Three or four years ago, professional investors who invested in semiconductors in China might not be enough to get together. In 2021, the Top 100 semiconductor investment institutions can already be selected.
Under the boom in semiconductor investment, the number of domestic semiconductor companies has also shown explosive growth. Some people even feel that the number of domestic chip startups in recent years, just like Moore’s Law, doubles every six months when it is crazy.
In 2022, semiconductor investors have a deep feeling that the primary market is too expensive, the secondary market continues to decline, and investment is becoming more and more difficult. Entrepreneurs have also realized that as long as they are related to chips, a good team can get financing. This year, they have clearly felt the pressure, and investors have begun to calculate the return on investment.
Under the background that domestic semiconductor investment is ushering in a cold winter and the global semiconductor industry is entering a downward cycle, China’s semiconductor industry is also brewing a merger.
At the IC NANSHA “2022 China Nansha International Integrated Circuit Industry Forum” hosted by Simmou Research, many investors expressed the hope that entrepreneurs can calm down and actively participate in mergers and acquisitions integration.
As one of the key factors in the development of the chip industry, how should capital become the driving force for the third pole of China’s semiconductor industry?
The cold winter of domestic semiconductor capital
The semiconductor industry is a sunset industry in Silicon Valley, but it is an emerging industry in China. It is difficult to obtain investment in chip startups in Silicon Valley, but it is very easy in China. This is the biggest impression of many semiconductor practitioners on the domestic chip industry in recent years.
But in 2022, both domestic and global, the semiconductor industry has ushered in an inflection point. Since April this year, the sales of domestic chips have dropped significantly, and the domestically listed electronic sector has also undergone a significant adjustment. The stock prices of Huiding Technology and Changdian, the leading domestic chip design and packaging and testing companies, have halved in the past year. The phenomenon of newly listed chip companies’ share prices breaking frequently occurs.
The secondary market continues to fall, and the primary market is too expensive. This inversion is like flour is more expensive than bread, chip investment is becoming more and more difficult, and the attractiveness of previous Pre-IPO investment has also dropped significantly.
“The valuation of the primary market is rigid. Generally speaking, the A round is funded at a valuation of 2 billion, and the B round cannot be financed at a valuation of 1.8 billion, which will lead to a deadlock.” Guangdong-Macao Semiconductor Industry Fund, Executive Business partner Liu Dan said: “If the company is still in the stage of financing and burning money, it may face operational difficulties if it cannot raise money. It is necessary to be alert to the global semiconductor down cycle. Although the cold winter of the domestic semiconductor industry may not come, it is necessary to It’s always good to be prepared. “
The semiconductor industry has cyclical characteristics. Generally, it will experience a cycle of demand explosion, price increase, production expansion, capacity release, demand shrinkage, excess, and price decline every few years. The global semiconductor industry may enter a trough in the past two years.
Wang Lin, a partner of Walden International, described the current investment and financing market in the semiconductor industry as “capital winter”.
“I agree with Capital Bitter Winter’s point of view that it is very difficult for many domestic chip startups to find investment.” Xiong Quan, a partner of Wuyuefeng Capital, said at the same time, “The upside-down time of the primary and secondary markets will not be very long . Conversely, this is also a A good opportunity for development. Now there is a reasonable valuation point, the investment slows down, and the industry opportunity may be bigger.”
The cold winter of capital may cause companies facing operational difficulties to seek mergers and acquisitions, which will also trigger a wave of mergers and acquisitions in the domestic semiconductor industry.
The wave of Chinese semiconductor mergers and acquisitions is coming
Throughout the global semiconductor industry, there are several leading companies in each field, such as intel and AMD in the field of PC processors, Qualcomm and MediaTek in the field of mobile phone processors, but these companies have experienced decades of growth, and there have been many The mergers and acquisitions are slowly growing.
“I think the same should be true for domestic chip companies. Gradually, everyone needs to be able to join the group to warm up. After all, large companies have more resources.” Zhang Huanlin, a partner of SMIC Juyuan, believes, “It is difficult to grow into a large company. If a small company can integrate with the industry and large companies, it is not only a strategic agreement, but a deep bond, a combination of capital and equity, becoming a family and forming a joint force, which will be very beneficial to the development of the company.”
Wang Lin also said, “I have called on everyone to stay warm on different occasions. The integration of overseas capital markets has already begun, and foreign semiconductor companies are growing bigger and stronger, and domestic resources should also be integrated to bring together R&D forces to become stronger. Unite. We also call on the companies that Walden has invested in to integrate.”
