Judging from past examples, listing in two places can restructure the company’s value. SMIC (00981) is a typical example.
From the submission of the IPO application to the China Securities Regulatory Commission on June 1, 2020 to the IPO on July 7 of the same year, in just one month, SMIC’s Hong Kong stock market rose from HK$18.76 to HK$44.5. That’s a whopping 137% increase. Behind the skyrocketing stock price, it is mainly due to the high valuation premium of the Science and Technology Innovation Board, which has promoted the company’s value increase.
And all this is expected to be repeated on Shengmei semiconductor (ACMR.US). As the first semiconductor equipment company to be listed in the United States from mainland China, as famous as North Huachuang and China Microelectronics, Shengmei Semiconductor is about to set a new record: that is, with the successful listing of Shengmei shares on the Science and Technology Innovation Board, Shengmei Semiconductor Co., Ltd. American Semiconductor will become the first company listed on Nasdaq in the United States and then spun off to IPO on the Science and Technology Innovation Board. It will win the title of “the first ‘A+N’ share”.
On August 17, the China Securities Regulatory Commission issued an announcement to approve the registration of Shengmei’s initial public offering on the Science and Technology Innovation Board, which means that Shengmei is only one step away from the IPO on the Science and Technology Innovation Board. As the listing of Shengmei shares approached, Shengmei Semiconductor’s share price also rose to $119.12 on October 7, setting a new eight-month high.
The market can’t help but wonder, how high can the share price of Shengmei Semiconductor, which held 91.67% of Shengmei’s shares before the IPO, go up after the former successfully landed on the Science and Technology Innovation Board? What opportunities will it bring to investors? The answer can be known through multi-dimensional analysis of industry status, growth space, development strategies, and benchmarking companies.
Two core advantages to accelerate platform development
Throughout the world’s semiconductor equipment companies, there are two typical business models. According to Huaan research data, one is represented by the world’s leading semiconductor equipment application materials (AMAT.US), whose product line covers almost all categories except lithography machines, and is committed to creating a comprehensive and multi-category “” Semiconductor equipment comprehensive supermarket”, such companies tend to “platform development”, as is the case with the domestic North Huachuang (002371).
The second is represented by “Fanlin Group”, which takes etching machine as its core product and extends to the fields of process-related thin film and cleaning/degumming. Its business is more focused, and it has become the world’s leading etching machine. And such enterprises are “specialized enterprises”, such as the domestic Zhongwei company (688012), which pays attention to the pursuit of technology and products, first refined and then complete.
The current development stage of Shengmei Semiconductor is to develop into a platform model on the basis of specialization, which is a new attempt to combine the North Huachuang and Zhongwei Company models. Zhitong Finance APP learned that Shengmei Semiconductor has developed a single-chip SAPS megasonic cleaning equipment, a single-chip TEBO megasonic cleaning equipment, a single-chip back cleaning equipment, and a single-chip brushing equipment based on SAPS technology, TEBO technology and Ultra-C Tahoe technology. , tank cleaning equipment, Tahoe single-piece tank-type combined cleaning equipment and single-piece high-temperature sulfuric acid equipment and other products. At present, Shengmei Semiconductor’s product portfolio has covered more than 80% of the cleaning equipment market. In the future, the addition of high-temperature IPA drying and supercritical carbon dioxide drying technology is expected to expand the products that can cover the market to more than 90%.
With a differentiated and diversified product portfolio, Shengmei Semiconductor has established its leading position in the domestic cleaning equipment market. Its share in the domestic cleaning equipment market in 2020 has reached as high as 23%, becoming a leading player in this track. The company said that it will launch more new product portfolios for cleaning equipment in 2022, when Shengmei will become the most comprehensive equipment supplier of cleaning technology in the world, thus consolidating the company’s technological leadership in the field of cleaning equipment.
While leading the industry in the cleaning equipment market, Shengmei Semiconductor has gradually expanded its product layout to other aspects of the wafer manufacturing process, in order to achieve the company’s “platform-based” development. Up to now, in the seven major processes of the previous wafer manufacturing, Shengmei Semiconductor is involved in the four major links of oxidation/diffusion, film growth, electroplating and polishing outside the cleaning process, and it is realized in the advanced packaging process of the subsequent process. to continue shipping.
