This announcement caused an uproar in the global semiconductor industry. Foreign analysts believe that the two poles, Morgan Stanley analyst Zhan Jiahong believes in the July report that UMC is "spending money in the right place", raising the investment rating of UMC; UBS ( UBS also gave buy reviews; Citigroup continued to question UMC's competitiveness at 28 nm and gave it a sell rating. Many analysts questioned, "When not investing in advanced processes, will UMC grow? SMIC, Groffonte, Intel did not dare to say no to the investment in advanced processes, and UMC actually opened the first shot.
The decision of UMC Chairman Hong Jiacong is a very interesting case in the business strategy. "Caixin" has obtained the view of co-general Wang Shi through the formal speech pipeline. During his 400 days, UMC is almost "changing." A brain has a different strategy. The strategy of pursuing growth has been different from the past. UMC has given up a market that everyone can see, in fact, the market that may not be eaten, admits its weaknesses, but may open up new opportunities.
Wang Shi was the deputy general manager of the American company Trident. During his tenure, the company that made the graphics chip was dying after his repositioning, and the final market value increased by 2 billion US dollars. He joined in 2008. After U.S. U.S., it was discovered that the reason why UMC continued to lose to TSMC in the market was not the intention, but the strategy needs to be adjusted.
"18 years is a strategy of constant catch-up." Wang Shi analyzed that in 2000, UMC chose to cooperate with IBM to develop a copper process. TSMC chose to develop itself, which has made UMC fall behind in advanced processes.
"Liandian's customer base has shrunk, but for each generation of advanced processes, the investment cost of production capacity is getting higher and higher." He analyzed. If UMC and TSMC are compared to warships. In the war of advanced processes, UMC's warship is getting more and more Small, TSMC is getting bigger and bigger. In the past 18 years, when TSMC has replaced this big ship with a larger cannon, UMC is also trying to do the same thing, expecting to rely on technology to lead and expand its scale; but 18 years have passed, this Things have not happened.
The catch-up strategy has made UMC a disadvantage for a long time. "Once the customer base becomes smaller, the technology and resources will be less. You will continue to invest, but the launch time will be later than others." The frequent occurrence is that when UMC catches up with TSMC's latest process, The new process also passed the golden period of the highest price and began to cut prices. Similarly, the advanced process, UMC will take more time to recover the investment in research and development and construction capacity.
Take 28 nm as an example. This is the most profitable service in the foundry industry. UMC is one of the few companies that have developed a 28-nm process after TSMC. But as long as UMC catches up, TSMC’s 28 nm As for the revision, "Every time the revision is made, the customer will switch to the new process," UMC has to invest again. TSMC is using this method, and it has already been "tired opponents."
"When we arrived, we must change." Wang Shi said bluntly, one of the most obvious indicators is that due to excessive investment in the past, UMC must maintain capacity utilization rate of more than 90% before it can make money. "Our EPS (per share of tax After the net benefit, it was squeezed out of the towel," he said. "In the past, we used sacrifice to make a profit, in exchange for revenue growth."
"But don't continue to catch up with advanced processes, is it right?" In order to answer this question, Wang Shi has been tracking the company for several years; he found that the key to cracking TSMC's "tired opponents" strategy is to use rationality and discipline. Solidly establish the influence and financial discipline of UMC in the market.
Then, he strictly demands that every investment must meet the requirements of return on investment. If it does not meet, it will be cut off. "Investment technology research and development is relatively cheap, and we will continue to develop at 12, 14 nm." He analyzed, expensive It is built capacity, and the production capacity of 12, 14 nm is relatively small. "If you want to expand, I will strictly control the ROI."
Pursuit of return on investment, not necessarily the market leader
If the cash flow improves, will UMC invest 7 nanometers of technology again? Wang Shi firmly said, "Do not do it!" Because he counted, the size of UMC, doing 7 nm without benefits, SMIC, Groffont, behind With the support of the Chinese government and Abu Dhabi, UMC does not have a rich father, and it is irrational to continue to pursue advanced processes.
However, if you don't participate in advanced process competition, how should UMC grow in the future? Wang Shi's choice is to go back and invest resources in the market that UMC is good at, and squeeze out companies smaller than it!
According to Wang Shi, the global wafer foundry market size is about 6 billion to 7 billion US dollars. The most advanced process accounts for more than one billion US dollars, growing at a rate of 29% per year. However, the more mature process, the market size has The $5 billion market, which is still growing slowly every year, "will become $6 billion in the future."
He found that in this market, UMC's advantages are obvious. "Liandian's research and development funds are more than all other companies that have mature processes!" Companies like the world's advanced companies do not rely on advanced processes to make money. UMC's 12 nanotechnology is better than many competitors, which is the advantage of UMC.
However, in the past, UMC ignored this big market. “UMC is here (referring to the 12-nanometer process market), and the global market share is only 9.1%.” UMC’s existing revenue is about US$5 billion, if the city The share can grow from 9% to 15%, and UMC's revenue will turn into $8.2 billion, equal to 60% of growth.
At the same time, SMIC and other rivals are still busy vying for advanced processes, which will crowd out their investment in mature processes, and UMC will have the opportunity to become a big fish in this pool.
Targeting advanced processes, aiming at strategic value customers
"Union will make an impact on the mature process." This is Hong Jiacong's calculation. For example, UMC announced the acquisition of the 12-inch factory in Fujitsu, Mie Prefecture, Japan. After the acquisition, the production capacity of 90, 65 and 40 nanometers worldwide, UMC has 22 %. After buying this factory, UMC's global market share of 12 nanometers or more will exceed 10%.
In other words, in the future, when electronic companies around the world need these semiconductor technologies, they must regard UMC as an important partner. UMC can therefore have a more stable customer relationship and improve the return on investment.
When others only see the business opportunities of traditional process miniaturization, Wang Shi believes that the next step is to add the high-voltage-resistant process to the existing logic process, plus the embedded memory technology, just like stacked wood. The value of the product will increase with each new technology added. The capacity of the recent 8 吋 fabs is in short supply, because there are many new applications with mature processes.
"There is no shortage of growth topics in this field." Wang Shi explained, "Embedded memory, RF-SOI and other technologies, UMC have opportunities."
When Wang Shi met internally, he repeatedly counted "Where to play, How to win." This time, UMC is not only a technology leader, but every time it costs 1 yuan, it must be One step to think clearly, what kind of market this investment can compete for, and which customers with strategic value.
How do future investors think about UMC? Wang Shi analyzed that in the past few quarters, UMC’s cash accumulation has become faster, and its ability to fight against the wind has become stronger. “There is a lot of money in the hands of cash.” 4. The beginning of the purchase of treasury shares, the rate of profit distribution is also increasing.
"In the medium and long term, we must look at the improvement of EPS." Wang Shi said that from the second half of next year, the cost of depreciation will begin to decline, and UMC’s funds will be more abundant. The reforms after Wang Shi and Jane Shanjie took office have the opportunity to let UMC Going out of the lost 18 years, restarting growth.