Liu Dan also judged that with the development of the industry, several large industrial platforms will be formed, which is the law of the industry. Opportunities for industry consolidation and mergers and acquisitions are also of great concern.
As for whether the domestic semiconductor merger and acquisition wave will come soon, Leifeng.com has communicated with many investors and industry insiders and found that everyone has different judgments. Some people think that it will happen in recent years, and some people say that it will not come soon.
Xiong Quan gave a relatively clear judgment. He believes that there may be a big development in domestic semiconductor mergers and acquisitions in two years.
From the perspective of investors, everyone realizes that small companies must grow together with large companies, and mergers and acquisitions are also conducive to the development of the domestic semiconductor industry, but a non-negligible obstacle to the emergence of mergers and acquisitions in the domestic semiconductor industry is the founding team.
Dai Weimin, founder of VeriSilicon, said, “Everyone in China wants to be a boss, and they have to let it go, hoping to see more mergers and acquisitions.”
This is also the advice of many investors to the founder of the chip company. “If you can afford it, you can put it down.” Zhang Huanlin said, ” I think from the founder’s point of view, the upstream and downstream binding is more conducive to the development of the enterprise. From the perspective of investors, it is the same, from the perspective of industrial capital and financial capital. Let’s all work together to support.”
How should capital support the development of the third pole of domestic semiconductors?
Capital is one of the three major elements of the development of the semiconductor industry. For Nansha and the Guangdong-Hong Kong-Macao Greater Bay Area, which want to become the third pole of China’s integrated circuit industry, targeted investments are required based on the characteristics of the Guangdong-Hong Kong-Macao Greater Bay Area and Guangzhou Nansha.
“The third pole does not mean third, but a complementary concept. The Guangdong-Hong Kong-Macao Greater Bay Area should give full play to its market advantages.” Xiong Quan said.
On the whole, the characteristics of the development of integrated circuits in the Guangdong-Hong Kong-Macao Greater Bay Area are very similar to the characteristics of China in the global semiconductor industry, that is, the application concentration.
Li Jinxian, a partner of the Guangdong-Macao Semiconductor Industry Fund, pointed out, “The Greater Bay Area is over-market-oriented and over-opened, but the integrated circuit industry has a relatively long manufacturing cycle and a large amount of investment. From the perspective of the Guangdong-Macao Fund, we may need to focus on manufacturing and packaging. end to make relatively heavy investments in capital and resources. ”
“From the perspective of the development of the chip industry chain in the Greater Bay Area, the project of adding new wafer fabs and packaging plants is an important area for the development of the entire industry in the future.” Li Jinxian said at the same time.
In recent years, Nansha has vigorously promoted the agglomeration development of the integrated circuit industry, introduced and cultivated a number of leading enterprises such as Xinyue Energy, Xinjuneng, Lianjing Intelligent, etc., and took the lead in realizing the layout of the whole industry chain of wide-bandgap semiconductors in China, and initially formed a coverage The entire industry chain of wide-bandgap semiconductor design, manufacturing, packaging and testing, and materials has a complete ecosystem, built an integrated circuit industrial park of about 1.97 square kilometers, and established a Guangdong semiconductor and integrated circuit risk sub-fund with a scale of 2.1 billion.
The policy will also promote the development of Nansha’s integrated circuit industry with capital. Leifeng.com learned from IC NANSHA’s “2022 China Nansha International Integrated Circuit Industry Forum” that Nansha has formulated the “Guangzhou Nansha New Area (Free Trade Zone) to promote semiconductor and Measures for Supporting the Development of the Integrated Circuit Industry (i.e., the “Nine Measures for Strong Cores”), which provide support from 9 aspects, including the settlement of major projects, corporate financing, improvement of the integrated circuit industry chain, subsidies for enterprises’ productive electricity consumption, and support for enterprises to carry out vehicle-level certification. . For example, newly introduced integrated circuit manufacturing enterprises will be given 10% of the total investment and a maximum of 300 million yuan to settle in support; according to 30% of the actual investment of the enterprise to build a public service platform, a one-time subsidy of up to 30 million yuan will be given; according to the actual flow of the enterprise 50% of the cost of the film, with a subsidy of up to 20 million yuan.
In addition, the “Nansha Plan” issued by the State Council also gave Nansha three major fiscal and tax policies.
It is difficult to find a new track in today’s semiconductor industry, but it is possible to create a differentiated Guangdong-Hong Kong-Macao Greater Bay Area with policy and capital support, which may be a good choice for semiconductor talents and enterprises.
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