For example, the company launched the Ultra Furnace in May 2020. This is the first system developed for a variety of dry process applications. After optimization, it can achieve high-performance low-pressure chemical vapor deposition (LPCVD). The equipment platform extends to applications such as oxidation and annealing, as well as atomic layer deposition (ALD), involving multiple stages of wafer fabrication.
In the first half of 2021, Shengmei Semiconductor delivered several first delivery equipment for undoped polysilicon low pressure chemical vapor deposition LPCVD and doped polysilicon low pressure chemical vapor deposition LPCVD, and the number of deliveries will continue to increase in the second half of the year. At the same time, the company’s Bevel Etch edge bevel wet etching products have been added to the company’s wet product series, and delivered to Chinese logic manufacturers in the third quarter of this year. In terms of ECP series products, it includes map equipment for Damascus copper interconnection, front-end TSV equipment and back-end AP advanced packaging equipment. Although ECP did not record revenue in the second quarter of 2021, it has delivered verification equipment to three customers. ECP products will continue to be in high volume in the second half of the year. It is expected that twenty electroplating equipment will be delivered to customers throughout the year.
From the performance of Shengmei Semiconductor in the first half of 2021, its platform development has achieved remarkable results. According to the financial report, the company’s cleaning equipment revenue during the reporting period was US$77.874 million, accounting for 79.79% of the total revenue, down nearly 9 percentage points from 88.53% in the same period in 2020; advanced packaging equipment and services The proportion of revenue increased to 14.5%, an increase of more than 10 percentage points year-on-year. With the continuous volume of new products in the second half of the year, Shengmei Semiconductor’s revenue will be more balanced, which also shows the forward-looking and correctness of Shengmei Semiconductor’s platform development strategy.
But the key question is, why can Shengmei Semiconductor in the intensive cleaning process achieve rapid breakthroughs in other process links? Zhitong Finance APP believes that this is mainly due to two aspects.
One is that the company has always pursued technological innovation, and has always entered the market with differentiated products to form differentiated advantages. In fact, since Shengmei Semiconductor officially won the order of the internationally renowned semiconductor company Hynix with differentiated products in 2011, technological innovation and differentiation are the genetic background of the company.
Second, Shengmei Semiconductor enjoys a leading position in the cleaning equipment industry. The continuous growth of 30%-50% of the business can generate cash flow that allows the company to maintain 13%-15% of R&D investment and increase investment in other links. And research and development, which is an important support for Shengmei Semiconductor to achieve platform development; and based on rich customer and channel reserves, new products and original business can produce obvious synergies, accelerating the penetration of the company’s products in the market.
Obviously, in terms of platform development, Shengmei Semiconductor has the above two core advantages. As long as the company continues to consolidate its leading edge in the cleaning equipment sector, it can be in the strategic leading position of “easy to defend and difficult to attack” in this track. It is beneficial for Shengmei Semiconductor to continue to expand to other links in the industry chain, and it is only a matter of time before the company develops into a platform enterprise.
Product potential growth space exceeds 10 billion US dollars
For Shengmei Semiconductor, platform development is the key to bringing the company’s development prospects to a higher level, but the market has underestimated the potential effect of this strategy on Shengmei Semiconductor’s intrinsic value and growth space. Judging from the market size of cleaning equipment in 2020, if Shengmei Semiconductor only stays at the level of cleaning equipment, the company’s potential global market space is only 2.54 billion US dollars, and the proportion of this value in the previous wafer manufacturing equipment is only 4 .1%.
However, after the development of the platform, the potential growth space of Shengmei Semiconductor has been greatly improved. The company’s copper plating equipment and vertical furnace tube packaging equipment have expanded the company’s serviceable market from $2.45 billion to $5 billion. On the conference call in the second quarter of 2021, Shengmei Semiconductor management stated that Shengmei Semiconductor is investing heavily in R&D on two new products, which are expected to be delivered for client verification in 2022. This will expand the company’s serviceable market range from $5 billion for existing equipment to $10 billion, doubling the potential market size, which means that the company’s growth has undergone fundamental changes, and the company’s intrinsic value will also be Then increase.
