Domestic semiconductor equipment for many years of precipitation finally erupted!

With every major breakthrough in information technology, the scale of the semiconductor equipment industry has made a great leap. For example, the scale of supporting equipment in the PC era is 200-30 billion US dollars, the scale of supporting equipment in the smartphone era is about 40 billion US dollars, and the scale of supporting equipment in the 5G era is 60 billion US dollars. At the same time, the market concentration is also continuously increasing, with the market share of the top five equipment leaders rising from 47% to 64% in the past ten years, the market share of lithography machine ASML rose from 65% to 89%.

Highlight: Key domestic equipment that entered mainstream fab process validation in 2016-2019 will achieve a substantial breakthrough in 2020.

With every major breakthrough in information technology, the scale of the semiconductor equipment industry has made a great leap. For example, the scale of supporting equipment in the PC era is 200-30 billion US dollars, the scale of supporting equipment in the smartphone era is about 40 billion US dollars, and the scale of supporting equipment in the 5G era is 60 billion US dollars. At the same time, the market concentration is also continuously increasing, with the market share of the top five equipment leaders rising from 47% to 64% in the past ten years, the market share of lithography machine ASML rose from 65% to 89%. In the second half of the year, the global semiconductor equipment industry rebounded strongly and the local storage factory research and development line accelerated production expansion after mass production. In 2020, the domestic semiconductor equipment industry will be in a good market environment. Domestic equipment and material brands will achieve rapid development in the new year. First, the leading business scale of equipment and materials will continue to grow at a high speed. Second, a number of rising stars will emerge from ion implantation machines, lithography machines, glue development and measurement equipment, which have not yet broken through. In this issue of Smart Insider, we recommend BOC International Securities' research report "Semiconductor Equipment Industry 2020 Strategy" to analyze the latest developments in the global semiconductor industry and explore new development opportunities in the domestic semiconductor market in 2020. If you want to collect the report of this article (Semiconductor Equipment Industry 2020 Strategy), you can reply to the keyword "nc424" at Wisdom Things (Public Number: zhidxcom). Source: BOC International Securities Original title: "Semiconductor Equipment Industry 2020 Strategy" Author: Yang Shaohui Chen Xiang

Characteristics of the semiconductor industry 1. The high growth of the industry scale is greater than that of the cyclical semiconductor equipment industry. It was only US $8.1 billion in 1992, stable at US $200-30 billion in 1995-2003, stable at US $300-40 billion in 2004-2016, and climbed to US $550-65 billion in 2017-2018. The global semiconductor equipment industry market scale grew by 8% annually from 1992 to 2018, showing a phased growth trend as a whole.

▲ The global semiconductor equipment industry is expected to grow at an average annual rate of 8%. Semi predicts that the scale of the semiconductor equipment industry will reach a record high with 5G technology pushing the scale of the semiconductor equipment industry to US $57.6 billion, US $60.8 billion and US $66.8 billion from 2019 to 2021. 2000-2010 is the era of global PC Internet. The market size of semiconductor process equipment industry is at the average level of US $25 billion (process equipment accounts for 70%-80% of the semiconductor equipment industry as a whole). By 2010-2017, mankind has entered the era of smartphone social media, and the market size of the semiconductor process equipment industry has risen to an average of $32 billion. From 2017 to 2020, mankind will enter the era of 5G, artificial intelligence and the Internet of Things, and the market size of semiconductor process equipment will increase to an order of magnitude of more than $500-60 billion.

▲ 2. The market scale of semiconductor process equipment in the era of 2. 5G big data has reached a higher level. 2. The industry is highly concentrated and the concentration has been rising. In 2018, the top three AMAT, ASML and Lam Research accounted for about 50% of the total market share, while the top five AMAT, ASML, Lam Research, TEL and KLA accounted for 71% of the total market share.

▲ The global semiconductor equipment industry is highly monopolized. The competition pattern of various semiconductor equipment: each type of product is oligopolized by the top 1-4 companies:(1) Lithography machine: 100% of EUV100 comes from ASML, which is in an absolute monopoly position in the lithography machine market;(2) Etching equipment: silicon-based etching is mainly monopolized by Lam and AMAT, and medium etching is mainly monopolized by TEL and Lam;(3) thin film equipment: CVD is mainly monopolized by Hitachi, Lam, TEL and AMAT, while PVD is monopolized by Lam and AMAT. (4) Developing equipment: TEL is in an absolute monopoly position;(5) Ion implanter: 70% from applied materials and 18% from Axcelis Technologies;(6) Cleaning equipment: mainly from DNS, Lam, TEL, etc. (7) CMP:70% from Applied Materials,26% from Ebara;(8) Heat treatment: monopolized by Applied Materials, Hitachi International Electric and TEL;(9) glue removal equipment: PSK, Lam, Hitachi Hi-Tech, Yitang Semiconductor;(10) Process testing equipment: KLA market share 50%,Applied Materials 12%, Hitachi Hi-Tech 10%;(11) dicing/thinning machine: Japan's DISCO absolute monopoly;(12) Test equipment: monopolized by Tereda and Edwan duopoly.

