Science Technology

Scramble “three body games”! Semiconductor parts and components open the way

Recently, foreign media said that the Netherlands, Japan and the United States reached an agreement to restrict the export of lithography machines to China. The details of the sanctions are unknown, but the hands of the neck are no doubt getting tighter and tighter. This time, the spotlight shines on the lithography equipment.
Compared with lithography machine, the “pearl in the crown of semiconductor industry”, the discussion of precision parts in the semiconductor equipment industry chain is not high. In fact, the performance and quality of components directly determine the reliability and stability of semiconductor equipment, which is the cornerstone of high-quality development of semiconductor industry.
Under the background that the global semiconductor equipment parts market has been monopolized by the United States, Japan and other international giants for a long time, the growth and expansion of the strength of domestic semiconductor equipment parts has become one of the keys to the Jedi counterattack.
On October 10, 2022, the semiconductor equipment parts manufacturer Fuchuang Precision successfully landed on the Science and Technology Innovation Board, which is a famous “small giant” in the industry and has entered a new stage of development.
Under heavy pressure, how did domestic semiconductor equipment parts manufacturers grow? Under the smoke of the Sino-American science and technology war, how to lay the road of parts localization? This article will describe the following three parts through the struggle process of Fuchuang Precision:
1. Work hard to open up mountains and forests
2. The “three bodies” of the industrial chain
3. The “furious” way of parts
Work hard to open up mountains and forests
The birth and growth of Fuchuang Precision is inseparable from its founder, Zheng Guangwen.
Zheng Guangwen, who was born in 1966 and graduated from Jilin University of Technology and Economics (now incorporated into Jilin University), is a rare college student in that era.
After graduation, Zheng Guangwen was assigned to Liaoning Automobile Trade Group for seven years. It seems to others that he has won the iron rice bowl of state-owned enterprises. For Zheng Guangwen, this experience has accumulated business management experience and contacts in the automobile trade industry for him, which is the foundation of entrepreneurship.
In the 1990s, when the “spring breeze of reform was blowing all over the land”, Zheng Guangwen lost his iron rice job and founded an enterprise called “Liaoning Automobile Material Sales Center”, which seized the relatively small blue ocean market. Within a few years, he developed into three automobile 4S stores, and made an appearance in the Shenyang automobile market.
In 2003, Shenyang Advanced, a subsidiary of the Shenyang Institute of Automation of the Chinese Academy of Sciences, opened its investment entrance. Zheng Guangwen took the first step towards manufacturing industry by taking the opportunity and investing heavily in Shenyang Advanced.
In 2008, Zheng Guangwen founded Shenyang Fuchuang Precision Equipment Co., Ltd. through Shenyang Advanced Investment. As a result, the predecessor of Fuchuang Precision was born. Zheng Guangwen started his second business and plunged into the field of high-end precision manufacturing.
Why did Zheng Guangwen make such a choice when a number of auto 4S stores were making money every day and making a lot of money in their first venture?
When recalling his two entrepreneurial experiences, Zheng Guangwen said, “At that time, China’s semiconductor industry was not so prosperous as it is today. It was purely the sentiment of engineering students to devote themselves to semiconductors, and they felt that it was only practical to do manufacturing.”.
This sense of steadfastness has led Zheng Guangwen to lead his team in the field of precision parts of semiconductor equipment for more than 10 years, and has forged Fuchuang Precision into one of the mainstays of domestic semiconductor equipment parts.
From auto distribution to semiconductor manufacturing, how does Fuchuang Precision leap over the technological span and market gap? This can be summed up in three points: timing, location and harmony.
Tianshi: Fuchuang Precision grew up with the support of the National 02 Special Program.
The full name of “02 special project” is the national major science and technology special project of “large-scale integrated circuit manufacturing equipment and complete process”, which was launched during the “12th Five-Year Plan” and ranks the second among the 16 major projects launched at the same time. Its focus is on the research and development of 22-45nm chip manufacturing equipment.
It can be said that the “02 special project” represents the top strength of China’s independent chip research and development, and is an important force to fight against the hand that is stuck in the neck of China’s mature process chip manufacturing.
Fuchuang Precision took the lead in undertaking two phases of 02 special projects in 2011 and 2014, with a total of 650 million projects approved.
In 2011, in the project of “Integrated manufacturing technology and processing platform for key parts of IC equipment”, Fuchuang Precision solved the manufacturing technology including lithography main board, micro-frame and other manufacturing technologies in the lithography machine. In the same year, the company delivered the first precision parts to Applied Materials and became its qualified supplier.
In 2014, Fuchuang Precision undertook the project of “development of manufacturing technology for large aluminum parts based on welding and surface coating technology”. Relying on the achievements of the project, the company’s special welding and surface treatment technology for precision parts has achieved international standards, and has rapidly promoted the industrial application of ultra-strong corrosion resistance and special welding technology for large aluminum alloy parts below 22nm.
During the second undertaking of the “02 Major Special Project”, Fuchuang Precision became a strategic supplier of applied materials, a supplier of international well-known enterprises such as Tokyo Electronics and VAT, and provided research and development of precision parts and mass production supporting services for domestic well-known semiconductor equipment enterprises such as North Huachuang, Zhongkexin Equipment and Tuojing Technology.