From the perspective of market demand, both at home and abroad are in the high economic cycle of the industry, which is a key opportunity for Shengmei Semiconductor to accelerate its platform development. In the domestic market, the continuous surge in downstream demand has accelerated the expansion of wafer fabs and packaging and testing companies, thereby increasing the demand for upstream equipment, and superimposed on the long-term logic of domestic substitution, the domestic semiconductor equipment industry has ushered in a golden period of development.
If my country’s semiconductor equipment is to be autonomous and controllable, the localization rate of each link in the industrial chain needs to reach a level of about 60%. But so far, according to the data of Xinda Securities, only the localization rate of cleaning equipment has reached the level of 60%. 20%, etching and single crystal furnaces are still lower than 20%, CMP and PVD equipment are lower than 15%, and the localization rate of other equipment is even lower. Domestic substitution + market share increase will become the main growth line of domestic semiconductor equipment companies, which has laid a solid foundation for Shengmei Semiconductor to expand from the field of cleaning equipment to other links.
Even if we look at the global semiconductor equipment market, the demand for the global semiconductor industry continues to exceed market expectations due to the continuous increase in downstream demand for 5G, artificial intelligence, Internet of Things, new energy vehicles, photovoltaics, etc., which has ushered in a new round of global Expansion tide. According to the International Semiconductor Industry Association (SEMI), global OEM sales of semiconductor manufacturing equipment will exceed $100 billion in 2022, a record high, an increase of nearly 5% from $95.3 billion in 2021.
In order to seize the industry opportunities brought by this round of global production expansion, Shengmei Semiconductor has strengthened the sales team in Taiwan, China, and hired top sales teams outside to conduct in-depth development of leading customers in the United States. Recently, the company has also strengthened the construction of the European sales team. By strengthening overseas sales and differentiated technology strategies, it is Shengmei Semiconductor’s long-term sales goal to adjust the proportion of domestic and foreign revenue to 50% each. If the two-wheel drive development at home and abroad can be realized, the growth rate of Shengmei Semiconductor will be further accelerated.
Does the stock price still have room to rise?
Thanks to the continuous increase in market demand, the continuous volume of new products and the rapid expansion of new customers, Shengmei Semiconductor’s performance has entered a period of rapid growth. Zhitong Finance APP learned that in the second quarter of 2021, Shengmei Semiconductor’s revenue was US$54 million, a year-on-year increase of 38%, and among forward-looking indicators that better reflect the actual development of semiconductor equipment companies, Shengmei Semiconductor’s revenue Equipment deliveries totaled $82 million, up 82% year over year and setting a new record for total deliveries in the company’s history.
Not only that, Shengmei Semiconductor raised the company’s 2021 revenue guidance to $225 million to $240 million from the previous $205 million to $230 million, a year-on-year increase of 43.3% to $240 million. 52.87%. This not only shows that Shengmei Semiconductor still maintains rapid growth, but the actual development has once again exceeded management’s expectations.
In fact, due to Shengmei Semiconductor’s leading position in the cleaning equipment industry and the high volume of new products under the platform development, since the domestic semiconductor market began to replace domestically in 2019, Shengmei Semiconductor has maintained a stable and high-speed growth, and the revenue growth rate Steady improvement (2021 revenue growth at the midpoint of the company’s revenue guidance). On the other hand, North Huachuang and Zhongwei Company (the revenue of the two companies in 2021 is consistent with wind forecast), the stability of revenue growth is weaker than that of Shengmei Semiconductor, especially Zhongwei Company, whose three-year revenue growth rate lags behind Shengmei Semiconductor. American Semiconductor.
Steady, high growth tends to enjoy a higher valuation premium in the secondary market due to funding’s pursuit of certainty. If we focus on the medium and long term, under the high economic cycle of the global semiconductor industry, Shengmei Semiconductor will maintain high growth under the platform development strategy, and the growth of performance will become the driving force for Shengmei Semiconductor to drive the company’s market value after revaluation. A new impetus for improvement. Based on this logic, the listing of Shengmei shares on the Science and Technology Innovation Board is only the starting point of a new stage for Shengmei Semiconductor, and its development deserves long-term attention.
