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Why does China's semiconductor industry not have to be pessimistic?

via:驱动之家     time:2020/5/19 18:41:32     readed:142

15 May 2020, the United States Department of Commerce issued a notice, said the United States Department of Commerce said Huawei.

As a result, Fang Jing, chief analyst of Cinda securities electronics industry, conducted an industry analysis report on the incident with Mr. Meng, strategic consultant of Huawei. Lei reproduced the following:

Good afternoon, investors!

I'm Xinda e-fangjing. In today's conference call, we invited Mr. Meng, the former blue army commander, to read the announcement of the US Department of Commerce on May 15. The blue army is a unique organization of Huawei, directly subordinate to the strategic marketing department of the core function platform. The main responsibility is to provide strategic suggestions for Ren Zhengfei and Huawei EMT (executive management team) by simulating and researching competitors.

1、 Interpretation of the announcement of the US Department of Commerce

First, let's introduce the basic information. On May 15, the US Department of Commerce issued two consecutive announcements. The first one is to extend the temporary license for the last time for 90 days to August 14. This extension is different from the market interpretation. In fact, it refers to the extension of Huawei's ability to continue providing services to us customers. As Huawei does not have much business in the United States, this temporary license extension is the last one, but it has little impact.

The second announcement, however, upgraded controls on Huawei chips ,Huawei Commerce Department said

How to limit it? The U.S. has expanded its controls to make the following materials subject to ear:

1) Huawei or its affiliates on the entity list (such as Hisilicon) use products designed using software and technology from the control list (CCL), such as semiconductors. (mainly limited to EDA)

2) Chips and other products designed by Huawei or its affiliated companies (such as Hisilicon) on the entity list, such as those manufactured outside the United States, also use equipment in the control list (CCL). It is necessary to apply for a permit at the time of import and export. (mainly for wafer factories)

At the same time, in order to avoid the impact on semiconductor equipment companies and wafer factories, the US Department of Commerce said that the products (initiated any production step for items based on Huawei design specifications as of May 15, 2020) that have been started in accordance with Huawei's design specifications on May 15, 2020 will not be affected by the shipment to Huawei within 120 days after the effective date of these regulations. (this also means that it's not possible to place an order temporarily, and those who have already cast films will not be affected.)

2、 Influence analysis

After the introduction of Huawei's restriction plan, the market has paid close attention to it, but we think it has a relatively limited impact on software. Because American EDA company stopped cooperation with Huawei last year and cut off the upgrade, Hisilicon is now using the old version of EDA for product design without restriction. At the same time, Huawei's early chip design cooperation with Italian French semiconductor, to some extent, can solve EDA problems through outsourcing.

For the fabs, it may be a bigger challenge. Of course, we can't be too pessimistic. First of all, after the regulations come into effect on May 15, there will be a 120 day buffer period during which TSMC and other manufacturers can deliver goods to Huawei. Second, we also emphasized Huawei's order addition and other issues in the early stage, and the company has a plan in advance.

So from an optimistic point of view, on the one hand, the U.S. restriction plan leaves more room for mediation. Related semiconductor manufacturers and potential terminal manufacturers affected by trade disputes will lobby the U.S. government vigorously within the time limit, and leaders of the two countries also have room for urgent consultation. At the same time, the U.S. restrictions on wafer factories are more to apply for licenses, rather than one size fits all, which will probably extend the supply license of wafer factories for a certain period of time.

Although Trump's actions are more and more obvious, we still believe that the US will not cut off Hass's supply chain immediately. In 2018, Huawei's share in the global base station market reached 30.9% , and there are many layouts in the European market.

On May 5, Deutsche Telekom publicly supported Huawei, saying that if Germany wants to achieve the goal of building 2000 LTE base stations by the end of this year, it needs Huawei's participation. If Huawei is rejected, Deutsche Telekom will not be able to quickly solve the 5g signal coverage problem. If the US cut off Huawei's supply chain in an all-round way, it will bring irreparable losses to the 5g layout of European operators, which will also bring a global rebound!

3、 Guest speech

Restrictions on the use Huawei U.S. technology software to design and manufacture semiconductors, announced by the Commerce Department, are also a plan, not a resolution. Such words were also said:

For Germany, Britain and other countries, the United States can say at any time that it will not let you use Huawei's products, which is intolerable for the third country. In fact, the U.S. is still very cautious. This deterrence is greater than the reality, which is good for Trump's vote. In addition, it will increase the worry of Huawei's customers, and may cut down Huawei's orders. In fact, the United States has torn up its business reputation and signed terms. The United States wants to do this with its own business reputation.