▲ Conductor etching equipment is monopolized by Lam and applied materials.

▲ Dielectric etching equipment was monopolized by TEL and Lam. The top 10 companies in the semiconductor equipment industry had a total market share of 66% in 2007 and a total market share of 81% by 2018, up 15 percentage points. The top five companies had a total market share of 57% in 2007 and 71% in 2018, up 14 percentage points.

▲ The concentration of the global semiconductor equipment industry is increasing day by day. Judging from the sales of lithography machines, the market share reached 89% in ASML2018, while ASML only accounted for 55% in 2005. The market share of ASML has continued to rise in the past ten years or so.

▲ The market share of ASML, the world's leading lithography machine leader, is increasing year by year. Judging from the competition pattern of etching equipment, the industry concentration is also continuously increasing:(1) In the market of dielectric etching equipment, TEL and Lam Research monopolized 97% of the market share in 2018, while the two companies only accounted for 76% in 2005;(2) In the conductive etching equipment market, Lam Research and Applied Materials monopolized 86% of the market share in 2018, in 2005, the two companies accounted for only 74%.

The market share of TEL and Lam Research in the media etching equipment market is increasing year by year.

The market share of Lam Research and AMAT in conductor etching equipment is increasing year by year.

Reversal of Semiconductor Equipment Industry in 5G Era Since the first and third quarters, the semiconductor equipment industry has significantly reversed the shipment amount of North American semiconductor equipment manufacturers to US $2.109 billion in October, up 7.7 month on month and 3.9 year on year. The cumulative shipment amount in the first October was US $19.7 billion, down 17% year on year, but the decline was significantly narrower than that in the past 9 months. Statistics of 7 global semiconductor equipment listed companies, the third quarter revenue of 14.2 billion U.S. dollars, an increase of 10%, is the first time after four consecutive quarters of negative growth to resume positive growth, down 6% year-on-year, the decline was significantly narrower than the second quarter of 1. Looking forward to the fourth quarter, ASML expects revenue to increase by 30% month-on-month, while Lam, KLA, Teradyne and others expect positive revenue growth in the fourth quarter.

The single-quarter revenue of ASML, KLA, Applied Materials, etc. stabilized and rebounded ASML's third-quarter revenue continued to rise month-on-month. ASML's revenue in the third quarter was 3 billion euros, up 16% from the previous quarter and 8% from the same period last year, continuing the strong rebound since the second quarter of this year. ASML expects revenue in the fourth quarter to be 3.9 billion yuan, up 31% from the previous quarter and 24% from the same period last year. Single-quarter operating income will reach a record high. In addition, Applied Materials expects revenue of $36.85±1.5 billion in the third quarter of this year, up about 3.5 percent from the previous quarter, while TEL expects revenue of about $2.55 billion billion in the third quarter of this year, up 30 percent from the previous quarter.

▲ ASML's quarterly revenue growth rate rebounded significantly year-on-year. Select the listed companies that have published the third quarter report as an example. In the third quarter, the gross profit margin continued to recover slightly on the basis of the second quarter's quarter-on-quarter recovery, indicating that the profitability of the global semiconductor equipment industry has stabilized and rebounded. Among them, ASML's gross profit margin in the third quarter will continue to rise to 43.7 from 41.6 in the first quarter and 43% in the second quarter, and is expected to reach 48-49% in the fourth quarter. KLA's gross profit margin will rise from 55.6 in the first quarter and 52.9 in the second quarter to 60.8 in the third quarter, and is expected to reach 60%-61% in the fourth quarter.

▲ Some of the world's semiconductor equipment listed companies for the sample gross margin recovery.

▲ ASML's single-quarter gross profit margin rebounded 2 and 5G had obvious pulling effect on advanced process equipment. Judging from ASML's overall revenue structure in the third quarter, the main reason for the positive growth in single-quarter revenue was 2.04 billion euros from logical customers, up 81% from the previous quarter and 98% from the previous year, while the revenue from storage customers was only 0.54 billion euros, down 25% from the previous quarter and 62% from the previous year.

