Recently, smic once again become a hot spot in the industry, in addition to taking a stake in long telegram become the largest shareholder, which in turn led to smic will strengthen industrial chain to control speculation, has just released the first quarter of 2016 earnings, according to its 16 straight quarterly profit, make the industry's ability to consistently profitable smic sit up and take notice.

However, can only as a domestic and international the wafer detect factory of enterprise, the industry seems to be more to look for in smic. And in the popular "ones Evergrande" law in the semiconductor industry, the "fourth" ranked smic is there a chance to overtake, into the global foundry "top three"?

The news that 2016 years the core will increase investment, the construction of a productivity of board approval will be capital spending will be $2.5 billion in 2016. This figure has two landmark: one is single in the history of smic annual maximum investment. 2 it is more than the previously published umc capital spending ($2.2 billion). Smic can get enough money and financing support, even if is to keep the size of capital expenditure. Still have the confidence to profit this year. To a certain extent, this number can be regarded as smic plan beyond the umc signal.

Beyond, Romania, or umc?

Released on May 13, smic reported in the first quarter of 2016, sales of $634.3 million, in the first quarter rose 4.0%, year-on-year growth of 24.4%; Attribution of smic profit leap to $61.4 million, 11% more than last year. If combined with smic's performance can be found in recent years, although still cannot be compared with TSMC, but has 16 consecutive quarterly profit, this generation in the global industry, is a specialist.

Can be seen from the disclosure of data also, smic has build a relatively complete contract manufacturing platforms. From a technology standpoint, smic seven generations of introduced technology, respectively is 28 nm, 40 nm, 65/55 nm logic technology, 90 nm, 0.13/0.11 microns, 0.18 mu m, 0.25 mu m, 0.35 mu m mature logic and non-volatile memory technology, analog/power management, LCD driver IC and CMOS microelectronics mechanical systems product line. Especially on 28 nm process, smic is mainland China only now able to provide customers with 28 nm process services of pure foundries. In addition, for the more advanced nano technology process, smic has also been a sustained development.

In this case, more and more people begin to put the revitalization of China's semiconductor manufacturing task in smic. In 2015 released Gartner whole chip foundry rankings, was fourth smic. It cannot but make the person daydream, is it possible to catch up with the top of the Romania and umc.

To this, smic seem to is open. In an interview with reporters, smic chief financial officer and executive vice President Gao Yonggang said: "the goal, smic's effort was 3 ~ 5 years in the future, to become the world's top three enterprises."

This means that, for the previous case Romania with umc, smic need to go beyond one of them. And according to the internationally accepted now, instead of sales ranking by core international sales were $2.236 billion, 2015 years, Romania with umc 2015 sales of $4.7 billion and $4.414 billion respectively. Smic is not short of a way to go.

"In the future in 3 ~ 4 years, smic's sales revenue growth is expected in more than 20% a year." Gao Yonggang said. Calculated according to the figure, the mid - 2018 the international sales of the party is expected to reach $4 billion, close to the current umc and Romania's sales figures.

Capacity expansion is not strong enough?

Despite smic expressed quickly close to international advanced level of confidence, but challenges remain. "The global semiconductor industry showed a stronger polarization trend." New technology asia-pacific President Lin Rongjian global semiconductor industry development trend in 2016 speech pointed out that "generation industry, for example, in 2015, TSMC's market share accounted for 55.40% of global OEM market, in 2014 was 52.85%, from 49.33% in 2013, 46.49% in 2012, presents the centralized state as a whole. If the horizontal comparison, 2015 other foundry enterprise market share, respectively is 10.36% 10.36%, umc Fang Dezhan, samsung, smic, 6.28% to 4.66%." Can be seen from the above data, smic beyond the former difficult.

Specific to smic itself, also exist in the development of the challenge. Interview some experts pointed out: "in recent years, smic too much emphasis on earnings, inevitably on the investment of new capacity is not strong enough, may affect the long-term competitiveness of the enterprise."

The root , according to a few companies after the disclosure in 2015 capital expenditures of $8.12 billion, TSMC, Romania and umc for $5.6 billion and $2.095 billion respectively, smic's spending $1.57 billion in 2015. In terms of new factory building, 2014 and 2015 TSMC and umc decided in xiamen and nanjing respectively, investment to establish a 12-inch fabs, smic although also has the construction of the shenzhen factory of 8 inches, but still have some on the scale.