To analyze the US sanctions against Huawei, we need to analyze the US decision-making model.

1) In fact, the power of the president of the United States is very large. The nature of the president is very important to the game between the two countries. Trump's character is that he can sacrifice any interests for his own interests, including the interests of the United States. For example, in order to fight the epidemic, we should cooperate with big countries to make some protective clothing and testing reagents. He only needs to consider death within 200000 as KPI.

2) Trump does things at will, and sanctions against Huawei are not a plan from the beginning to the end. In Huawei's case, we first hit ZTE, then prepared a year for Huawei, and then arrested his daughter, which was not in line with the general methods of warfare. Later on, including the extension period for Huawei, we have signed four 90 day extension periods, during which Huawei has replaced all parts. Sanctions against Huawei not only lose the reputation of the United States, but also hurt the interests of the industrial chain.

3) Trump is a selfish man. It's a tool to get public opinion and votes. From this point of view, we can understand when to fight against Huawei. If we fight against China, we will fight on cotton. We will have a better image of Huawei. Every time we fight against Huawei, we can improve its support rate.

After analyzing Trump's character, it's a mistake to fight Huawei, and win the vote by fighting Huawei. This is an election year. If Trump's approval rate falls behind Biden before the election, there may be extreme measures to win votes.

It can be said that no matter how the U.S. beats Huawei, Huawei will survive, which has been proven in one year. The United States has no unlimited right to fire, and the two sides may still talk. In the end, it may be possible to turn the motion into a resolution, but it will be prepared for Huawei 120 days later. The fact that the United States can't kill Huawei by default is true.

So, this matter, in terms of the general pattern, Trump's strategy for winning votes.

IV. Q of the report

Q: To what extent does the ban affect Huawei's 5g base station? If we can't get the 5nm base station chip from TSMC, how can Huawei simulate the worst state? What's the impact on the 5g base station performance?

A (host): just now in the conference call, Hisilicon also said that it urgently added 5nm orders to TSMC. If it is completely banned in a short period of time, it will actually maintain the base station supply for at least three to six months. At the same time, you can see that on May 6, the United States signed a new regulation allowing American companies and Huawei to customize 5g standards. U.S. companies can cooperate with Huawei, which is signed by the Ministry of Commerce. Now it is also the Ministry of commerce that restricts Huawei's upgrading, which is contradictory from the basic logic. We still think that the United States wants to put this matter more on the negotiation table.

Q: What about other enterprises in Huawei's industrial chain?

A (host): we are worried about the impact on Huawei's industrial chain. First of all, we emphasize the 120 day buffer period. Huawei can adjust its design. We believe that it will increase the proportion of domestic chips used and find a spare tire for Hisilicon. For example, Hisilicon used to make a lot of PMUs for power chips and mobile phone processors, which was originally made by Hisilicon itself. Next, it will increase the proportion of enterprises such as Shengbang and help them to make some more meaningful chips. In the short term, there will definitely be impact. When the inventory consumption is completed, the transition period will be a little difficult, but it will certainly promote the domestic substitution later.

A (guest): on the whole, it has no great impact on Huawei's industrial chain. Huawei will not die. It is only possible to lag behind in making mobile phones in the next period of time. As long as Huawei can't die, the supply chain will supply whatever it needs, and grow together in closer coordination. So the influence is all emotion, not substance.

Q: Can the U.S. have long arm jurisdiction over Japan's semiconductor consumables?

A (guest): if we can't do it, the United States has strength. If we have strength, we can't do anything.

Q: What if 120 days is not extended?

A (guest): the United States will be more cautious, because it involves goodwill, but with this motivation, it depends on Trump's support rate.

Q: Is there a very low probability that other countries will follow the US completely?

A (guest): your business partner can tear up the contract at any time, which means that it is against the basic reputation to buy his goods and the business contract is invalid.

Q: What chips does China have to threaten the United States?

A (guest): we don't occupy a complete commanding height in the whole industrial chain. We have a vast market, but it's not enough to threaten the United States, but we have defense capabilities. The market is big enough, and a lot of dirty work in the industrial chain is done at home. If we face each other in an all-round way, it will also be bad for the United States, so we will finally negotiate.

Q: Now in this form, will Huawei's business shrink significantly?

