Selling 60% of the equity for 1.97 billion yuan, Zhongxin Wafer may sprint for IPO

Foreword:

In this context, Ferrotec, which produces semiconductor materials and equipment components in Japan, chose to continue to invest in high-level equipment in China. The company believes that Sino-US frictions are likely to become long-term.

60% stake sold for 1.97 billion

Ferrotec Holdings, a Japanese semiconductor silicon wafer factory, announced the sale of its Chinese semiconductor silicon wafer subsidiary to local local governments, and will sell 60% of its equity, hoping to improve the company’s financial system and strive to make the Chinese silicon wafer subsidiary listed in the mainland IPO . The transaction consideration reached about 29.6 billion yen (about 1.971 billion yuan).

Hangzhou Zhongxin Wafer was established in 2017 as a joint venture by Ferrotec Holdings, a Japanese company, Hangzhou Dahe Thermomagnetic Electronics Co., Ltd., and Shanghai Shenhe Thermomagnetic Electronics Co., Ltd. It is mainly engaged in the research and development and production of high-quality semiconductor silicon wafers for integrated circuits. manufacture.

According to the announcement, a total of 12 investment institutions participated in the above-mentioned equity transfer, including Shanghai Xingcheng Capital, Tongling SASAC, Xiamen C&D Group, the listed company YOFC, etc. A total of 15 funds entered, with a maximum shareholding of 7.06% . However, the shares are relatively scattered, with their respective shareholding ratios ranging from 1.25% to 16.4%.

This announcement comes amid the US-China trade war

The day Ferrotec issued the above announcement was the day when the US sanctions against Huawei came into effect. The sanctions order stipulates that any foreign company that uses U.S. technology and equipment must first obtain permission from the United States if it wants to supply Huawei.

Subsequently, a number of large Japanese semiconductor companies, including Toshiba, Kioxia, Sony, and Mitsubishi Electric, announced that they would stop supplying Huawei from now on.

Recently, with the intensification of trade friction between the United States and China, the government has stated that it will reach 70% of the chip self-sufficiency rate by 2025, and the trend of localization of semiconductors is accelerating more than ever.

At the same time, the semiconductor chip business requires huge equipment investment, which has a great impact on the Ferrotec Group’s finances. The introduction of external capital is also of great benefit to the company’s business expansion.

Compared with the most advanced semiconductors, traditional semiconductors are not easily affected by trade frictions, and China is likely to expand production at present. If Chinese-made semiconductor manufacturing equipment is used, it will drive the demand for equipment components such as quartz and ceramic products produced by Ferrotec to grow.

In addition to the factors of trade friction, another factor that Ferrotec considers to increase its investment in China is “China’s speed”. Ferrotec believes that the production of semiconductors in China will accelerate.

Ferrotec’s China Semiconductor Layout

Ferrotec Holdings entered China in 1992 and invested and built factories in many places in Shanghai, Hangzhou, Yinchuan and Anhui. Among them, Hangzhou Zhongxin Wafer Semiconductor is one of its subsidiaries producing wafers in China.

Ferrotec entered the silicon wafer business through its subsidiary Shanghai Shenhe Thermal Magnetic Co., Ltd. in 2002 and produced small-diameter (under 6-inch) silicon wafers.

After that, it entered the medium-caliber (8-inch) market in 2016; in 2017, the silicon ingot factory of the subsidiary Ningxia Zhongxin Wafer Semiconductor Co., Ltd. was opened, and later, in order to further strengthen the silicon wafer business, Shanghai Shenhe Thermomagnetic The semiconductor silicon wafer business was spun off and Shanghai Zhongxin Wafer Semiconductor Co., Ltd. was established.

From the perspective of national layout, through the integration of Ferrotec Group’s semiconductor silicon wafer industry, Hangzhou Zhongxin Wafer will become the flagship enterprise of Ferrotec’s semiconductor silicon wafers, forming an integrated silicon wafer with Hangzhou factory, Shanghai factory and Yinchuan factory. Circle industry pattern.

Ferrotec plans to increase its equipment investment in fiscal 2019 (as of March 2020) by 30% year-on-year to 48 billion yen, the highest in a single year.

Among them, investment in China accounted for 96%, amounting to 46 billion yen. Among them, the largest investment is the construction of production equipment for semiconductor material wafers in the Hangzhou factory.

Targeting Production Opportunities for Large Wafers

The larger the wafer, the higher the utilization rate when manufacturing chips. The more chips that are cut out, the more practical it is. Therefore, the chips after the 14nm process basically use 12-inch silicon wafers. It can be seen that it is important to master the manufacturing technology of large-scale silicon wafers.

The Chinese market has a large demand for large-sized semiconductor wafers, but now China can only meet 4-6-inch wafers, 8-inch and high-end 12-inch large wafers have weak independent supply capacity and mainly rely on imports .

And Hangzhou Zhongxin Wafer is targeting this market.

In 2019, the actual demand for 8-inch and 12-inch silicon wafers in domestic fabs is about 1.73 million and 3.41 million per month. However, in contrast to the demand-side data, there is a large market gap on the silicon wafer supply side.

On December 30, 2019, Hangzhou Zhongxin Wafer Semiconductor Co., Ltd. announced that it successfully completed the rollout of the first 12-inch semiconductor silicon polishing wafer in the 12-inch production workshop.

On June 30, 2019, Zhongxin Wafer’s first batch of 8-inch (200mm) semiconductor silicon polishing wafers were successfully rolled off the production line.

If it has a monthly production capacity of 100,000 pieces by the end of 2020, this will also be a breakthrough in the large-scale production of 12-inch silicon wafers in China.

It will break the long-term monopoly of foreign companies in the semiconductor silicon wafer market, and greatly alleviate the short board of insufficient supply of large semiconductor wafers in my country.

In addition, Zhongxin Wafer landed in Hangzhou, which is also in line with the Yangtze River Delta. For opening up the upstream and downstream enterprises in the industrial chain, the influence of 12-inch large wafer manufacturing will be radiated to a wider area, in the process of the integration of the Yangtze River Delta. , Hangzhou and Zhongxin Wafer will face more industrial opportunities.

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The most important thing is that this acquisition is enough to see China’s determination and release a signal: it is going to create its own semiconductor industry line.

However, it is still too early to complete this goal. The wafer as a material is only the first step of the chip. Next, there are EDA software, extreme ultraviolet lithography machines, etc. that need to be broken through. These will be even more difficult, so there is a long way to go. .