▲ Logic circuit customers drove a sharp rebound in ASML's quarterly revenue ASML's EUV orders hit a record high. In the third quarter of this year, ASML's new EUV orders reached 23 units, 130 higher than the historical high of 10 units, ushering in another explosive growth in history, indicating that the demand for equipment in advanced processes is very strong. At the same time, ASML's EUV delivery volume has also steadily increased, with 7 EUV devices delivered in the third quarter, 8 EUV devices expected to be delivered in the fourth quarter and 26 EUV devices delivered throughout the year, while 5, 11 and 18 units will be delivered in 2016, 2017 and 2018.

▲ ASML EUV orders record high

▲ ASML EUV cumulative delivery of more than 50 ASML lithography equipment EUV orders explosive growth, mainly TSMC-based wafer foundries to increase capacity expansion of advanced processes. According to TSMC's latest quarterly report, TSMC raised its capital expenditure plan for 2019 from the original US $11 billion to US $140-15 billion, a new high in the company's history. The main reason is that the demand for 5G is higher than expected, and its overall market development is even faster than 4G. The company expects capital expenditure to remain at $140-15 billion in 2020, and the company will continue to expand production and research and development on 5nm, 3nm and 2nm processes.

▲ 2019 TSMC Capital Expenditure Record High Advanced Process Demand for Equipment Elasticity. Take TSMC as an example, the investment per node is rising rapidly, with the 16nm process 10000 chip capacity investment of US $1.5 billion, while the 7nm process 10000 chip capacity investment is estimated at US $3 billion, and the 5nm process 10000 chip capacity investment is estimated at US $5 billion.

▲ TSMC's advanced process expansion will continue for many years. According to the Electronic Engineering Network (ee.ofweek.com), TSMC's 16nm and 7nm process capacity is in short supply in the near future, and the 7nm capacity will be increased by 10000 pieces to 8-90000 pieces/month, while the 5nm process capacity to be mass produced in March next year was originally planned to be 50000 pieces/month, and the current capacity has been scheduled by customers, TSMC plans to increase 5nm process capacity from 50000 pieces/month to 7-80000 pieces/month. 5G technology is the main application area of advanced processes. Since the beginning of this year, more than a dozen 5G mobile phones have been put on sale one after another, such as Huawei Mate 20 X(5G), ZTE Skymachine Axon 10 Pro 5G, iQOO Pro 5G, China Mobile Pioneer X1, Samsung Galaxy Note10 5G. Among them, vivo's iQOO starts at 3,798 yuan, while Samsung's most expensive starts at 7,999 yuan. 5G phones are usually equipped with 12-7nm process baseband chips, including Qualcomm SnapdragonX50, MediaTek HelioM70, Intel XMM8000 series, Samsung ExynosModem5000 series, HiSilicon Balong5000 series, etc.

▲ 5G mobile phone baseband chips mainly use 7nm technology According to the monthly data released by the China Institute of Information and Communications, domestic 5G mobile phone sales in July, August and September 2019 were 72000, 219000 and 497000 in turn, accounting for 0.2, 0.7 and 1.4 percent of total mobile phone sales. It is estimated that 0.16 billion 5G mobile phones will be sold worldwide in 2020, accounting for about 10% of total mobile phone sales. 5G mobile phone sales will be fully rolled out and popularized in 2019-2020.

▲ 5G mobile phone sales accounted for a rapid increase 3, 5G applications will make storage manufacturers equipment procurement demand rebound 5G mobile phone storage capacity will increase significantly. Due to the fast transmission speed, the corresponding data storage capacity of 5G mobile phones will be more than 1 times higher than that of 4G mobile phones. Usually, the storage capacity of 4G mobile phones is 64-256GB, while the storage capacity of 5G mobile phones will be more than 512GB.

▲ The storage capacity of 5G mobile phones will be more than twice that of 4G. According to the estimation of Western Data, mobile data will maintain an annual growth rate of 40%-50% from 2016 to 2021, of which mobile video will grow by 870 by 2021, the fastest growth rate. It can be seen that the storage capacity of mobile terminals will become larger and larger.

