Shulou(Shulou.com)06/03 Report--

From the "neck" of the chip to the 120-day countdown, external pressure has led Huawei to the "darkest moment" step by step. However, as the old saying goes, "living after death" puts heavy pressure on Huawei to break through itself in a desperate situation, and it also allows domestic chip companies to find new vitality and seek better development under heavy pressure.

Zhuo Shengwei is one of these enterprises. As a member of Huawei's supply chain, it is already a leading domestic 5G company, and even after Huawei encountered a "neck jam", many people said that it would be awesome if anyone could find the next Zhuoshengwei. Although there is a joke element in it, but Zhuo Shengwei's strength is also evident.

Recently, Zhuo Shengwei also made a major decision under heavy pressure.

The transformation from light to heavy

The new decision makes Zhuo Shengwei formally transform from light assets to heavy assets.

As a chip design company, Zhuo Shengwei, which does not need to build its own factory and production line, has always been a typical light asset company. In the 2019 annual report, Zhuo Shengwei said that the company focuses on integrated circuit design and adopts the Fabless (wafer-free manufacturing) business model. The main types of enterprises involved are chip designers, wafer manufacturers and outsourced closed testing enterprises.

Zhuo Shengwei is only engaged in the R & D, design and sales of integrated circuits, and the rest is entrusted to wafer manufacturers and packaging and testing plants respectively. This Fabless model effectively reduces the financial risk brought by large-scale fixed asset investment, and can obtain a higher rate of return on investment.

On May 31st, Zhuosheng announced that an additional 3 billion yuan would be put into the high-end RF filter chip production line and other projects. According to the announcement, of the 3 billion increased funds, 1.41 billion are invested in high-end RF filter chip and module research and development and industrialization projects, mainly for the mobile phone market; another 830 million are invested in 5G communication base station radio frequency device research and development and industrialization projects, mainly for the base station market.

In the two aspects of investment, hardware equipment is the highlight. The total investment in hardware equipment is 2.24 billion yuan, which is obviously not an order of magnitude compared with Zhuoshengwei's fixed assets of only 66.36 million yuan before. Similarly, this also indicates that Zhuo Shengwei has transformed from a simple chip design light asset model to a heavy asset model integrating design, production and closed testing.

However, Zhuo Shengwei's "weight gain" journey is full of the flavor of having to do it.

The filter is the key.

Zhuo Shengwei's high investment in filters naturally takes a fancy to this market full of opportunities.

Zhuoshengwei's current main business is radio frequency switch and radio frequency low noise amplifier for mobile phones. The revenue of these two products in 2019 is 1.208 billion yuan and 255 million yuan respectively. But in the whole RF front-end market, RF switches and RF low noise amplifiers only occupy a small part of the market, while the larger market is in filters.

According to QYR, the global market for radio frequency filters is US $8.361 billion in 2018 and is expected to reach US $21.91 billion by 2023. Nowadays, most of the global filter manufacturers adopt the IDM mode to have the ability to design, manufacture and close the whole industry chain of testing. High-end filters are basically monopolized by a few foreign manufacturers such as Skyworks.

However, Zhuoshengwei, a Fabless mode, does not have enough room for survival in terms of radio frequency filters. This is because the precise combination of filter design and manufacturing process requires not only simple design theory knowledge, but also sufficient manufacturing experience to prevent the impact of subtle changes in process parameters on the performance of the filter.

The R & D, design and manufacturing process must be integrated and closely coordinated to ensure that the filter products produced can compete with the products of leading enterprises in the market. This requires Zhuo Shengwei to need hardware equipment and production lines to improve their theoretical knowledge, and can only build their own production lines to extend their tentacles to the larger filter field of the market.

In other words, if Zhuo Shengwei wants to achieve better development in the field of RF front-end, it must set foot in the larger filter field of the market. The filter products for the design and production of two-way high requirements, but also let Zhuo Shengwei have to invest a lot of money to buy related hardware equipment and production lines, from the light asset mode to become an asset-heavy enterprise.

And Zhuoshengwei's layout in the field of 5G base stations is also full of a last resort.

5G is urgent.

The vigorous development of 5G driven by new infrastructure has also filled Zhuo Shengwei with a sense of urgency and has to invest heavily.

China is the country with the largest coverage of 5G base station construction. In February 2020, the state stressed to promote the accelerated development of 5G network and industrial Internet, and many governments immediately responded to speed up the construction of 5G. 5G technology will give new energy to smart phones and other mobile terminal devices, while the development of the global integrated circuit industry is also undergoing a process of transfer to China.

This will provide Zhuoshengwei with many development opportunities. On the one hand, the gradual realization of 5G band, the support of MIMO and carrier aggregation, and the popularity of wireless technologies such as Wi-Fi, Bluetooth, GPS and so on, will lead to a surge in demand for high-end RF filters.

And with the continuous development of mobile communication technology, the demand for filters in high-end applications is becoming more and more complex, high-end and miniaturized, while high-frequency, high-power and high-performance filters represented by TC-SAW and BAW will become the dominant filter technology in the field of mobile intelligent terminals.

