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Chip design industry is on the rise. Can China's Chip Industry Rise?

Author: Lu Hong

Zhongxing Micro's "Starlight" series chips occupy 60% of the global market share in the field of PC image input chips, and Zhuhai Action has also become a world-class giant in MP3 production. Can subdivision create an invisible champion and provide a way out for the growth of chip design industry in China?

165438+1on October 30th, Robert greifeld, president and CEO of Nasdaq, appeared in the lecture hall in Tsinghua University.

Facing the gathering of China enterprises and the public, he issued an invitation: "If China enterprises need to obtain liquidity in the international capital market in the future ... we welcome them to list on NASDAQ."

Greifeld's words are well documented: half a month before he took office, Zhongxing Microelectronics (VIMC；; Nasdaq) officially listed on Nasdaq; One day after his speech, another was called Zhuhai Torch Power (ACTS; ; China (Nasdaq) has also entered this market. These are two chip design companies, and their debut has brought the chip design industry in China into people's field of vision again-can these two companies represent the chip design industry in China? Does China have a competitive advantage in this industry?

China's chip design industry is on the rise.

In the past many years, the chip industry has been synonymous with high technology. At that time, all the technologies about chips were also in the hands of big companies in developed countries, such as Intel, Texas Instruments and Sony. These companies often cover the whole process from chip design and chip manufacturing to chip testing and packaging, which is called IDM mode in the industry.

However, since the late 1980s, the situation has begun to change. At that time, a company called TSMC (TSMC; Taipei), specializing in IDM mode chip manufacturing. This is a milestone event. It is precisely because of the rise of this enterprise and several similar enterprises that it began to have a real impact on the IDM model. The original complete chip industry chain from design to packaging began to be divided into chip design industry (fabless), chip manufacturing industry (Foundry) and chip testing and packaging industry.

This division has its inherent logic. In IDM mode, because the chip production line often needs huge investment, to a large extent, the upstream chip design can only be attached to large companies with production lines. After the rise of the chip foundry industry, the upstream chip design industry gradually separated from the IDM model and became an independent industry that is no longer subject to the production line that needs huge investment.

Worldwide, the development of chip design industry is in the ascendant. However, the domestic chip design industry started relatively backward. However, after the mid-1990s, the government hoped to take the opportunity of re-differentiation of the chip industry to increase its support for the development of the chip industry, and set up chip industrial parks in nine cities including Beijing and Shenzhen. I hope to rely on overseas returnees who have deep experience and technology in foreign high-tech companies to do this industry in China.

The insiders believe that the listing of Zhongxing Micro and Zhuhai Juli can be regarded as a sign that the chip design industry in China has gradually become a climate.

ZTE Micro occupies 60% of the global market share.

Zhongxingwei was founded in Zhongguancun, Beijing, 1999. Deng Zhonghan, Zhang Hui and Yang Xiaodong are the three founders of Zhongxing Micro. Although they were all from the semiconductor industry and had many years of experience in semiconductor research and development in large enterprises such as IBM, Bell Laboratories and Hewlett-Packard, they were at a loss because of the lack of initial start-up funds. Finally, under the introduction of relevant people, we finally got the investment of the Ministry of Information Industry100,000 yuan as the start-up capital. This fund was entered through the popular venture capital mode in Silicon Valley, which is completely different from the way that was completely funded by the government in the past.

It should be said that the founder of zhongxingwei has a unique vision. In the market positioning of zhongxingwei, they avoided the fields of general CPU, storage or embedded chips and chose digital multimedia chips in a unique way. They think: "In the era of 3C convergence, the future development of digital multimedia will definitely provide a very broad market for Zhongxing Micro, which will be an excellent opportunity."

After choosing the right market direction, the development of zhongxingwei began to hit the road. Just over a year after its establishment, it launched a million ultra-large-scale digital multimedia chip "Starlight-1". This product is mainly used in the digital image market, and its good performance makes it quickly occupy this market. Following "Starlight 1", Zhongxing Micro has successively launched a series of "Starlight" chips until "Starlight 5".

It is particularly worth mentioning that "Starlight" series chips are the first chips with independent intellectual property rights in China. Today, when this big European and American company often raises the sword of Damocles for intellectual property protection, it is naturally very important for chip design enterprises to have their own intellectual property rights. It is precisely because of its leading technology that ZTE's "Starlight" series chips occupy 60% of the global market share in the field of PC image input chips, and its important product customers have included many international enterprises such as Samsung, Hewlett-Packard, Philips, Fujitsu and Logitech. According to the news released by ZTE, the sales revenue in the first half of 2004 was US$ 2,465.438 million, and the total sales for the whole year was US$ 50.3 million. By comparison, it reached $40.4 million in the first half of 2005 alone.

