18 years of missing core: prosperity, collapse and rebirth

I am Hua Jie, a chip Superman. I have been working in the chip industry for 18 years since I joined the industry in 2005. With the fastest growth of China's GDP in the past 18 years, the chip industry has experienced ups and downs. Some seemingly unrelated or unexpected events are the fuse of chip shortage and price rise. The 2-3-year cycle of semiconductor and the industry characteristics of large manufacturing investment and multiple supply chain links cause serious imbalance between chip supply and demand and sharp price rise.

In the more than ten years of my career, I have almost caught up with the fast train of the chip industry and witnessed the great changes in the industry: the stable pattern of chip distribution players, the iteration of large consumer products, the unprecedented chip market, the scientific and technological innovation board and the investment boom, the domestic chip from a spark to the current prairie fire... In the process, I have also completed several changes in my identity: from chip procurement of foreign-funded enterprises The partners of local distribution enterprises will then create a new type of semiconductor distribution platform. In the process of docking customers and transactions, we have gradually established some thinking perspectives from the downstream of the industrial chain to the upstream.

In the past two years, due to the news of various high-priced chips, the chip distribution industry, which originally acted as a "lubricant" behind the scenes, has been pushed to the stage. Even recently, a well-known organization judged that "in the chip shortage in the past two years, there is actually an amazing conspiracy that needs to be uncovered - that is, the distributors deliberately hoard goods, creating this unprecedented chip shortage." (is it a little too flattering to the distributor)

In the following, from the perspective of chip distribution practitioners, I will use my experience to tell you about the big price rise in chip shortage in my eyes, from the environment at that time, from the well-known global analog chip leader Ti (Texas Instruments), the typical representative of domestic chips, Zhaoyi innovation, and Weill semiconductors, which was unknown at that time and now has grown into a chip giant of 100 billion.

01

2006-2007

On January 17, 2006, on the eve of the Spring Festival, a mysterious informant posted a mysterious post on the BBS of Tsinghua University - "the dark side of Han chip". The post directly pointed out that Chen Jin had completely resorted to fraud in the development of Han chip and cheated the state of hundreds of millions of yuan. Later, the matter gave a response: "the fraud of Han chip No. 1" was basically true. This incident was tantamount to casting a dark cloud over the rising Chinese chip industry and lasted for many years.

One year ahead, Zhu Yiming, who returned from overseas, returned to China with a mysterious patent called "ultra high speed static random access memory technology", and founded the predecessor of Zhaoyi innovation - chip technology Jiayi, focusing on SRAM (a kind of DRAM, similar to today's memory module).

The general background here is that in 2000, the state issued document No. 18 on supporting the integrated circuit industry. After being trained in the overseas semiconductor industry in the 1980s and 1990s, the electronic / computer / Communication graduates were full of enthusiasm and joined the domestic chip entrepreneurship army. In addition to Zhaoyi innovation, Spreadtrum communications, huiding technology, radico, Huawei Hisilicon, LanChi technology and other companies familiar to the semiconductor industry today were established during this period.

Unlike Zhu Yiming, Yu renrong, who is also an alumnus of Tsinghua University in grade 85, took a completely different path: after graduation, he went to Inspur as an engineer for two years. Two years later, he changed his job to Hong Kong Longyue electronics, which distributes electronic components. His identity changed from an engineer to a sales manager of the Beijing office.

In 1998, Yu renrong started his own business and founded Beijing Huaqing Xingchang science and Trade Co., Ltd. to continue to engage in the distribution of electronic components. According to the Internet, Yu renrong is smart. With the guidance of experts, in 2006, Yu renrong became the largest distributor in Beijing. The following year, Weill semiconductor was established, which opened the two leg route of "distribution + design". This decision also foreshadowed Yu renrong's becoming the "richest man in chips" many years later.

In 2006, I just left the apple OEM and joined a foreign distributor. I began to deal with chip distribution and became an independent distributor.

When I first entered the industry, I met with a large shortage of capacitors. As long as there were goods, I would be robbed by people. I also made the first order: the customer was short of 1 million pieces of Murata type capacitors, and the whole Asia could not find the goods. After several twists and turns, I finally found the goods the customer needed from the French agent.

I got a profit of $40000. In a few days, the same goods will be delivered to the customer again, which is US $20000. For me, who has just entered the industry, I should be lucky.

In the same year, Ti ushered in the beginning of its third decade in China and the key transition period from mobile phone chips to embedded and analog markets. At that time, the mobile phone was in the GSM era (2G era). With the cooperation with Nokia, Sony and other manufacturers, TI's DSP chips with excellent performance were developing rapidly. Only from 2003 to 2006, its mobile phone processor market share reached more than 60%.

Later, because Nokia wanted to adopt the "multi supplier system" to increase the bargaining power, Ti heroes turned to the embedded and analog chip fields where they were good at.