Fuchuang Precision has completed two major projects of 02 in nearly ten years, making up for the shortage of domestic parts manufacturing. At the same time, the transformation of 02 special technical achievements also supports the rapid expansion of the company’s business. 02 The special basic R&D technology has been continuously applied to more products, and its product services have also been rapidly recognized by domestic and overseas markets.
Location: High-end manufacturing industry is the dominant industry in Shenyang.
Shenyang is an important heavy industry base with equipment manufacturing industry as the main industry in China, and the comprehensive strength of IC equipment industry ranks the third in the country. At the same time, Shenyang is also the city with the largest number of undergraduate colleges and universities in Northeast China.
At the beginning of its establishment, Fuchuang Precision was promoted by the state-level incubator of Shenyang Integrated Circuit Industrial Park. Shenyang’s rich industrial base and talent reserve also provided strong support for the company to further develop the emerging industry of parts and components.
Renhe: Fuchuang Precision has caught the ride of the industry giants.
This is the inextricable bond between Fuchuang Precision and applied materials. How did a fledgling domestic component manufacturer get the support and training of international equipment giant application materials?
The “three bodies” of the industrial chain
In 1967, Applied Materials (AMAT) was founded, focusing on the manufacturing of semiconductor equipment, and has made great progress. It was listed on NASDAQ in 1972 and became the world’s largest semiconductor equipment company in 1992, and has maintained this title until now.
To ask how the equipment giant made it, the development history of applied materials will give two answers:
First, follow the market and transfer industries.
After the 1970s, the production capacity center of the semiconductor industry began to change from the United States to Japan, South Korea and Taiwan, China in the Asia Pacific region. When deploying the globalization strategy, Applied Materials also set up subsidiaries or offices in Japan, South Korea and Taiwan, China.
The second is to maximize the strength of the integrated industrial chain.
The high-tech threshold and R&D investment in the semiconductor industry drive industrial integration to become the first choice of giants to reduce R&D risks and product costs.
As the equipment leader, applied materials need to deliver products to a large number of downstream wafer factories. With so many orders, no large company can complete them independently.
Therefore, there are hundreds of component manufacturers in the equipment industry chain of applied materials. Apply materials to purchase various parts from the parts manufacturers that have passed their verification, and then conduct assembly and integration to provide the complete equipment products to the wafer factory.
After occupying most of the market share, in order to maintain high performance growth, Applied Materials began to conduct a large number of M&A activities and cooperation integration in 1997, looking for new support forces.
When the time came to 2008, the financial crisis in that year triggered a major recession in the global semiconductor industry, and most of the international mainstream manufacturers fell into losses, or layoffs or salary reductions.
At that time, China’s electronic product manufacturers consumed more than one-third of the global output of semiconductors for the first time. Semiconductor production capacity was being transferred to China, and a large number of start-ups were born, among which Fortune Precision was one.
At this time, Applied Materials began to look for developable Chinese equipment parts suppliers in order to reduce its own procurement costs and improve profit margins.
Fuchuang Precision has seized this window period and won the opportunity to compete with giants.
Zheng Guangwen once talked about the “top two strategy” of the company at the beginning of its establishment: the company that just started to make small parts said that it was a joke to become one of the top two enterprises in the world, so Fuchuang Precision only provided support to the top two enterprises in the world and grew with it.
In 2011, through the introduction of overseas experts who had worked in applied materials, Fuchuang Precision came into contact with applied materials and accepted the inspection, and then was listed in the list of key cultivation suppliers of applied materials.
Under the guidance of applied materials, Fuchuang Precision started from structural parts with low technical threshold, and successively completed higher level system certification, process certification, and product certification. Then it undertook the batch business of process parts, and expanded its category to module products, gas pipeline products, etc. in recent years.
With the support of the distinguished people, the business category and quality system of Fuchuang Precision has been continuously improved, and it has also had the opportunity to access more advanced manufacturing processes of applied materials, such as 7nm and 5nm, which has played a forward-looking leading role in its technology research and development.
Today, Fuchuang Precision can mass produce precision parts and components used in 7-nanometer process equipment, which cannot be separated from the cultivation of applied materials.
The example of Fuchuang Precision and Applied Materials is just the tip of the iceberg in the “three body” pattern of semiconductor manufacturing.
Wafer factory, equipment factory and parts factory are three key roles in semiconductor manufacturing.
As the downstream buyer, the wafer factory should verify and screen the equipment, and the orders it provides also drive the production and sales of the equipment factory.
Similarly, the equipment factory is also the buyer of the parts manufacturer. At present, the global division of labor in the manufacturing industry is highly sophisticated. Most semiconductor equipment manufacturers will complete the production of products by importing parts.
Sounds like a simple linear relationship?
However, as written in “Three-body I”, “Three-body is a chaotic system that will infinitely amplify small disturbances”. Under the geopolitical conflict of international trade, the dynamic balance of cooperation and mutual benefit and common growth has been disrupted, and the entire semiconductor industry has begun to show a trend of vertical integration.