Zhuhai Juli wins MP3.

If Zhongxing Micro is a successful example of China chip design enterprises in a subdivision of overseas students' chip design, then the success of Zhuhai Torch Power can be regarded as another representative of China local enterprises' achievements in this field. The story of Zhuhai Juli begins with Zhao Guangming, its current vice chairman. Zhao Guangming, who has worked in the microelectronics field in Beijing for eight years, started a business in Zhuhai with a group of friends in the early 1990s and established Zhuhai Yali Electronics Co., Ltd. ... At that time, the company was engaged in chip design related to sound processing. 200 1 Zhuhai Yali was transferred to a company called Zhuhai Juli, which was registered in the Cayman Islands by Zhao Guangming and some investors from Taiwan Province Province. Zhao Guangming served as the general manager of Zhuhai Juli until he was appointed as the vice chairman in September 2005. At this point, Zhuhai Yali officially ended and the torch power was officially unveiled.

In fact, there was a "route dispute" between USB flash drive (portable mass storage) and MP3 at that time. At that time, various manufacturers put USB flash drives on the market in succession. In order to win the competition, everyone has integrated some additional functions into the USB flash drive as chips, including the music function, which is the so-called "singing USB flash drive". Just as everyone was scrambling to do kung fu on the USB flash drive. Zhuhai Juli began to gamble on MP3, and specially developed MP3 chips for music control and playback. However, this practice did not get too many people's favor at first. A common view is that there will be no special MP3 player, because many consumer electronic products regard it as an accessory function. Visible examples, in addition to singing USB flash drives, some mobile phones also have the function of playing music.

However, Zhuhai Juli persisted. With its predecessor Zhuhai Yali's strength in sound chip technology and understanding of business, they have taken root in this market. A few years later, when MP3 became popular in the market and the function of USB flash drive became the proper technology of MP3, people had to admire the persistence and foresight of Zhuhai Torch Power.

A few years ago, the unimaginable MP3 multimedia chip and complete solution made Zhuhai Torch Power go public. Similarly, with the leap of MP3 in the hands of young people, this field has grown into a well-defined and interrelated sub-industry. In Zhuhai (a SOC platform provider; Downstream of SOC (System on Chip) are value-added distributors, contract manufacturers and brands.

In this subdivision, the growth rate of Zhuhai Torch Power is amazing. Zhuhai Juli disclosed in the prospectus that its revenue in 2002 was only $654.38 million+$10,000, and in the following two years it reached $5.6 million and $57.3 million respectively. As of September 30, 2005, before listing, its revenue had reached $ 654.38+009.7 million, with a year-on-year growth rate of 337%. Corresponding to its high growth, its share in the world market has increased. Zhuhai Torch Power is undoubtedly the leader of domestic MP3 terminal providers. According to Gartner's statistical report, in 2004, the output of MP3 players in China accounted for about 44% of the global output.

The tortuous road to listing

After the successful listing, it is undoubtedly full of glory, but behind the glory is often bitterness. These two China chip design companies listed overseas had to face critical and suspicious American investors from the very beginning. "The biggest difficulty we encounter is the distrust of American investors. This has also caused us great trouble. " Deng Zhonghan said.

American investors often have unexpected hopes for China enterprises listed on the Nasdaq market. They often hope to find models or prototypes of China listed companies in the United States, such as Baidu to Google. This of course has its logic. On the one hand, American investors are far away from China, and it is difficult to know all aspects of the China market in detail; On the other hand, the market value of China enterprises in the US stock market is relatively small, and stock analysts are rarely willing to spend a lot of energy to collect information about China enterprises and conduct in-depth research on them; Naturally, there are other reasons. For example, due to different levels and stages of development, China enterprises are often used to transplanting the successful model of the United States to the China market.

"It is precisely because of the above restrictions that if there happens to be an American company that can be called the prototype of China Company and sold at the corresponding price, it will be easier for American investors to understand and recognize it." A venture capitalist who has helped many domestic enterprises to list on Nasdaq said so.

In contrast, a China company listed in the United States will face distrust from American investors if it can't find a "prototype" in the United States. This is a headache for zhongxingwei and Zhuhai juli before listing.

In the process of operating satellite micro-listing in Deng Zhonghan, a question that Americans often ask is: "Do you have your own patents?" Americans are extremely concerned about whether China companies have their own intellectual property rights. It's no wonder that for companies engaged in SOC chip design, their intellectual property rights are almost life. Moreover, for Americans, almost all China companies in the network service industry or manufacturing industry are often seen in the American stock market, and few pioneers rely on advanced technology. It is precisely because of this that when Zhongxing Micro appeared as a technology company, the curiosity of American investors was natural.