At the same time, Ti has opened sales points, established R & D centers and set up wafer factories in various places. In addition to serving large customers, Ti is also committed to serving many small and medium-sized customers in China. It was only after many years that people suddenly realized that these layouts were only a pawn for Ti to maintain its high gross profit rate and competitiveness. The purpose was to control channels, customers and technologies in its own hands.

The beginning of 2007 belongs to apple, which officially launched its first smartphone iPhone.

Looking at the whole market, 2007 was a crazy year. The real estate market and the stock market had a great increase. The national housing prices were red, and the Shenzhen composite index, the Shenzhen Composite Index and the Shanghai index reached new highs. The conjecture about whether the market would rise to 10000 points appeared for the first time. However, after 15 spring and autumn, the market was still strong at 3000 points.

In 2008, the RMB appreciated, inflation accelerated rapidly, and the artificial economic foam burst, revealing all vanity. Looking back, we found that 2007 was the eve of a storm.

02

2008-2011

Source: IC insights

In the past 20 years or so, computers and mobile phones are the two core super "explosive products", which are the major consumers of chips, from analog mobile phones, digital mobile phones to smart phones; From desktop computers to notebook computers, companies that enter the electronic supply chain in each product iteration seize the opportunities, and of course they are easily "injured by mistake".

The global financial crisis has dampened the global consumption capacity, which was particularly evident in the third quarter of 2008 - the peak season is not prosperous, and both mobile phones, computers and other consumer electronics have declined compared with previous years. The whole semiconductor industry is filled with a pessimistic mood.

Erbida announced the postponement of the 12 inch construction project in Suzhou, which costs US $5 billion;

Under the double impact of the storage decline and the financial crisis, Hynix has closed two 8-inch wafer factories in Wuxi, China and the United States;

SMIC's capacity utilization rate does not exceed 40%, which is incomparable with the full capacity utilization rate in 2021 and 2022.

In the cold winter, semiconductor manufacturers at home and abroad began to "tighten their belts" to survive. After October, they often heard the news of layoffs from time to time, from the upstream chip design companies and equipment manufacturers to the downstream OEM and terminal factories.

I remember that a colleague in Hong Kong was told after work that he was on the layoff list and did not need to return to work the next day; Another friend bought a house in Hong Kong and paid the down payment. However, after the financial crisis, the house price fell more than the proportion of the down payment. In addition, he was laid off and had no choice but to abandon his house and return to Shanghai.

At this time, the development of Zhaoyi innovation and Weil was relatively stable. In May 2008, chip technology Jiayi launched the first 8m SPI nor flash chip in China. Soon, the unique core technology Jiayi in China attracted the attention of foreign companies. The American ISSI storage company proposed to buy it for us $10 million. And another nor flash giant, fisso semiconductor, called for a higher price, but Zhu Yiming refused.

In 2010, the company achieved mass production of all 512k ~ 32m capacity chip products, and the company sold about 100 million storage products. In the same year, the company was renamed Zhaoyi innovation.

The person in charge of Weill semiconductor recalled how to survive this industry downturn, which was closely related to its accumulation of distribution layout and its understanding of the market.

During the period of mournful depression of the mobile phone industry, the 20% growth of smart phones is like a wisp of hope in the dark. (Note: the total growth of mobile phones in the Chinese market is 6% - 7%), and apple, which has just been born one year, is expected to reach the third place in the industry. The ranking of smart phones at this time is: Nokia (46.4%), blackberry (19.9%), apple (11.9%) and Microsoft (11%).

When the darkness enveloped the industry, two natural disasters that seemed unrelated to the industry were shining like light, driving the first wave of climax in my career.

In March 2009, an e-mail from Ti said that the Philippine factory had been shut down for three weeks. After half a year, the economy recovered, and the vigorous shortage wave came. The shortage continued until the end of 2010.

Before November 2009, the order price of tms320f2812pgfa was US $11, and then it began to rise to US $15. In mid January 2010, it began to fail to deliver... At that time, I bought more than 1000 pieces at the price of US $36.8 each, and finally sold them to the customer at US $150 each.

There are numerous examples of this kind.

On March 11, 2011, a sudden earthquake occurred in Japan, and the shortage of goods gradually spread from large terminals such as Ericsson to large and small OEM plants. It is said that one of the top five agents has a stronghold in Japan. Immediately after the earthquake, they sent people to Murata's Japanese affected factories to investigate. The unique models of these factories were immediately locked by the agent's system. The next day, they directly added "1" to the original price of us $0.0x, which became US $1.0x

At that time, I often received orders from customers, and I received all the goods that could be found in every corner of the world. No matter what year it was, as long as it was lead-free, I received all the goods! I remember that during the Tomb Sweeping Day holiday in 2011, I went to the company to work overtime and found four capacitor materials for Ericsson in Brazil. I didn't expect to find them in the inventory. I turned my head to make a quotation. The transaction was successful and the profit of $100000 was recorded!