Judging from past examples, listing in two places can restructure the company’s value. SMIC (00981) is a typical example.
From the submission of the IPO application to the China Securities Regulatory Commission on June 1, 2020 to the IPO on July 7 of the same year, in just one month, SMIC’s Hong Kong stock market rose from HK$18.76 to HK$44.5. That’s a whopping 137% increase. Behind the skyrocketing stock price, it is mainly due to the high valuation premium of the Science and Technology Innovation Board, which has promoted the company’s value increase.
And all this is expected to be repeated on Shengmei semiconductor (ACMR.US). As the first semiconductor equipment company to be listed in the United States from mainland China, as famous as North Huachuang and China Microelectronics, Shengmei Semiconductor is about to set a new record: that is, with the successful listing of Shengmei shares on the Science and Technology Innovation Board, Shengmei Semiconductor Co., Ltd. American Semiconductor will become the first company listed on Nasdaq in the United States and then spun off to IPO on the Science and Technology Innovation Board. It will win the title of “the first ‘A+N’ share”.
On August 17, the China Securities Regulatory Commission issued an announcement to approve the registration of Shengmei’s initial public offering on the Science and Technology Innovation Board, which means that Shengmei is only one step away from the IPO on the Science and Technology Innovation Board. As the listing of Shengmei shares approached, Shengmei Semiconductor’s share price also rose to $119.12 on October 7, setting a new eight-month high.
The market can’t help but wonder, how high can the share price of Shengmei Semiconductor, which held 91.67% of Shengmei’s shares before the IPO, go up after the former successfully landed on the Science and Technology Innovation Board? What opportunities will it bring to investors? The answer can be known through multi-dimensional analysis of industry status, growth space, development strategies, and benchmarking companies.
Two core advantages to accelerate platform development
Throughout the world’s semiconductor equipment companies, there are two typical business models. According to Huaan research data, one is represented by the world’s leading semiconductor equipment application materials (AMAT.US), whose product line covers almost all categories except lithography machines, and is committed to creating a comprehensive and multi-category “” Semiconductor equipment comprehensive supermarket”, such companies tend to “platform development”, as is the case with the domestic North Huachuang (002371).
The second is represented by “Fanlin Group”, which takes etching machine as its core product and extends to the fields of process-related thin film and cleaning/degumming. Its business is more focused, and it has become the world’s leading etching machine. And such enterprises are “specialized enterprises”, such as the domestic Zhongwei company (688012), which pays attention to the pursuit of technology and products, first refined and then complete.
The current development stage of Shengmei Semiconductor is to develop into a platform model on the basis of specialization, which is a new attempt to combine the North Huachuang and Zhongwei Company models. Zhitong Finance APP learned that Shengmei Semiconductor has developed a single-chip SAPS megasonic cleaning equipment, a single-chip TEBO megasonic cleaning equipment, a single-chip back cleaning equipment, and a single-chip brushing equipment based on SAPS technology, TEBO technology and Ultra-C Tahoe technology. , tank cleaning equipment, Tahoe single-piece tank-type combined cleaning equipment and single-piece high-temperature sulfuric acid equipment and other products. At present, Shengmei Semiconductor’s product portfolio has covered more than 80% of the cleaning equipment market. In the future, the addition of high-temperature IPA drying and supercritical carbon dioxide drying technology is expected to expand the products that can cover the market to more than 90%.
With a differentiated and diversified product portfolio, Shengmei Semiconductor has established its leading position in the domestic cleaning equipment market. Its share in the domestic cleaning equipment market in 2020 has reached as high as 23%, becoming a leading player in this track. The company said that it will launch more new product portfolios for cleaning equipment in 2022, when Shengmei will become the most comprehensive equipment supplier of cleaning technology in the world, thus consolidating the company’s technological leadership in the field of cleaning equipment.
While leading the industry in the cleaning equipment market, Shengmei Semiconductor has gradually expanded its product layout to other aspects of the wafer manufacturing process, in order to achieve the company’s “platform-based” development. Up to now, in the seven major processes of the previous wafer manufacturing, Shengmei Semiconductor is involved in the four major links of oxidation/diffusion, film growth, electroplating and polishing outside the cleaning process, and it is realized in the advanced packaging process of the subsequent process. to continue shipping.
