IC industry mergers and acquisitions to deal with crisis

China's integrated circuit industry welcomes policy favorably. According to China Securities Journal, the chip industry related to information security has been raised to a national strategic height. The state will invest heavily to support the development of the integrated circuit industry, and the 120 billion yuan national chip industry support fund is expected to be announced in the near future.

At present, China's IC import and export deficit exceeds 100 billion U.S. dollars. Compared with foreign countries, the domestic IC industry is lagging behind, over-reliance on imports, insufficient capital input, and small-scale enterprises, restricting the development of China's IC industry. Mergers and acquisitions, restructuring, and integration of the industrial chain are the trend of the times, free from external dependencies, solve the difficulties of capital, talents, and patents, and realize localization of chips is the future direction of efforts.

IC industry will welcome good

As the foundation of the electronic information industry, the integrated circuit industry has always been concerned by the nation. After the “U.S. Prism Gate” occurred, the chip industry related to information security was even raised to the national strategic height. In this year's national "two sessions", the IC industry was first written into the government work report. In the "Government Work Report," Premier Li Keqiang stated that "the establishment of an emerging industry entrepreneurship and innovation platform will catch up with the advanced generation in the new generation of mobile communications, integrated circuits, big data, advanced manufacturing, new energy, and new materials, leading the future industrial development. ".

As one of the focuses of the Chinese government's work in 2014, the integrated circuit industry is currently in the period of rapid development of the industry. The state attaches great importance to the development of the semiconductor and integrated circuit industries, and will also intensively introduce IC industry support policies in the near future.

Recently, at the 2014 China Semiconductor Market Annual Conference and the third China IC Industry Innovation Conference (IC Market China 2014), the senior officials of the Ministry of Industry and Information Technology revealed the four directions of policy support for the first time, including the establishment of central government and local government support. Coordinate long-term mechanism of policy; Solve the bottleneck of investment and financing that has plagued IC industry for a long time, Find more resources from the capital market, Use policies to guide social capital investment; Encourage innovation; Strengthen opening to the outside world, encourage domestic and foreign companies to actively cooperate with Policy guidance improves the quality of cooperation.

According to the China Securities Journal, the country will spend heavily to support the development of the integrated circuit industry. The national chip industry support fund is expected to be announced in the near future and the scale will reach 120 billion yuan, which will exceed the amount of research and development in the past decade. sum.

Analysts said that with the escort of the national team funds, breakthroughs in core technologies and localization will enter a peak period. Including cloud computing, Internet of Things, big data, digital TV and other important areas of chips, will be expected to achieve import substitution. On the industrial chain, equipment, design, manufacturing, and packaging companies for integrated circuit chips are also expected to usher in rapid development.

The import and export deficit exceeds 100 billion yuan, and the entire upstream and downstream pipelines are behind

With the increasing demand of the integrated circuit downstream products in the domestic market and the gradual shift of the global semiconductor industry to China, in recent years, China has become a manufacturing power in the integrated circuit industry. Data show that in 2011 China's IC industry realized sales revenue of 157.221 billion yuan, an increase of 9.2% year-on-year, while global IC industry sales revenue growth rate of only 0.2%; and in 2013 this figure has been updated to 269.3 billion yuan. However, behind this considerable growth, there is a huge deficit in the import and export of integrated circuits. ICs needed in the domestic market rely heavily on imports. Statistics from the Ministry of Industry and Information Technology show that in 2013, China imported 231.3 billion U.S. dollars of IC products, a year-on-year increase of 20.5%. Its imports exceeded crude oil and became China's largest import commodity. The import and export deficit in the IC sector reached US$143.6 billion, an increase of 3.5% over the previous year. %.

The upper, middle and lower reaches of the IC industry chain correspond to design, wafer fabrication, and packaging, respectively. As far as the gross margin level is concerned, IC design is much higher than package testing abroad. IC design company's gross profit margin is generally 60%, wafer manufacturing is maintained at 35%, and the average gross margin of the packaging and testing companies is only about 25%; but the domestic IC industry chain is lagging behind, and low gross margin IC packaging and testing The industry accounts for half of the market, and IC design and manufacturing rely heavily on imports.

The bottleneck of the development of China's integrated circuit industry is mainly reflected in funds, patents, and talents. The IC industry is a capital-intensive industry. According to data from the Bureau of Operational Inspection and Coordination of the Ministry of Industry and Information Technology, the total investment in fixed assets of China's IC industry was only about US$40 billion in the past six years, while Intel’s investment in 2013 alone reached US$13 billion; at the same time, China’s IC The industry has experienced three years of severe negative growth in six years, and the total investment has dropped significantly, showing instability and insufficient sustainability. In addition, as a newly emerging industry, the high-end talents of ICs are extremely scarce; and patents are also the main barriers to hinder the internationalization of the domestic IC industry and become bigger and stronger.

Compared with foreign IC giants, China's integrated circuit companies are too small. In 2012, China's top ten integrated circuit design companies had total sales of 22.6 billion yuan, while the ranking of the world’s top US Qualcomm companies’ turnover was 13.18 billion US dollars; in the field of integrated circuit foundry, China ranked first The difference between SMIC’s revenue and TSMC’s revenue, which is the world’s largest, is about 9 times.

M & A restructuring is a trend

Integrated circuits are typical technology and capital-intensive industries. They have developed rapidly, are highly competitive, and are characterized by global competition. At present, mergers and acquisitions and restructuring have become the inevitable trend of China's current integrated circuit industry becoming bigger and stronger, and coordinated development of the industrial chain. Due to the intensified international competition pressure and the change in the corporate competition model to the entire industrial chain, the integrated circuit industry chain in China may enter a new round of peak periods.

Recently, major mergers and acquisitions of IC companies have taken place in different colors. The Shanghai Ziguang Group, which has a “state-owned assets” background, successively acquired Spreadtrum (IC mobile phone chips upstream) and RDA (RF front-end) in June and November last year. In January of this year, Lenovo successively acquired IBM x86 server and MOTO mobile phone business. Datang Telecom integrated its integrated circuit design business and established Datang Semiconductor, a wholly-owned subsidiary. Pudong Branch Investment has also sent a privatization offer to Shanghai. It can be imagined that in the next few years, there will be more than 500 million U.S. dollars in IC design companies.

China's annual import of IC chips exceeds US$ 190 billion, which is comparable to the import of crude oil. If the IC industry has sufficient space for development, it will greatly narrow the gap between China's and developed countries' capital investment in the chip industry. Analysts believe that the general trend of localization of chips has been irreversible, and capital investment in related areas is expected to achieve geometric growth. How to get rid of external dependence and gradually realize domestic substitution is the most important thing in China's localization of information technology.

At the same time, the vigorous development of the integrated circuit industry also requires the solution of financial difficulties, the need for talent, and the protection of patents. Therefore, national policy support is particularly critical, and setting up branch offices overseas or directly attracting talents is the only way out. Raising their own level, “going out” to adapt to internationalization rules, and participating in the formulation of international standards are inevitable approaches.