After the major shortage of goods caused by the earthquake in the first half of the year, Thailand launched an unprecedented flood in the second half of the year, which lasted from July 25 to January 16, 2012, flooding several major hard disk factories and Rohm factories in Thailand.

Various industries have been busy looking for hard disks. At the beginning of November, a big American trader emerged, with a hard disk, 80 US dollars in, 140 US dollars out, 50000 sets, and a single gross profit of 3 million US dollars! I have heard many stories about buying a house with a single profit.

03

2011-2017

In 2010, jobs released the cross era product iPhone4 in the United States, marking the beginning of the world's mobile Internet era. China's entry into the mobile Internet era is generally considered to have started with the Xiaomi mobile phone launch in 2011.

The industry has gradually recovered from the repair of the financial crisis. The transformation of the mobile Internet era brought by smart phones, the explosion of several new products and the wave of semiconductor mergers and acquisitions have become the main melody of the next rapid market.

At the beginning of 2013, Samsung informed domestic appliance customers in the mainland that it would stop production of several 8-bit MCUs. By the middle of the year, this news was confirmed: Samsung planned to sell the MCU business to IXYS, and Samsung began to have a shortage of MCUs. I began to be busy looking for goods, looking for MCU starting with s3c all summer.

Samsung withdrew from MCU business because MCU is not profitable. Its business is mainly 4-bit and 8-bit, mainly focusing on the home appliance market. However, after St launched the first arm based MCU, the threshold of general MCU was lowered, the price of MCU was knocked down, and the low price caused Samsung to leave the market.

It was also in this year that Zhaoyi innovation, which was later called the "first brother" of domestic MCU, began to enter the MCU market.

On the other hand, Yu renrong was busy with mergers and acquisitions. First, in 2013, he integrated his company Hong Kong Huaqing and Beijing jinghongzhi; In 2014, Yu renrong successively acquired Beijing Taihe Zhiheng technology, Wuxi Zhongpu microelectronics and Wuhan Guohe technology to enter the SOC chip field; Later, in 2015, Yu renrong invested in Wuxi Zhongpu micro, expanding its territory to RF chips.

The M & A that really became the turning point of Weil's M & A occurred in 2019, which will be described in detail later.

From the perspective of Weil's acquisition, its purpose is mainly to strengthen the existing distribution business and develop new product lines. Looking at the entire semiconductor industry, almost all the world's leading semiconductor companies achieve performance growth and maintain competitiveness through mergers and acquisitions.

Source: Ping An Securities

In December 2013, the Ministry of industry and information technology issued three TDD (TD-LTE) licenses to the three major domestic operators, marking that China officially entered the 4G era, and the mobile phone market opened a new round of reshuffle. With the rise of "China cool link", Lenovo and Kupai even once became the top 1 in the domestic mobile phone market. In the same year, Nokia and Motorola became the past, including the former generation of "machine king" - BlackBerry.

In 2014, the sales volume of blackberry phones was only 8.5 million, while the sales volume of Apple phones in Q4 of 2014 reached 74.832 million. In the domestic market, Xiaomi won the first place in the Chinese market with the sales volume of 61.12 million.

In this year, there was not a big shortage of chips. The only thing worth mentioning was to clean up the stock of blackberries. This wave of market made many traders make a lot of money. A US funded big brother broke the table because of the clearing of blackberries, with a sales volume of 710 million US dollars, a record high in more than 30 years.

Since the first half of 2015, Sony 214 camera chips have faced unprecedented shortage. Top companies such as Xiaomi and Huawei can only meet the quota of about 50%, while oppo, ZTE, Coolpad and Jinli can only meet the quota of 10-30%. Other companies can hardly get the quota. Lei Jun went to Japan to ask for goods.

In addition to the mobile phone, the rise of several popular consumer electronics has also brought about the surge and shortage of related components.

In May 2015, the balance car quickly exploded in the European and American markets. The main components of the balance car are the main board, the motor, the battery and the outer Kit (plastic and aluminum plate). At the beginning, the factory price of one set was about 1300 yuan, and the supply was in short supply. Later export data showed that in 2015 alone, the shipment of China's balance cars reached 12 million.

This directly led to the shortage of the main control chip MCU in the main board, and the STM32F103 series was out of stock. At this time, Zhaoyi innovation, which had entered the board for two years, began to replace the st and became famous in the first World War. However, the popularity of balance cars has not been long. In early 2016, after a series of incidents such as self ignition of balance cars and passengers' injuries in the United States, the balance cars entered a "melancholy" after being taken off the shelves and prohibited from going on the road.

The consumer goods that have continuously exploded are hot and cold, but the story of MCU shortage is far from over.

During this period, there is also a wave of semiconductor mergers and acquisitions, and relevant data show that