For example, the company launched the Ultra Furnace in May 2020. This is the first system developed for a variety of dry process applications. After optimization, it can achieve high-performance low-pressure chemical vapor deposition (LPCVD). The equipment platform extends to applications such as oxidation and annealing, as well as atomic layer deposition (ALD), involving multiple stages of wafer fabrication.
In the first half of 2021, Shengmei Semiconductor delivered several first delivery equipment for undoped polysilicon low pressure chemical vapor deposition LPCVD and doped polysilicon low pressure chemical vapor deposition LPCVD, and the number of deliveries will continue to increase in the second half of the year. At the same time, the company’s Bevel Etch edge bevel wet etching products have been added to the company’s wet product series, and delivered to Chinese logic manufacturers in the third quarter of this year. In terms of ECP series products, it includes map equipment for Damascus copper interconnection, front-end TSV equipment and back-end AP advanced packaging equipment. Although ECP did not record revenue in the second quarter of 2021, it has delivered verification equipment to three customers. ECP products will continue to be in high volume in the second half of the year. It is expected that twenty electroplating equipment will be delivered to customers throughout the year.
From the performance of Shengmei Semiconductor in the first half of 2021, its platform development has achieved remarkable results. According to the financial report, the company’s cleaning equipment revenue during the reporting period was US$77.874 million, accounting for 79.79% of the total revenue, down nearly 9 percentage points from 88.53% in the same period in 2020; advanced packaging equipment and services The proportion of revenue increased to 14.5%, an increase of more than 10 percentage points year-on-year. With the continuous volume of new products in the second half of the year, Shengmei Semiconductor’s revenue will be more balanced, which also shows the forward-looking and correctness of Shengmei Semiconductor’s platform development strategy.
But the key question is, why can Shengmei Semiconductor in the intensive cleaning process achieve rapid breakthroughs in other process links? Zhitong Finance APP believes that this is mainly due to two aspects.
One is that the company has always pursued technological innovation, and has always entered the market with differentiated products to form differentiated advantages. In fact, since Shengmei Semiconductor officially won the order of the internationally renowned semiconductor company Hynix with differentiated products in 2011, technological innovation and differentiation are the genetic background of the company.
Second, Shengmei Semiconductor enjoys a leading position in the cleaning equipment industry. The continuous growth of 30%-50% of the business can generate cash flow that allows the company to maintain 13%-15% of R&D investment and increase investment in other links. And research and development, which is an important support for Shengmei Semiconductor to achieve platform development; and based on rich customer and channel reserves, new products and original business can produce obvious synergies, accelerating the penetration of the company’s products in the market.
Obviously, in terms of platform development, Shengmei Semiconductor has the above two core advantages. As long as the company continues to consolidate its leading edge in the cleaning equipment sector, it can be in the strategic leading position of “easy to defend and difficult to attack” in this track. It is beneficial for Shengmei Semiconductor to continue to expand to other links in the industry chain, and it is only a matter of time before the company develops into a platform enterprise.
Product potential growth space exceeds 10 billion US dollars
For Shengmei Semiconductor, platform development is the key to bringing the company’s development prospects to a higher level, but the market has underestimated the potential effect of this strategy on Shengmei Semiconductor’s intrinsic value and growth space. Judging from the market size of cleaning equipment in 2020, if Shengmei Semiconductor only stays at the level of cleaning equipment, the company’s potential global market space is only 2.54 billion US dollars, and the proportion of this value in the previous wafer manufacturing equipment is only 4 .1%.
However, after the development of the platform, the potential growth space of Shengmei Semiconductor has been greatly improved. The company’s copper plating equipment and vertical furnace tube packaging equipment have expanded the company’s serviceable market from $2.45 billion to $5 billion. On the conference call in the second quarter of 2021, Shengmei Semiconductor management stated that Shengmei Semiconductor is investing heavily in R&D on two new products, which are expected to be delivered for client verification in 2022. This will expand the company’s serviceable market range from $5 billion for existing equipment to $10 billion, doubling the potential market size, which means that the company’s growth has undergone fundamental changes, and the company’s intrinsic value will also be Then increase.