After the Sino-American science and technology war, domestic wafer factories have been restricted in purchasing imported equipment. No matter how exquisite the design drawings are, they can’t make bricks without straw.
On the other hand, the strength of domestic equipment factories is not strong enough, and they are still in the growth period of low profits and high sales. When key parts get stuck in the neck, it becomes a problem to build usable equipment at one time.
On the one hand, it is the stability of its own supply chain, and on the other hand, it is the profit space of product sales. Under the catalysis of dual factors, some domestic equipment manufacturers have begun to gradually cultivate processors in other domestic industries, or have engaged themselves in the processing of precision parts of semiconductor equipment, with a view to achieving “freedom of parts”.
Huahai Qingke, which supplies CMP equipment for wafer factories such as Changjiang Storage and Huahong Group, is a new star in the domestic substitution of semiconductors, and also faces the pain point of reducing costs and increasing efficiency in the industry. Due to the dependence of core parts on imports, the company’s production costs remain high, and the gross profit margin is less than 30%.
In this regard, Huahai Qingke disclosed that it is acquiring raw materials with higher cost performance by developing a second supplier and selecting replacement parts.
Coincidentally, Vientiane acquired Cassaten in 2018, horizontally entering the semiconductor equipment circuit, and then acquired Compact Systems in 2020, expanding its parts business vertically.
When the equipment factory starts to supply parts through mergers and acquisitions or self-research, its competitive relationship with the parts manufacturers arises. As the end user of the equipment, the wafer factory will verify and choose between the components of the two, and the component manufacturers will have the risk of being replaced.
Not willing to be the vassal of the equipment factory, some parts manufacturers are no longer limited to mechanical processing, and began to try to integrate resources and provide a complete set of equipment services.
In the three-body galaxy, the “eternal era” is extremely short, and the “chaotic era” of conflict and collision is the normal. The capacity improvement of the wafer factory urgently needs sufficient qualified equipment, while the equipment factory and the parts manufacturer each seek to occupy the other’s territory, and mutually repel each other.
Under the chaotic industrial structure, how should domestic parts survive and develop?
The “furious” road of parts
In “Rape”, Gao Qiqiang often looked at Sun Tzu’s Art of War in the early stage of his rise to power. One of the words had a great impact on him: “Don’t stop returning to the division, leave the division behind, and don’t force the poor.”
In the context of the semiconductor industry, this sentence can be understood as: when the blockade and sanctions are extreme, they will inevitably be backfired by the other side.
In this way, domestic components are forced to go on a “crazy” road.
One of the reasons is the endogenous factor of the parts industry.
Due to the high fragmentation of parts and components and the differences and technical barriers between different parts and components, the semiconductor equipment parts and components market has not been dominated by a single company and the concentration of enterprises is not high.
Therefore, domestic parts manufacturers are in a dilemma of small scale, large quantity and low profit. The R&D investment of new products and new technologies in the subdivided fields cannot be compared with that of overseas leaders.
The second is the external factors of the Sino-US science and technology war.
At present, most of the domestic equipment uses imported parts with mature technology first, and then gradually uses equipment and grinding equipment to replace low-cost domestic parts.
In the process of polishing, the technical team needs to constantly modify the design and parameters, deeply study the principle problems, so as to get rid of outsourcing and improve the understanding and transformation ability of the core component process.
At this stage, the scarcity of domestic design talents and the limited level of technology determine that this is a long and painful process.
While the technology war has reached the deep water zone, the hand of the neck has reached the semiconductor equipment such as the lithography machine. The advanced process nodes and the core component technology in the high-end field are all in the hands of overseas giants. Some high-end CNC machine tools in the production line still rely on imports.
Domestic parts manufacturers themselves do not have scale effect. Once the supply is limited or cut off, the expansion of existing products will stagnate, and it is more difficult to spare no effort to expand new fields.
So, how can we fight back the desperate domestic parts?
First of all, market forces alone are not enough. In order to obtain R&D and mass production strength sufficient to compete with international manufacturers, domestic semiconductor parts and components enterprises must be guided by relevant special policies and supported by the government to help them grow rapidly.
At the same time, the consolidation and unity of the industrial chain are unavoidable.
Domestic wafer manufacturers need to actively provide trial and error opportunities for domestic equipment and core components, so as to find out deficiencies and improve them as soon as possible.
In this regard, the state can contribute to help the wafer factory establish a separate experimental line outside the production line, make full efforts to tackle domestic equipment, and accelerate the improvement and iterative upgrading of the core parts process.
In addition, concentrating on major issues has always been our advantage in the face of crisis. The trend of vertical integration in the industrial chain needs to be standardized and properly guided: on the one hand, play the tandem role of equipment manufacturers, actively promote the certification of high-quality parts manufacturers, and open the way for them to enter the wafer line; On the other hand, parts manufacturers should be encouraged to expand their business categories and protect the local equipment supply chain.
Under the situation that the complete equipment has been heavily dependent on the West, the localization process of parts will largely determine the future semiconductor production capacity of China.
It takes determination to fight against each other and hard work.
There is no room for domestic parts to retreat after the smoke of gunfire. Only by going all the way can we break through the siege and survive and develop.