Wafer is the basic raw material for manufacturing semiconductor devices. High-purity semiconductors are prepared into wafers through processes such as crystal pulling and slicing. The wafers undergo a series of semiconductor manufacturing processes to form extremely small circuit structures, which are then cut, packaged, and tested to become chips, which are widely used in various Electronic devices. .

Wafer and chip relationship

The chip is a semi-finished chip that is completed by wafer cutting. The chip is composed of N multiple semiconductor devices. Semiconductors generally include diodes, triodes, field effect tubes, low-power resistors, inductors, capacitors, and so on. Silicon and germanium are commonly used semiconductor materials, and their characteristics and materials are materials that are easy to be used in large quantities and at low cost for the above technologies. A silicon chip is composed of a large number of semiconductor devices. Of course, the function is to form semiconductors into circuits as needed and exist in the silicon chip. After packaging, it becomes an IC.

With the development of information technology, the demand for wafers has greatly increased. The larger the silicon wafer size, the more chips can be manufactured on each silicon wafer, and the lower the manufacturing cost. Therefore, the expansion of silicon wafer size and the reduction of chip manufacturing process are the two main lines of technological progress in the integrated circuit industry. At present, the mainstream silicon wafer shipments in the market have been concentrated on large-size silicon wafers such as 8-inch and 12-inch.

Why is 8-inch so popular?

Because the market demand is so strong, the demand for 8-inch wafer production capacity will continue to increase in the next few years. In order to meet the demand, the construction of new production lines has been launched one after another, which shows that the current production capacity cannot fully meet the supply demand.

First of all, of course, the demand for analog chip applications is strong, especially with the gradual landing of the Internet of Things, 5G and new energy vehicles, the demand for power devices is quite strong, and this also gives more business opportunities for 8-inch wafers.

Secondly, the 8-inch foundry capacity and delivery time have always been tight. The 8-inch line production capacity of major foundries is generally tight, and most of the analog and discrete device markets are controlled by major IDM manufacturers, such as Infineon and Texas Instruments. However, due to limited capacity, these IDMs usually outsource orders to Foundry factory foundry, at the same time, in the process of shifting from 6 inches to 8 inches, part of IDM’s main production capacity was focused on the 12-inch line, and no additional 8-inch line was added, so 8-inch products had to be outsourced. Therefore, the expansion rate of most IDMs is lower than the growth rate of demand, and the proportion of outsourcing will be higher and higher. This will aggravate the situation of Foundry factory orders being in short supply.

Moreover, the supply of related equipment is insufficient (many equipment factories no longer produce 8-inch wafer processing equipment. Therefore, in recent years, second-hand 8-inch wafer equipment is very popular in the world, especially in mainland China), 8-inch silicon The limited output of films is also the reason for the tight production capacity of the overall market.

The Chinese market will explode

Under such an industry format, China’s IDM, Fabless, and Foundry are all benefiting from the 8-inch wafer market, and they are also an important driving force for the boom in this market.

It can also be seen from the above figure that in 2018, the revenue of SMIC and Hua Hong Hongli mainly came from 40nm and larger node process technology, especially Hua Hong, which is more prominent. When manufacturing chips with 90nm and larger nodes, 8-inch wafers are mainly used. I believe that in 2019, the overall situation of these two companies will still be like this, but there are some changes in individual proportions.

SMIC said: “After two years of accumulation, we have not only further shortened the gap in advanced technology, but also comprehensively expanded new mature process technology platforms.” The company’s third-quarter performance was better than guidance. Customer demand in China is strong, with revenue accounting for 60.5%, an increase of 10% month-on-month. The Internet of Things and smart homes drove demand, and revenue in the consumer electronics sector increased by 16% month-on-month.

SMIC’s wafer fabs are mainly distributed in 4 cities, Beijing, Shanghai, Tianjin and Shenzhen. Among them, Beijing is mainly based on 12-inch lines, and Shanghai and Shenzhen each have an 8-inch fab. Shanghai’s monthly production capacity is about 112K. Shenzhen’s monthly production capacity is approximately 52K. Tianjin is the company’s main base of 8-inch fab. There is an old fab and a new fab. The monthly production capacity of the old fab is about 58K. The new fab is expected to become the world’s largest 8-inch wafer production line.

As China’s customer revenue accounted for 60.5%, and this proportion will continue to increase, the company’s 8-inch wafer production line will further benefit.

For Hua Hong Hongli, its third-quarter revenue reached 239 million US dollars, an increase of 3.9% from the previous quarter, and basically the same year-on-year. This was mainly due to the increase in the production of customers from China and other Asian countries and regions, especially MCU, super junction, IGBT, general MOSFET, power management chip and analog products. This also highlights the company’s strategic layout of focusing on specialty craft products. In addition, its gross profit margin is maintained at 31%. In mainland China, semiconductor companies can maintain a gross profit margin of about 30%, which is a good result and performance.

The strategic layout of Hua Hong’s special process products determines that its 8-inch wafer production line accounts for a higher proportion than SMIC’s. From the perspective of market conditions and the characteristics of customers in mainland China, the utilization rate of its 8-inch wafer production line is expected to further increase in the next few years.