▲ Mobile data is growing at an average annual rate of 40%-50%. 5G realizes the interconnection of things. The development of Internet of Things, industrial Internet, etc. will drive the demand for data storage. The advantages of 5G in low latency and transmission speed have made the era of data generation by machinery and equipment come, in the form of, on the one hand, 5G remote operation excavators similar to Sany Heavy Industries, on the other hand, the Internet of Things, industrial Internet and so on. In the 5G era, trillions of devices will be linked to each other, and the generation of data will move from people in the 4G era to objects. The massive data formed will not only drive the demand for logic circuit chips in processing, but also put forward more demand for storage capacity. Therefore, storage chips will face new challenges. According to sohu and IDC, the number of networked terminals worldwide will be 14.866 billion in 2016. With the development of 5G, Internet of Things, artificial intelligence and other technologies, the number of terminals connected to the global network will exceed 30 billion in 2020, with a compound annual growth rate of 20.2 percent. In the 5G era, data storage will also change in the underlying technology. One is the change in storage content. Storage objects will include AR/VR, video, text, numbers, etc., requiring a dedicated storage model. A typical example is shaking sound and fast hand, 4G era has realized the rapid transmission, processing and storage of short video, in the 5G era up to GBPS level of transmission speed, short video even evolved into medium and long video, clearer video. Second, the performance requirements such as read and write speed will be higher. According to IC Insights data, capital expenditure on memory equipment increased from US $14.7 billion in 2013 to US $52 billion in 2018. The proportion of capital expenditure in the semiconductor industry has increased significantly in the past 7 years, from 27% in 2013 to 49% in 2018. The capital expenditure of the memory industry in 2019 will account for 43% of the total capital expenditure of semiconductors this year, down from 49% in 2018. The main reason is that the prices of Nand and Dram continue to decline due to oversupply, and memory manufacturers have greatly reduced their capital expenditure. Among them, IC Insights expects the capital expenditure of memory equipment to be 41.6 billion US dollars in 2019, down 20% year on year.

Short-term fluctuations in capital expenditure of global memory manufacturers.

Domestic equipment into a comprehensive breakthrough period in September this year, Hua Hong Semiconductor (Wuxi) project, Guangzhou Guangdong core semiconductor project, Hefei Changxin DRAM project are officially put into production. From the end of this year to the beginning of next year, a number of 8-inch lines in China, including Yandong Microelectronics and Shanghai Jita Semiconductor, will also be put into production one after another. With the R & D production line put into production, a number of fabs started a new round of equipment procurement pace, including:(1) Changjiang Storage started a new 10000 pieces/month capacity of equipment procurement in August, is expected to increase procurement efforts at the end of the year, is expected to reach 5-60000 pieces/month capacity by the end of 2020. Changjiang Storage purchased a total of 19 lithography machines from 2017 to the first quarter of 2019, and in the third quarter of 2019 Changjiang Storage announced a new tender for 4 lithography machine equipment, and tendered for the purchase of nearly 100 other process equipment. (2) Huali Phase II was put into production last year, this year has also started the new 10000 pieces/month production capacity of equipment procurement. Huali II centrally purchased 7 lithography machines in 2017 and 3 new lithography machines in July 2019. (3) The first phase of Hua Hong Wuxi project was put into production in September with 10000 pieces/month, and the purchase of new 10000 pieces/month equipment has been started. Huahong Wuxi purchased 4 lithography machines in 2018 and 2 new lithography machines in August 2019. (4) Hefei Changxin currently has a production capacity of about 20000 pieces/month and is expected to have a production capacity of 40000 pieces/month by the end of 2020. (5) Guangzhou Guangdong core first phase of 3,000 pieces/month put into production in September, is expected to expand to 18000 pieces/month in the short term. (6) Shanghai Jita 8-inch line will also be put into production, is expected to start the 12-inch production line equipment procurement in early 2020. (7) Yandong Microelectronics 8-inch line is about to be put into production, 12-inch line equipment procurement is worth looking forward. (8) SMIC South plans to invest a total of US $10.2 billion to build two 14nm integrated circuit production lines with a production capacity of 35000 chips per month. It is expected that the commercial production of 14nm FinFET will begin by the end of this year. 1, process equipment with the global semiconductor equipment industry into the boom stage, and the expansion of local fabs speed up, domestic equipment will also usher in rapid development, at the same time, the market share of domestic equipment is also expected in the case of tight international brand delivery, to ease the price pressure faced in 2019, and accelerate the pace of import substitution.