On the other hand, with the emergence of 5G new spectrum and the application of large-scale antenna technology (Massive MIMO), communication base stations need to integrate more frequency bands, expand larger bandwidth and increase output power, which also brings huge development opportunities for communication base stations and RF front-end industry.

However, due to the particularity of 5G base station RF semiconductor materials and technology, the technical content is also relatively high. At present, domestic manufacturers are still in the initial stage, and the materials and equipment in this area are mainly imported. And because there are great differences in the application field between mobile intelligent terminals and communication base stations, there are different requirements for the design, performance and function of RF devices.

While the 5G wave brings new growth opportunities for the RF front-end industry, it also puts forward new requirements for the design and manufacture of RF devices, that is, it poses new challenges to related enterprises. If Zhuo Shengwei wants to occupy a place in this field, it has to invest heavily in production process and R & D design in order to improve the technology reserve and ensure the success of technological innovation.

The accumulation of technology is important, and it is also important to ensure the landing of technology. In other words, the investment in radio frequency devices of 5G communication base stations also requires both design and production, and ensure that both hands are hard enough, so as to ensure Zhuo Shengwei's core competitiveness and promote the rapid realization of its strategic goals.

In a more macro field, Zhuo Shengwei's "weight gain" is also full of desperation.

Domestic substitution that has to be carried out.

The pressure from the outside is huge, let Zhuo Shengwei shoulder the important task of domestic replacement.

At present, the RF front-end chip market is vast, with a total size of more than 10 billion US dollars, but the high and middle market is basically occupied by foreign manufacturers. And after Huawei suffered a "choke" in the United States, Chinese technology companies not only have to fight for their own market, but also, more importantly, how to replace foreign devices with their own devices.

Zhuoshengwei, as one of the few domestic manufacturers with RF chip supply capacity, the performance of some of its products can be compared with international first-class manufacturers. Zhuosheng Micro is one of the first companies in the industry to realize the production of RF low noise amplifiers based on RF CMOS technology, and it is also one of the first companies in the world to introduce single chip products integrated with RF low noise amplifiers and switches.

But for Zhuo Shengwei, or for Chinese technology companies, there is still room for progress. Especially in the special period when Chinese science and technology enterprises are facing increasing external environmental pressure, domestic substitution has reached an urgent stage.

The upsurge of domestic substitution will bring dividends, and Zhuo Shengwei is the obvious beneficiary. Zhuo Shengwei, which went public last year, successfully broke into Huawei's supply chain in less than a year, became a hot chip stock in the A-share market, and was referred to by many investors as "technology Maotai".

But responsibility always comes with ability. The ability of Zhuo Shengwei is obvious to all, which also makes Zhuo Shengwei shoulder the important task of domestic substitution. And Zhuo Sheng Wei this time set an increase of 3 billion of the two aspects of the main layout, without exception, are also facing layers of pressure from foreign enterprises.

No matter in the field of filter or 5G base station, Zhuoshengwei needs to take on the important task of fighting for its own foothold in the unfriendly market. In order to achieve such a vision and successfully break the market monopoly dilemma of foreign enterprises, Zhuo Shengwei's "weight gain" has become a necessary move.

But Zhuo Shengwei's weight gain, in addition to having to, there is also a trace of eagerness to succeed.

You can't be fat by eating in one bite.

Zhuo Shengwei's "weight gain" is good, but he can't get fat with a bite.

Apart from the two investment projects disclosed in this announcement, the three investment projects proposed by Zhuo Shengwei at IPO in June 2019 are still under construction.

According to the latest announcement, Zhuosheng MicroIPO projects are radio frequency filter chip and module R & D and industrialization project, RF power amplifier chip and module R & D and industrialization project, RF switch and LNA technology upgrade and industrialization project, but the scheduled availability date of these three projects is November 16, 2021.

Before the old projects are completed, new ones follow, and the amount of money needed is far more than three times the amount raised by IPO. Such a money-burning "weight gain" move can not help but make investors wonder whether Zhuoshengwei has enough ability to drive such a grand plan. And in the announcement, Zhuo Shengwei did not give the investment payback period and the rate of return on investment.

Zhuo Shengwei said that the current production and supply of high-end filters and communication base station RF devices by domestic manufacturers still lags far behind that of international manufacturers, while trade frictions have greatly advanced the process of chip localization and substitution. And said that this financing project is to break the monopoly of foreign manufacturers and seize the opportunity of domestic substitution.

Although the main theme is the domestic alternative banner of the current market speculation, but if Zhuo Shengwei succeeds in raising funds, it will face the construction of five projects at the same time, which is no small challenge for Zhuo Shengwei. And in such a hurry to expand, it seems to Zhuo Shengwei that he is eager for quick success and quick profit.

Whether it is a last resort or a desire for quick success, Zhuo Shengwei's vision is always good. However, if Zhuo Shengwei wants to break the monopoly situation of foreign enterprises in the industry, it is still necessary to take one step at a time. Eager to achieve the "weight gain", it may be difficult to let Zhuo Shengwei achieve expectations, and may even stumble on this journey of "weight gain".

(official account of Liu Kuang / tr. by Phil Newell) ID:liukuang110

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