A (guest): death will not die, nor will the scale shrink too small. Huawei's industry position in many fields is still very stable. It's hard to judge how much it will shrink in the future. But I agree with Cinda that it's important to find a spare wheel for Hayes.

Q: How much pressure can the United States put on its allies? How influential?

A (guest): each country is different. The diplomacy of each country depends on its national strength and leaders. Moreover, the United States cannot turn its national will into the will of its company. This is a matter of the national system of the whole United States. If Huawei collapses, TSMC's big customers will disappear, which is something that no one wants to see.

Q: There is a point of view in the market. How does Huawei deal with US sanctions? What is the internal logic of this contradiction if Hisilicon pulls Huawei out? If we delay the conflict properly, what is the point that Huawei is not willing to split up?

A (guest): the trump team is fighting Huawei for support and votes. Now it's too far to talk about splitting.

A (Moderator): the possibility of the whole Hisilicon divestiture is very small, but we can observe the recent changes of Huawei. In the near future, there are continuous news reports about the changes in the legal person of Huawei's subsidiaries. Huawei also wants to make internal adjustments, and they will make preparations in advance. If the United States moves seriously, it can delay and delay, and finally return to the negotiation table. Of course, we have also had exchanges with the company. In the most pessimistic situation, Huawei Hisilicon eventually became an IP company, retaining the core IP authorization business, and the R & D personnel broke up to support other domestic chip companies.

Q: What is the difference between 14 nm process and TSMC in SMIC? How much room for improvement after 2020q1's high-end support revenue accounts for 2% of total revenue?

A( host): SMIC is pushing N 1. in addition to 14 nm, My weekly update of industry tracking mentioned that in fact in the first quarter, SMIC's 14 nm is doing less RF Transceiver,, so capacity utilization is not high. Kirin 710 A also began to batch in the near future run will pull the crop rate. However ,710 is the processor launched in 2018, the total life cycle is limited, can look forward to the 7 series processor upgrade, as well as the current test validation of the Low Cost version of Kirin 820.

However, 14 nm revenue accounts for more than 10% by 2021. Domestic substitution is a step-by-step process, or we should respect the laws of the industry. The difference between SMIC and international leading companies can't be underestimated.

Q: SMIC has a capacity of 14nm, but it is not large. If it supplies Huawei, will the United States ban SMIC?

A (host): we can't judge whether it will be banned or not. We think it's more time to fight for the speed of industrial chain. In the early Legal Conference, SMIC international indicated that it's always right to increase the capex of 1.1 billion US dollars this year, purchase more equipment and prepare more production capacity. In addition, Huawei has large-scale goods preparation and order addition in the early stage, which is enough to support March to June according to the most pessimistic expectation.

Ten questions Fang Jing of Lei feng.com

In response to this report, Lei Feng also interviewed Fang Jing, chief analyst of Xinda securities electronics industry. The interview mainly involved Huawei's response and survival strategy under the pressure of the United States, as well as the independent and controllable future development of China's semiconductor industry, so that we can have a more three-dimensional understanding of the event.

The following is the actual record of the interview:

IWhat is the real purpose of us chip regulation on Huawei?

The U.S. restrictions on Huawei are, on the face of it, a threat to national security, but in fact, a suppression of China's technology industry.

If we look back on the trade war between the United States and Japan in the 1970s, we will find that this is a consistent trick of the United States. At first, we call on the American people to smash Panasonic's radio, then to trap Panasonic's executives, then to file endless lawsuits and bans against Panasonic, and finally force Panasonic to abandon its semiconductor business.

If we compare today's us approach to Huawei, we will find that it is yesterday's reappearance, and the means are the same.

2、 What is the impact of this ban on Huawei's use of EDA?

In fact, the impact of EDA on Huawei is not great, because Huawei can continue to use the old version of EDA, but the new version cannot. Of course, the autonomy and controllability of EDA is also very important.

In fact, many high-quality EDA companies have sprung up in China, some of which have achieved the follow-up to the United States, or even reached the level of catch-up. For example, Huada Jiutian has achieved a very distinctive simulation level, with many listed companies cooperating with them.

3、 How should Huawei deal with the impact on TSMC's export?

Huawei will introduce more domestic chip design companies and strengthen cooperation with the ecological chain. Of course, Hisilicon may also be divided into parts, enabling domestic chip companies. This is also because there is a big gap in our manufacturing industry. If a company is stronger than TSMC, it will not be so passive.

