Behind the Semiconductor Investment Fever: Blue Ocean and Bubble Coexist

Chip startups are emerging, but some segments are not easy to break through.

"Since 2019, the industry has given domestic chip companies a lot of opportunities, because the lack of cores is too exaggerated. Before, everyone didn't consider the situation of localization. Now, we do chip design and verification in one week, and enter small batch production in one month. It's very fast, it's incredible." Recently, a semiconductor executive talked about the current state of the chip market at an industry salon.

This is a microcosm of the domestic semiconductor development in full swing. In the past two years, the popularity of the semiconductor industry has risen in all directions. From the perspective of capital, according to the data previously disclosed by Yunxiu Capital, there will be 413 equity investment cases in the domestic semiconductor industry in 2020, with an investment amount of more than 140 billion yuan, an increase of nearly 4 times compared to the investment amount of about 30 billion yuan in 2019. It is the year with the largest investment in the history of Chinese semiconductors in the primary market.

From the perspective of the number of new companies, Qixinbao data shows that there are currently more than 100,000 domestic semiconductor-related companies. As of October 28, 2021, the new increase reached 15,468, which is close to the new increase for the whole year of last year.

The hotness of the market is evident. On the one hand, trade games, speeding up localization, and technological upgrades have brought about a new blue ocean for the industry. On the other hand, the story of bubble bursting is also being staged. Many semiconductor investors told the 21st Century Business Herald reporter, At present, chip startups are emerging together, but some segments are not easy to break through. It is expected that there will be more mergers and acquisitions in two or three years.

Automotive electronics, analog chips, etc. are favored

At a semiconductor investment salon at ELEXCON2021, Liu Xu, a partner of Danen Capital, said: "In every track, no matter the blue ocean or the red ocean, many investors have turned over the industry chain. From the perspective of consumer electronics, localization and other logics, There are many opportunities."

So now, what are the blue oceans that investment institutions value?

Among them, automotive electronics is the most mentioned track. In Liu Xu's view, automotive electrification is a major trend. After the localization of electric vehicles, production and brands will be exported to the outside world. This major track will drive the overall supply chain in China. Mature.

According to information released by the State Administration for Market Regulation, at present, an ordinary car needs more than 200 chips, and a new energy vehicle needs at least 500 chips. That means demand is growing exponentially, with Intel predicting that chips will make up more than 20% of high-end automotive bills of materials (BOMs) by 2030, up five-fold from 4% in 2019.

However, it is not easy to cut into the track of automobiles. Compared with consumer electronics, automobiles have longer R&D and production cycles, more complex certification standards, and higher safety requirements. Entering the automobile industry chain is not a small challenge. Therefore, Liu Xu said that there will be many opportunities for big companies, because they may have passed the car standards before and cut directly to the track.

Startups need to be cautious when they want to enter automotive electronics. Chang Junfeng, secretary general of Shenzhen Semiconductor Industry Association, said: "Automotive electronics seems to be a huge market, but it must be a small number in the hands of various startups, and what you can attack The number of car factories that go in is also a decimal. Automobiles will have certain opportunities in third-generation semiconductors, discrete devices, MCUs, power management, etc., but the premise is that they need to accumulate in related fields of consumer electronics, and then subdivide them. Only when a market makes automotive products can it withstand the certification period of two or three years from other companies.”

From the perspective of the industry as a whole, an investor in the information technology direction of a certain line of RMB funds told reporters: "There are not many semiconductor and chip fields suitable for entrepreneurship, and digital logic, including storage, may not be supported by startups. The remaining volume is compared. The large segment is basically divided into three aspects. The first is analog chips, which have a market of 20 billion US dollars. If startups have a better positioning, they can seize the opportunity to do localization in the segmented market; the second is It is a power management chip, and it is also a market of 20 billion US dollars. There are also opportunities for startups to make specialties, such as high-end products such as high current; the third involves technological iteration, such as changes in storage materials and other market segments.”

In his view, there is a threshold for domestic IC production. "Basically, if the market size does not have 5 billion yuan, it is actually not worth starting a business. Another important criterion is whether the technology is difficult or not the most important thing. , we need to consider the problem from the scarcity of technology. For entrepreneurs, if these two points can be satisfied, they can think about the products and marketing teams in the future.”

How to make good use of the bubble cycle?

According to Qixinbao data, domestic semiconductor-related companies have grown rapidly in recent years. As of October 28, 2021, China's semiconductor industry chain-related companies have reached 118,465. Judging from the geographical distribution of new companies, Shanghai, Beijing, Chengdu, Dongguan, Guangzhou, Shenzhen, Suzhou, Xiamen, etc. are the cities with more new additions in the past five years. Among them, Shenzhen has added the largest number of related companies, with more than 3,000 new companies added every year since 2015. The Pearl River Delta is closer to the market, and registered companies are more conducive to market expansion.

With the rolling wave of semiconductors, the industry often discusses whether there is a bubble at the moment? What risks do entrepreneurs need to consider?

The aforementioned investors in the direction of information technology believe: "It is a good thing to have a bubble. With a bubble, everyone has the motivation to join the market and start a business. In this process, sufficient resources can be obtained to do a good job in independent research and development, targeting some new segments. Market, do a good job of products. Don’t be afraid of bubbles, the key is how to use it well.”

"For the industry to develop, it must go through a bubble cycle," Liu Xu said. "Being in a bubble cycle is especially good for entrepreneurs, but it may be embarrassing for investors. When the tide finally recedes, entrepreneurs must In order to form its own core competitiveness, it takes 24 months for the chip to go from design to product definition, to the market and product landing. Therefore, investors must see what the state of the invested company will be in two years. There must be a positive economic flow. The opportunity for mergers and acquisitions should appear in two years.”

In Chang Junfeng's view, there will be bubbles in any industry, "I think we should look at it from two aspects. On the one hand, from the perspective of consumer electronics, which has a replacement rate of 90% in my country, there have indeed been many bubbles. Before this semiconductor boom, the corresponding bubble extrusion effect has already occurred. Just need to pay attention to choose the track, choose the market, and look at your own differentiated development.”

On the other hand, he said that there is still a gap in the development level of the entire semiconductor industry in the trend of transferring to China. In this case, the bubble is not enough. "China's semiconductor development is divided into the era of planned economy before 2000. In the era of sparks after 2000, it was originally expected to start a prairie fire in 2010. As a result, the timely rain came a little late, and it did not arrive until 2017 and 2018. This rain will promote emerging industries and promote the development of semiconductors. Fortunately Yes, late arrival just gives us an opportunity, consumer electronics have matured, and can provide sufficient talents and capital for more companies to enter high-end chips such as industrial, automotive, and medical."

Facing the blue ocean or the red ocean, many semiconductor veterans told reporters that the most important thing is to stay close to the market, make full use of the vast domestic market demand, and carry out differentiated innovation. There are also investors who believe that the current level of some domestic semiconductor fields is still in the "primary stage", and more patience is needed to accumulate technology and accumulate experience.