The same problem also plagues Zhuhai Torch Power. However, the way it faces this problem is a bit special. As early as March this year, SigmaTel, another mainstream MP3 chip manufacturer in the United States, sued Zhuhai Julius with the US International Trade Commission (ITC) on the grounds of patent infringement. "We and our investors should say that we have fully estimated the possible impact of the lawsuit. We are confident. " Zhao Guang said.

Any worries or doubts of American investors will make people waiting for listing face a big test. During the global roadshow held a few weeks before listing, both Zhuhai Julius and members of the listing team of Zhongxing Micro often have to communicate with investors face to face more than five times in one day. If we consider that it will be held in five different places, it is not difficult to imagine what a difficult journey it will be.

During the roadshow, the listed team members are responsible for introducing their own companies, including business processes. This point is deeply felt by the team members of Zhuhai Juli. On a global scale, China's MP3 market and industrial chain are the most mature. "In this respect, we are ahead of developed countries," Zhao Guang said. It is precisely because of this that it is difficult for European and American investors who lack market experience to understand what Zhuhai Torch Force is doing. "Our person in charge had to explain it over and over again. In the end, he could recite almost every word in the thick prospectus." Zhao Guangming said with a smile.

Listing is a complicated process. Even if all the preparations are ready, something may happen at the last minute. According to the original plan, Zhuhai Action should be listed almost at the same time as Zhongxing Micro, but Zhongxing Micro fell below the issue price on the first day, with a decrease of 16.4%. Is it a bad time to go public now, or is the investor's recognition insufficient? "This makes us reconsider the timing of listing." Zhao Guang said, "However, our final choice depends on comprehensive consideration."

Although the initial break of Zhongxing Micro made Zhuhai Holly hesitate, they thought that listing would bring more benefits to enterprises besides financing. It is precisely because of this that after the issue price was lowered from $9.5 to 1 1.5 to $8 to $9, that is, half a month after the listing of Zhongxing Micro, the day after Greifeld gave a speech in Tsinghua, Zhuhai Action was finally listed on the Nasdaq market and officially listed.

Has China's chip industry risen?

However, does the listing of Zhongxing Micro and Zhuhai Torch Power mean the "rise" of Chinese mainland's chip industry? Huo, an analyst specializing in integrated circuit design research at CCID Consulting, doesn't think so: "This doesn't mean that the domestic industry is mature, but it just means that a number of enterprises are growing."

In fact, compared with domestic chip design companies and similar foreign companies, the gap is still quite obvious. According to statistics, in 2004, the United States accounted for 62.2%, Taiwan Province Province accounted for 28.8%, and China only accounted for 3.5%. "This ratio is still quite limited." Huo pointed out.

The same situation is also reflected in the output value of domestic design enterprises. According to CCID statistics, in 2004, the total output value created by 500 chip design enterprises nationwide was only 8 billion yuan (less than 654.38 billion US dollars), and less than 20 enterprises had sales exceeding 100 million. In terms of sales, over 100 million dollars is a recognized threshold. It is estimated that in 2005, among domestic enterprises, only Zhuhai Juli can do this (about 654.38 billion US dollars in the first nine months).

"Although there is still a big gap between the enterprise scale and foreign enterprises, Zhuhai Torch Power is only an entry-level enterprise. However, the development in this area in China is still relatively fast. " Huo said, "In the national semiconductor industry in 2004, the chip design industry accounted for15%; In the first three quarters of 2005, this proportion has reached 16.5%, and it is expected to reach 17% ~ 18% in the whole year. "

On the one hand, the progress of output value is more fundamental to market understanding and technological progress. Compared with the low level of domestic chip design enterprises a few years ago, the gap between the current design ability and the advanced level abroad has narrowed a lot. Huo said: "Now this piece is being designed in China, and more and more enterprises have adopted the design technology of 0. 13 micron." The design technology of 0. 13 micron is an advanced foreign design level. In addition, the designed product grade has also improved rapidly. "A few years ago, almost no domestic enterprises could do it in the field of communications, but now a group of enterprises are doing it, and they are doing quite well." Mr Said to:

Although the listing of Zhongxing Micro and Zhuhai Juli does not mean that the chip design industry in China has matured, "at least, their success in listing has inspired other design companies". After all, listing can not only obtain the necessary funds for development, but also significantly improve the management level and brand awareness of enterprises. It is very likely that, encouraged by this, another batch of domestic chip design enterprises will follow in the footsteps of Zhongxing Micro and Zhuhai Mobile. "As far as I know, many companies such as Shanghai Spreadtrum are planning to go public." Huo revealed.