Of course, I personally think this is not so pessimistic. It can be seen that TSMC is not completely banned. It can apply for permission through internal audit. In addition, Huawei has made a lot of efforts. For example, it is actively preparing goods and has at least half a year's stock of core devices.

4、 Does the US ban have anything to do with TSMC's announcement to build a factory?

Before that, the market thought it was related, that it was a show of goodwill to the United States and that Huawei should be kept. But now I think it's just a coincidence of time.

TSMC announced to build a 5nm plant in the United States. Although it looks very advanced now, the plant will be built in 2024. By then, 5nm is not advanced. Moreover, the factory has only 20000 pieces of monthly production capacity, which is very small. Its significance is more symbolic, more like a trump government performance project.

5、 At present, the development of semiconductor technology is difficult to leave the technology of the United States. If the United States dies, what kind of result will it eventually lead to?

I don't think that will happen. At the beginning, Panasonic was the same. Although it suffered a lot of pressure, it was finally supported. Huawei is sure to survive. The most serious situation is that Hisilicon becomes an IP authorized company, split up and play a role of burning itself and illuminating the industry.

At present, the United States targets Huawei as a company because Huawei threatens the technological hegemony of the United States. Once we are strong enough in the industrial chain, for example, if we have ten companies stronger than Huawei, we don't need to care about the attitude of the United States.

6、 What is the process of independent localization of China's semiconductor industry?

The independent control of China's electronic industry is realized in stages. We first recognized the brand, such as Lenovo and Hisense. Later, we realized that the design of semiconductors was very important, so we had companies like Hisilicon and huiding, and later it was not enough. We need to have a wafer factory, so we have high-quality listed companies like SMIC and Huahong. But now it is found that the upstream equipment and materials are also very important. As our company, Huachuang north is catching up.

So, autonomous control is one after another, the more upstream, the stronger the control. In fact, we have a strong voice in the downstream, but the downstream is still subject to the upstream, so we still have a gap in the upstream level.

7、 What is the progress in the independent research and development of lithography machine in China?

At present, Shanghai microelectronics is worth looking forward to. However, the commanding point of the lithography machine is in Holland, which is not completely controlled by the United States.

Photolithography is very important, but what we lack is a comprehensive and powerful upstream industry. For example, the United States has applied materials, Fanlin semiconductors, a comprehensive layout of PVD, CVD, etching machine, cleaning machine and a series of equipment. If we can also be strong on these equipment, we don't need to worry.

Of course, when we are strong enough, we can authorize each other; although the lithography machine also uses American technology, the United States is also using other countries' technology. So, if one day we are strong enough and ASML is also applied to our technology, we will have the foundation.

For example, in the early days, our panel makers still had to pay patent fees to Samsung and other manufacturers, but now they don't. Why? Because we have implemented follow-up on the panel, and we have surpassed in some areas.

So, it's not that the Netherlands wants to listen to the United States, but that we are not strong enough to let the lithography machine use our patent.

8、 What is the impact of the ban on China's semiconductor industry?

It will force China's semiconductor industry to make rapid progress, which is beyond doubt, especially in the upstream equipment and materials.

In fact, China has invested a lot of money in the field of semiconductors over the years, but we still frequently see the situation that relevant enterprises are suppressed by the United States. Because semiconductors are not a single industrial chain. This chain is very long. We are going up from the application end step by step. It will take time. We have made a lot of progress, but it is not enough.

9、 It is reported that China may carry out some countermeasures involving apple, Qualcomm and Boeing. What do you think?

I think Boeing Cisco is possible, but Apple Qualcomm will not.

In fact, an enterprise like apple is helpful to China. It promotes domestic employment, helps China cultivate a large number of technical talents and manufacturing practitioners. Many listed companies are the industrial chain behind apple, so thousands of jobs are involved. The same is true for Qualcomm. Many domestic mobile phone companies, such as Xiaomi, oppo, vivo, etc., are using Qualcomm's chips.

We don't need to be so pessimistic about the electronic sector, especially the electronic consumer industry, which is related to the national economy and the people's livelihood, to continue to develop; it's not that once the United States sanctions, there will be absolute opposition. I think there is still hope for reconciliation through negotiation, not confrontation.

It may also be a vote consideration for the United States to do so; in the light of Japan's experience, it doesn't need to be so pessimistic.

10、 Is it possible to form two sets of technology industry systems in China and the United States in the future?

It's possible.

But American technology comes first. We may follow the American technology route at first, but we may form our own technical characteristics in the future.


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