From the perspective of market demand, both at home and abroad are in the high economic cycle of the industry, which is a key opportunity for Shengmei Semiconductor to accelerate its platform development. In the domestic market, the continuous surge in downstream demand has accelerated the expansion of wafer fabs and packaging and testing companies, thereby increasing the demand for upstream equipment, and superimposed on the long-term logic of domestic substitution, the domestic semiconductor equipment industry has ushered in a golden period of development.
If my country’s semiconductor equipment is to be autonomous and controllable, the localization rate of each link in the industrial chain needs to reach a level of about 60%. But so far, according to the data of Xinda Securities, only the localization rate of cleaning equipment has reached the level of 60%. 20%, etching and single crystal furnaces are still lower than 20%, CMP and PVD equipment are lower than 15%, and the localization rate of other equipment is even lower. Domestic substitution + market share increase will become the main growth line of domestic semiconductor equipment companies, which has laid a solid foundation for Shengmei Semiconductor to expand from the field of cleaning equipment to other links.
Even if we look at the global semiconductor equipment market, the demand for the global semiconductor industry continues to exceed market expectations due to the continuous increase in downstream demand for 5G, artificial intelligence, Internet of Things, new energy vehicles, photovoltaics, etc., which has ushered in a new round of global Expansion tide. According to the International Semiconductor Industry Association (SEMI), global OEM sales of semiconductor manufacturing equipment will exceed $100 billion in 2022, a record high, an increase of nearly 5% from $95.3 billion in 2021.
In order to seize the industry opportunities brought by this round of global production expansion, Shengmei Semiconductor has strengthened the sales team in Taiwan, China, and hired top sales teams outside to conduct in-depth development of leading customers in the United States. Recently, the company has also strengthened the construction of the European sales team. By strengthening overseas sales and differentiated technology strategies, it is Shengmei Semiconductor’s long-term sales goal to adjust the proportion of domestic and foreign revenue to 50% each. If the two-wheel drive development at home and abroad can be realized, the growth rate of Shengmei Semiconductor will be further accelerated.
Does the stock price still have room to rise?
Thanks to the continuous increase in market demand, the continuous volume of new products and the rapid expansion of new customers, Shengmei Semiconductor’s performance has entered a period of rapid growth. Zhitong Finance APP learned that in the second quarter of 2021, Shengmei Semiconductor’s revenue was US$54 million, a year-on-year increase of 38%, and among forward-looking indicators that better reflect the actual development of semiconductor equipment companies, Shengmei Semiconductor’s revenue Equipment deliveries totaled $82 million, up 82% year over year and setting a new record for total deliveries in the company’s history.
Not only that, Shengmei Semiconductor raised the company’s 2021 revenue guidance to $225 million to $240 million from the previous $205 million to $230 million, a year-on-year increase of 43.3% to $240 million. 52.87%. This not only shows that Shengmei Semiconductor still maintains rapid growth, but the actual development has once again exceeded management’s expectations.
In fact, due to Shengmei Semiconductor’s leading position in the cleaning equipment industry and the high volume of new products under the platform development, since the domestic semiconductor market began to replace domestically in 2019, Shengmei Semiconductor has maintained a stable and high-speed growth, and the revenue growth rate Steady improvement (2021 revenue growth at the midpoint of the company’s revenue guidance). On the other hand, North Huachuang and Zhongwei Company (the revenue of the two companies in 2021 is consistent with wind forecast), the stability of revenue growth is weaker than that of Shengmei Semiconductor, especially Zhongwei Company, whose three-year revenue growth rate lags behind Shengmei Semiconductor. American Semiconductor.
Steady, high growth tends to enjoy a higher valuation premium in the secondary market due to funding’s pursuit of certainty. If we focus on the medium and long term, under the high economic cycle of the global semiconductor industry, Shengmei Semiconductor will maintain high growth under the platform development strategy, and the growth of performance will become the driving force for Shengmei Semiconductor to drive the company’s market value after revaluation. A new impetus for improvement. Based on this logic, the listing of Shengmei shares on the Science and Technology Innovation Board is only the starting point of a new stage for Shengmei Semiconductor, and its development deserves long-term attention.
The Links: CM300DY-12NF BSM100GAL120DLCK