capacity in 2018 and Advanced process development further.
Advanced process chasing
SMIC's 2018 is destined to be a year of transformation. Under the industry environment where the growth rate of smartphones is slowing down, the growth momentum of the industry has shifted to high-performance computing products based on advanced manufacturing processes. The competition in mature manufacturing processes has become increasingly fierce, and the pressure on prices is high. In anticipation, this was also due to the company's backwardness in advanced process technology. The following shows the gross profit margin for each quarter of 2017. Due to intensified competition in the industry, SMIC's gross margin has dropped to 18.9% in the fourth quarter. .
Table: Organized in company announcement
There are a large number of foundry foundries, which can be divided into three echelons according to technology. The first echelon: TSMC, Samsung, Intel, mastered the high-end process mass production technology of 10nm; the second echelon has mainly Global Foundries. UMC, etc., have small-scale mass production at the high-end 14nm, 28nm process is fully matured; the third gradient is mainly SMIC, 28nm mass production has been achieved, but the yield is low, 40nm process is fully mature. When the dominant force in the industry environment changes, SMIC is 2-3 years behind SCM foundry.
The enlarged production of 28nm wafers is one of the company's major growth drivers in 2017. The proportion of revenue from 28nm has rapidly increased from 5% at the beginning of the year to 11.3% at the end of the year. Among them, 28nm HKMG (metal gate + high-k gate dielectric) The capacity ramp has been completed in 2017. The improved version of HKC+ is expected to be put into production in 2018. The 14nm FinFET technology is currently in the R&D stage and is expected to be produced in the first half of 2019.
In terms of valuation, as of the close of April 4th, PE (TTM) was 35.8 times, which is the highest among the same industry in the Hong Kong stock market. Compared with historical valuation, SMIC’s current PE is also at its highest level in 2014, including many investments. Dr. Liang Mengsong is optimistic about the progress of 14nm technology research after joining Dr. Liang Mengsong. However, before narrowing the gap with the industry leading technology, SMIC will still face fierce competition in the existing process, and price pressure will affect the company's performance.
For SMIC, the 2018 is full of challenges. Whether or not the company can “fly and fly” is a result of the 14nm advanced process research.
Author: Yang Shihong Finet
2. Jiangsu Governor Wu Chenglong visited the China Construction First Bureau inspection factory in Wuxi Hynix;
On the morning of March 30th, Wu Zhenglong, deputy secretary of Jiangsu Provincial Party Committee and Governor, visited the expansion project of Wuxi SK Hynix plant of China Construction First Bureau Construction and Development Co., Ltd.; Yin Xiang's factory expansion project manager Yin Xiang accompanied.
Wu Zhenglong and his entourage first inspected the construction conditions on the site, and listened to briefings by project guides on the project’s advanced technical capabilities and excellent experience in general contracting management. As of now, the main structures of the individual monomers in the project have been completed. Wu Zhenglong and his party’s work on project quality, project control The on-site civilized construction was highly evaluated and expressed its confidence in the high-tech enterprises supporting the development of Jiangsu's industry.
The construction of the Hynix expansion and expansion project is the second cooperation between China Construction First Construction Development Corporation and SK Hynix. The total construction area is approximately 270,000 square meters. The total construction period is approximately 16 months. After the project construction is completed and put into production, It will greatly increase the production volume of finished semiconductor products and provide more than 1,000 jobs for the local area to promote local economic development.
3. Second-tier wafer foundry focus 3 business opportunities
The world-leading second-tier foundries and silicon-based silicon have benefited from automotive electronics, fingerprint identification and the influx of MOSFET orders. In the first half of the year, orders were booming and capacity utilization reached full capacity. Industry expects second-quarter results to be expected to challenge double digits growing up.
In the past, the foundry gradually shifted its production capacity to 12 miles, the global capacity of 8.6 tons gradually decreased, and the outsourcing production of international IDM plants has become a trend. This year in the car power management IC, fingerprint identification IC and MOSFET (metal oxides The semiconductor field effect transistors all have double-digit growth, driving the Taiwan factory second-tier wafer foundry performance.
One of the world's advanced companies received orders from foreign manufacturers for IDM production last year, especially for automotive electronics. This year in power management ICs, fingerprint identification ICs will see double-digit growth, with visibility to the end of the second quarter, at 8 Demand has soared, production capacity is not being demanded, and new production capacity for the fourth wafer fab is being evaluated. Capital expenditure in 2018 is estimated to be 2.1 billion yuan, an increase of 300 million yuan from last year.
This year, MOS has benefited from MOSFET and diode market conditions, and its capacity utilization rate has reached full capacity. In the second quarter, it strived to turn profit into profits. In response to the huge market demand, the Silicon Valley plans to use the original monthly capacity of 57,000 6-inch capacity in the third quarter. , Upgraded to 60,000 pieces per month. In addition, MOS accelerates the layout of IGBTs (Insulated Gate Bipolar Transistors), and it is expected that there will be a small amount of output in the third quarter. Economic Daily