As for 28 nm process, there are companies worry about smic 28 nm capacity climbing speed. The root In 2016, according to the goals of the smic 28 nm process node's sales plan of the company's total sales revenue of 5% ~ 8%. If sales accounted for 15% is important node of basic level, at least 2016 years, the main core international technology platform is still 65/55 nm, etc.

A strong signal issued to catch up with umc

Although gap exists, but smic is not without opportunity. If capital spending and sales conversion rate and net capital spending conversion two indicators, will find smic is accumulated over the years out of the strong foundation strength.

Wen-jun gu, core for consultation, chief analyst, semiconductor manufacturing, after all, is a swallow gold beast need long-term, huge capital investment, capital spending and sales conversion rate is becoming an important indicator of success for Foundry future extension. They test is one of the enterprises in the billions of dollars, can bring how many performance, can go further.

The root According to the core for consulting data, from 2011 to 2015, TSMC's capital spending sales conversion rate up to 35.89% on average. In 2011 to 2015, smic's sales conversion rate after TSMC, capital spending is as high as 30.08%. That is to say, $1 billion, TSMC can be converted into sales of $359 million, smic can be converted into us $301 million. And Mr. Romania and umc can only be converted into a $093 million and $068 million.

On the conversion of net capital spending more to the point, smic and TSMC almost flat, were 16.25% and 15.02%, respectively, are far ahead of umc and Romania. Per $1 billion investment, TSMC and smic can earn almost $160 million. And umc earn less than $20 million, GlobaFoundry is still losing money.

"How will the high investment, into the actual performance, smic gained valuable experience, the more laid the foundation of insist on high-speed expansion in the future." Wen-jun gu said.

Smic seems to have recognized the previous shortcomings. Gao Yonggang said in the interview, 2016 years the core will increase the capacity of the construction of the investment, the board approved to capital spending will be $2.5 billion in 2016.

The hallmark Numbers have two meaning: one is single in the history of smic's biggest annual investment. 2 it is more than the previously published umc capital spending ($2.2 billion). Smic can obtain sufficient funding and financing support, even if is to keep the size of capital expenditure. Still have the confidence to profit this year. To a certain extent, this number can be regarded as smic plan beyond the umc signal.

As for 28 nm process, Gao Yonggang said the plan by the end of the factory in Beijing form the production capacity of 18000 pieces per month, in the Shanghai factory production capacity of 20000 pieces per month. Although accounts for 5% ~ 8% of sales is not high, but "this is proof that there is the big customer, proves that the technology is mature." Gao Yonggang said. 28 nm process sales in 2017 is expected to have a bigger improvement.

After groundwork to consider beyond

Smic, then, how should continue the current momentum of development, catch up and surpass "leader"?

Great, semi conductor experts smic should continue differentiation strategy, lay a solid foundation, to consider beyond. "From the global foundry market analysis, the present 16/14 nm, 10 nm is too concentrated, and mature process such as 130 to 180 nanometers market instead may be very good. There is a case in point is 8 inches of global second-hand equipment is very tight now. And for TSMC etc. They can't give up 50% of the gross margin and competing The market, so smic last year set up in shenzhen, step 8 inches production line is good, should speed up the step forward again in the future.

At the same time, should be cautious in the investment expansion, but speed up technology research and development, keep up with the international trend of technology. "Accumulation and the development of the investment is in the balance. However, a good enterprise shall, on both sides are all able to juggle. Especially in the transformation period, this round of international semiconductor development enterprises shall consider more expansion, the bureau of cloth is good, the strategic engaged. Can continue to profit, of course, is better, but now it is more important is to consider the next step the extension of the layout problem. When doing the war just sex cloth has bureau, and some work to be more aggressive." Microelectronics institute of Chinese academy of sciences leaf sweet spring told "China electronics news" reporter said.

When smic's own money alone, required for capacity expansion and new technology research and development, to transcend the leaders have difficulty, countries, social capital should give appropriate support. In February 2015, national IC industry investment funds for the price of hk $0.6593 per share subscription smic to issue 4.7 billion new shares, the investment amount is about hk $3.1 billion. The investment effectively alleviate the smic's funding problems, will help the three periods of smic engineering and construction of a 12 inches of semiconductor production line. Smic's future as good with national policies and financial support, two balance leading industry and the enterprise's own development goal, into the "top three" goal, often can't Now.