▲ The localization rate of process equipment in major fabs is at the level of 10%. The localization rate of various process equipment:(1) degluing equipment: the highest localization rate is degluing equipment, mainly Yitang Semiconductor has realized the localization of degluing equipment;(2) Cleaning equipment: the localization rate is about 20%, and the local brands are mainly Shengmei Semiconductor and Northern Huachuang. (3) Etching Equipment: The localization rate is about 20%, local brands include Zhongwei Semiconductor, North Huachuang and Yitang Semiconductor. (4) Heat treatment equipment: the localization rate is about 20%, and local brands include North Huachuang and Yitang Semiconductor;(5) PVD equipment: the localization rate is about 10%, and local brands include North Huachuang;(6) CMP equipment: the localization rate is about 10%, and local brands include Huahai Qingke;(7) CVD equipment: there is a breakthrough of zero, but the overall localization rate is not higher than 5%, and the brand is Shenyang Tuojing. (8) Measuring equipment: the localization rate is about 2%, and local brands include Shanghai Ruili, Zhongke Feiyi and Shanghai Precision Semiconductor. (9) Ion implanter: there is a zero breakthrough in localization, and local brands include Zhongkexin, Kaishitong, etc. (10) Glue coating and developing equipment: there is a zero breakthrough in localization, and local brands, including Shenyang source;(11) Lithographic equipment: It is expected that there will be a zero breakthrough in localization, the local brand is Shanghai Microelectronics. According to the collection of micro-grid, DRAMeXchange, etc., at the end of 2017, as one of the five etching equipment suppliers, Micro was included in the 7nm process equipment procurement list by TSMC, and at the end of 2018, its self-developed 5nm plasma etching machine was verified by TSMC. During the continued expansion of TSMC's 7nm process and the construction of 5nm process lines, the medium-sized plasma etching machine is expected to see strong demand, enjoying the explosive growth of demand for advanced process equipment brought about by 5G mobile phones.

▲ The historical performance of the micro-etching machine entering the customer TSMC 2. The semiconductor test of the test equipment is subdivided into SOC test, RF test, Memory IC test and Analog IC test. Among them, SOC test accounts for 64% of ATE, Memory IC and RF test equipment each account for 15-20%. In 2018, the global semiconductor test equipment market size is about US $55-6 billion. According to the proportion of 64%, the SOC test equipment market size is estimated to be US $3.6 billion.

▲ SOC testing accounts for 2/3 of semiconductor test equipment. The SOC test equipment market is mainly monopolized by Teradyne and Edwan. 5G mobile phone SOC chip testing is more difficult, market integration is expected to continue to improve.

▲ Teradat and Edwan monopolize SOC test equipment market. Although precision test electronics, Changchuan Technology, Beijing Huafeng Measurement and Control, Beijing Guanzhong Jichuang, Jinhaitong and others have achieved breakthroughs in the localization of some test equipment or sorting machines, domestic brands mainly focus on the relatively mature power management chip test equipment in China, while SOC and Memory chip test equipment still mainly rely on imported brands such as Teradat and Japan's Edwin. Precision electronics, Changchuan Technology, Beijing Guanzhong Jichuang and other layout of digital test equipment in urgent need of market cultivation. 3. Silicon Wafer Growth and Processing Equipment There are many semiconductor silicon wafer projects, but most of the equipment is dependent on Japanese equipment manufacturers:(1) Crystal growth furnace: imported brand Korean S-TECH, domestic brand Jingsheng Electromechanical, Nanjing Jingneng, Jingsheng Electromechanical is expected to realize localization of crystal growth furnace;(2) Grinding equipment: more than 95% comes from Japan, including equipment manufacturers Tokyo Engineering, Koyo Machinery, Tokyo Precision Machinery, HAMAI, etc; jingsheng Electromechanical is expected to realize localization;(3) Polishing: 100 percent import-dependent, with foreign brands including Lapmaster, Fujitsu, OKAMOTO and Tokyo Seiki;(4) Thinning: 100 percent imported from Japan, including DISCO, Koyo Machinery and OKAMOTO (Okamoto Machinery);

▲ The localization rate of equipment for the main large silicon wafer production line is 10%-20%. Jingsheng Electromechanical has realized the localization of leading long crystal furnace and cutting equipment in Central. At present, single crystal silicon rod rolling mill, polishing machine, double-sided grinding and wafer edge detection equipment have been arranged. Intelligence believes that at every major breakthrough in information technology, the semiconductor industry will make a big leap in size. Now, driven by 5G technology, the full recovery period of the semiconductor industry is coming, and the scale of the industry will reach a new level and reach a record high. Although domestic equipment has accumulated more than 15-20 years of technology, it is restricted by factors such as lack of talents, insufficient investment in research and development, and long verification cycle. It is expected that key equipment entering mainstream fab process verification from 2016 to 2019 will achieve a substantial breakthrough in 2020, entering a new round of expansion in the global semiconductor equipment market, and the market share of domestic brands of etching, cleaning, CMP, heat treatment and other equipment will steadily increase, and lithography, coating development, measurement, CVD, PVD, ALD, etc. are expected to make significant progress. Source: Intelligence East-West graphic system network reprint, copyright owned by the original author. It does not represent the view of this public number. If copyright issues are involved, please contact us. We will negotiate copyright issues or delete the content in the first place!