On September 4th, an announcement made by a prominent semiconductor company, Chip Union Integrated, revealed plans to acquire the remaining 72.33% of its subsidiary, Chip Union Yuezhou, for a staggering amount of 5.897 billion yuanThis move, if completed successfully, is poised to set a remarkable record as the largest acquisition in the semiconductor sector on the secondary market this year.
Chip Union Integrated is already recognized as China’s largest manufacturer of automotive-grade IGBT chips and modulesBy acquiring Chip Union Yuezhou, which boasts China’s first 8-inch SiC MOSFET production line, the company's dominance in the automotive chip sector is expected to significantly increase, enhancing its competitive edge in this booming industry.
The wave of new energy vehicles (NEVs) is surging ahead, complemented by the rapid recovery of consumer electronics driven by AI developments
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Additionally, the wind and solar energy sectors are providing limitless opportunities, making it increasingly plausible for Chip Union Integrated to turn a profit if this acquisition transaction goes through smoothly.
Currently, the semiconductor industry is experiencing a phase of cyclical adjustment that is leading to varying fortunes among different playersEven industry giants like Intel, once monarchs of the PC era, find themselves grappling with the repercussions of missing out on the mobile and AI trends, reporting a net loss of $1.6 billion in the second quarter, compounded by a stock price drop of 60% this yearIn stark contrast, AI powerhouse Nvidia continues to thrive, posting a staggering profit of $16.6 billion in its second fiscal quarter.
Thanks to the AI boom, the previously sagging memory chip market is now rebounding robustly, with high-performance storage solutions such as HBM, DDR5, and enterprise-level SSDs witnessing significant growth
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Samsung Electronics, for example, has reported a remarkable recovery in both revenue and profit from its NAND flash and DRAM sectors in the second quarter.
In the context of these industry trends, the varied growth and decline within the same sector can largely be attributed to a company’s ability to smooth the cycles of business through technological innovation.
Within this cyclical landscape, Chip Union Integrated, established merely six years ago, has not only kept pace but has exhibited a solid ability to grow through a technology-driven approachIn the first half of 2024, the company recorded an operating income of 2.88 billion yuan, marking a year-over-year increase of 14.27%. After accounting for annual depreciation and amortization amounting to 2.046 billion yuan, the company achieved an EBITDA (earnings before interest, taxes, depreciation, and amortization) of 1.123 billion yuan, a remarkable increase of 176% compared to the previous year, with an EBITDA margin reaching 39%—the highest since the company's inception.
During the first half of this year, the company invested nearly 900 million yuan in research and development (R&D), a 33% increase year-over-year, which represented over 31% of its total revenue
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Despite incurring a net loss of 471 million yuan during this period, the company has managed to reduce its loss by 638 million yuan, reflecting a 57.53% improvement.
These accomplishments are attributable to the company’s strategic engagement in rapidly growing industries like new energy vehicles, as well as its substantial capabilities to capitalize on such opportunitiesChip Union Integrated has become the largest automotive-grade IGBT chip and module foundry in China, producing silicon carbide (SiC) chips for leading new energy vehicle manufacturers such as Xiaopeng Motors.
SiC high-voltage platforms have become standard features in flagship new energy vehicles, prompting major international manufacturers like STMicroelectronics and Infineon to heavily invest in this technologyChip Union Integrated is among the first in China to successfully implement mass production of SiC MOSFETs for principal drive inverters, leading in Asia for the shipment of SiC MOS products.
Riding this wave of momentum, revenue from the company's SiC MOSFET division has Tripled year-over-year in the first half, with automotive products constituting nearly half of its main business
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Projections suggest that annual revenue from its silicon carbide business could reach 1 billion yuan.
When it comes to technology, Chip Union Integrated is not hesitant; its 1.7 generation products stand at an international first-class level, boasting a CP yield exceeding 85%. The company is recognized as the first in China and the second globally to realize a full 8-inch integrated circuit production line, having commenced production in April and set to achieve volume production next year.
In the era of fuel-powered vehicles, there were no Chinese brands among the top ten global automakers; however, as of 2023, six of the top ten in the new energy vehicle sector are domestic firmsThe rise of the Chinese new energy vehicle supply chain is creating a fertile environment for companies like Chip Union Integrated to thrive.
In comparison to giants like Samsung, Nvidia, and Texas Instruments, China’s integrated circuit industry is still in pursuit of innovation
With the country's leapfrogging capability in new energy vehicles, the emergence of a world-class company in the automotive electronics domain is becoming increasingly feasibleLooking to the future, the target for Chip Union Integrated is to capture 30% of the global SiC market share.
In the first half of the year, the company accelerated its foreign export of onboard power modules, securing procurement from renowned European automotive firms with installation volumes growing over fivefold year-on-year, achieving close to 10% market share.
Additionally, due to the resurgence in consumer electronics, the company’s consumer sector revenue rose by 107% year-on-year, with its 12-inch silicon wafer production line seeing revenues increase more than sevenfold.
As the SiC market continues to expand, collaborations with major manufacturers and Tier 1 supplies on various project implementations, coupled with efforts in AI data centers, renewable energy storage solutions, and analog ICs, Chip Union Integrated has a promising path ahead for growth.
The company’s remarkable path to growth is not solely due to product replacement; it is also because of a well-defined methodology that enhances long-term competitiveness
Since its independent establishment in 2018, post its split from SMIC, the company has aimed to become a "solution provider of systems" by collaboratively engaging with downstream customers in product development, thereby enhancing customer loyalty.
To that end, Chip Union Integrated commits 20% to 35% of its annual revenue to research and development, a proportion that positions it among the top tier in the industry.
In the "software-defined vehicle" era, the supply chain ecosystem for new energy vehicles is evolving from a "chain-like relationship" to a "networked ecosystem," effectively breaking down traditional component relationshipsEmbracing current industry trends, the company goes beyond producing standalone chips to providing entire system solutions that engage throughout the entire product development lifecycle.
The integration strategy has allowed the company to incorporate formerly fragmented chips, such as MCU, power management chips, communication chips, and drive chips, into a single chip solution
This has significantly streamlined the vehicle control unit, reducing the count from hundreds of components to just four, which greatly enhances the efficiency of R&D for automobile manufacturers, reduces costs, and boosts their competitive edge—a solution already in mass production.
In the domain of onboard devices, the company spearheaded the "design win" collaboration model, which emphasizes close cooperation with automotive companies from the design phase to co-create next-generation platformsThis proactive strategy ensures that the company locks in future orders early on; as of now, it has secured over 20 "design win" projects, with expectations that half of the primary drive silicon carbide products will be provided by Chip Union Integrated in the Chinese market.
The planned acquisition of Chip Union Yuezhou encompasses a silicon-based capacity of 70,000 wafers per month, alongside a 5,000 wafers per month capacity for 6-inch SiC MOSFETs, and it has made forward-looking investments in high-voltage analog IC and other high-tech platforms
Currently, it stands as a leader in 6-inch SiC MOSFET shipment volumes in China and is developing the country's first 8-inch production line.
In the field of analog IC, China primarily focuses on lower-voltage BCD process technologies for consumer and industrial devices, while Chip Union Yuezhou possesses rare high-voltage analog IC production capabilityThis advanced capacity, however, currently holds a domestic production rate of less than 10%. This technology is critical in providing comprehensive high-voltage, high-current, and high-density solutions for new energy vehicles and high-end industrial control applications.
It is clear that this acquisition is a crucial advancement in enhancing the company’s core competency, reinforcing its strength in the highly potential fields of silicon carbide and analog ICsMoreover, it will facilitate the unified management of 8-inch silicon-based production capacity, improving operational efficiencies and further augmenting the company’s innovative advantages.
The global chip landscape is diverse, with companies like Samsung and SK Hynix thriving on memory chips, TSMC dominating with advanced processes, and Nvidia capitalizing on GPUs to emerge as a new contender in AI
While high-stakes competition in the digital chip realm is drawing significant attention, the analog chip market persists quietly yet confidently, proving its resilience in the volatile capital markets.
In 2024, industry heavyweights Texas Instruments and Analog Devices have both reached record-high market valuations, surpassing that of IntelThe variety of analog ICs has expanded enormously, with the current demands fueled by the rise of new energy vehicles, energy transformations, and AI breakthroughs—these developments are continuously boosting the market scale for analog chips.
Although China holds the title of the world’s largest chip-consuming market, the country’s analog chip market is notably less self-sufficient, managing only about 15% of domestic supply with limited growthThis percentage is even lower than the overall self-sufficiency rate for chips, indicating an urgent need for domestic replacements
Additionally, production capabilities are largely concentrated in low to mid-end consumer electronics, while high-end analog functionalities still heavily rely on imports.
Since its inception, Chip Union Integrated has adhered to a philosophy of strategic progression, "taking one step while planning three ahead," resulting in annual expansions into new technological domainsFrom MEMS ventures in 2017, to the expansion of silicon-based power devices in 2018, to the further growth of module businesses in 2019, and cutting into high-voltage analog IC, silicon carbide, and laser radar MCU in 2020, the company follows a clear path of systematic growth.
Through consistent entry into new fields each year, the company aims to achieve product iteration within two to three years, continuously enhancing product quality to meet the standards of industry leaders—this aligns with current demands from the automotive sector for its chip industry.
To date, Chip Union Integrated has developed three key growth lines: the first encompassing 8-inch silicon-based IGBT, MOSFET, and MEMS chip and module production; the second focused on SiC MOSFET chips and modules; and the third aimed at high-voltage, high-power BCD process analog IC, covering diverse product fields and application areas.
In the first half of the year, all three growth lines showed significant traction, propelled by the AI paradigm shift aiding rapid iteration in AI mobile and PC products and thereby revitalizing consumer electronics demand and bolstering the company’s performance in this sector.
The second growth line featuring SiC MOSFETs has steadily ramped up production with numerous projects actively realizing bulk output, leading to a remarkable threefold increase in revenue year-on-year during the first half.
In the first half of the year, multiple integrated BCD process platforms emerged, filling gaps in the Chinese market