One wave followed another.
Intel, struggling in the competitive chip market, cut 15,000 jobs and suspended its dividend, sending its shares down more than 20% on the day, the biggest drop since 1982. On the other hand, the global automotive semiconductor giant Infineon has announced that the company will lay off 1,400 people worldwide and move another 1,400 jobs to countries and regions with lower labor costs. The moves of industry giants are a sample that reflects the overall trend of the semiconductor industry. Even so, domestic chip startups naturally can not escape the pain - blocked financing, IPO failure, bankruptcy liquidation, mergers and acquisitions difficult... The global semiconductor landscape is changing. In the dilemma of "running out of ammunition" and the strange move of "surviving", how to break the situation of domestic chip enterprises in the mire has become a key proposition.
Domestic chip startups are Mired in the mire. In recent years, the global semiconductor market has experienced several twists and turns. A few years ago, the capital sought after, "everywhere gold" track, suddenly ushered in the capital winter. Under the cold winter, "can not see clearly, dare not invest, no money" once became the keynote throughout the industry, and the era of semiconductor "blind investment can also make money" came to an end. This will be a "bad luck" for domestic chip startups, especially those that continue to rely on financing for blood transfusion and lack of self-hematopoietic ability.
01, the enterprise closed down
The collapse is perhaps the most direct evidence of the shift in capital.
As we all know, semiconductor is an industry with huge initial investment and long return of funds, and capital is extremely important to its development. For companies with insufficient self-hematopoietic ability, the result of long-term outliving is a substantial decline in performance and profit loss. In the past, when capital markets were hot, none of this was a problem. Because as long as the story is well told, there is a certain technology and product landing ability, there is always a lot of money willing to pay for this. Now, with the cooling of capital heat, everyone has tightened their pockets, and companies that lack vitality gradually cannot finance the next round. In this environment and situation, some poorly run start-ups are likely to face elimination. Jack Abraham, managing partner and CEO of Atomic, warned: "With two-thirds of semiconductor startups surviving less than a year at best, we are about to enter an era of mass startup death." In 2023, the sudden dissolution of Zheku shocked the industry. Since 2024, the bankruptcy and liquidation of chip companies have occurred frequently. On April 15 this year, the case of Huaxia Core company applying for bankruptcy liquidation was accepted;
On April 24, Chongqing Xinmu Semiconductor said that there was no bankruptcy property for distribution, and requested the court to rule to terminate the bankruptcy liquidation procedure of Chongqing Xinmu Semiconductor Company;
On May 17, the People's Court of Shanghai Pudong New Area ruled to accept the case of the compulsory liquidation dispute of Shanghai Wusheng Semiconductor Company. On June 6, the court also issued the announcement of Shanghai Wusheng Semiconductor Liquidation Group;
On May 26, the relevant departments have ruled to accept the bankruptcy liquidation case of Jiangsu Glitit Electronics Company;
June 7, Suzhou Longchip Microelectronics bankruptcy liquidation.
In addition, there is also a company notice that the company has decided to stop production from now on for X months. It also pointed out that if the company's business situation fails to improve during the shutdown period, or if there are enough orders, the deadline will be extended or brought forward by notice.
These bankruptcy cases and enterprise survival crisis may only be the tip of the iceberg of the current status of the semiconductor industry, reflecting the difficulties and pains faced by the development of the domestic semiconductor industry.
02. Ipos fail frequently
On the other hand, since June 2023, the phased tightening of China's IPO policy superimposes the cyclical downturn in the global semiconductor industry, which has reduced the heat accumulated by the local chip industry for several years to the freezing point, carrying the equity investment tide of countless dreams of sudden wealth.
This year, as the CSRC issued four policy documents on "improving the quality of listed companies", "strengthening the supervision of listed companies", "strengthening the supervision of securities companies and public funds" and "strengthening the construction of the CSRC system itself", the IPO entrance was strictly controlled. With the tightening of regulatory review, the listing threshold has been raised, and the road to listing financing for semiconductor companies has become difficult. According to elephant Jun statistics show that as of July 29, there have been 43 semiconductor IPO termination in 2024, of which 42 are actively withdrawn IPO, only 1 is due to financial information has expired and overdue for three months have not been updated to terminate the review, the number of terminations more than the whole of last year, showing semiconductor companies in the IPO process of severe challenges. According to the Shenzhen Stock Exchange recently disclosed that due to the withdrawal of Shanghai Yingfeng Electronic Technology Co., LTD., the sponsor of the listing application, according to the rules of the Shenzhen Stock Exchange decided to terminate its listing review. In contrast, only 11 semiconductor companies terminated IPO reviews in 2020, further increasing to 19 companies in 2021 and 22 in 2022. In 2023, 40 IPO companies pressed the "pause button." The number of IPO terminations so far this year has already exceeded the whole of 2023. It is not difficult to see that "termination" and "withdrawal" have become the most frequent keywords for chip companies in the IPO market, and the number of acceptances and the scale of fundraising have declined sharply. Looking back at these companies that terminated their ipos, the reasons are different: some companies withdrew their IPO applications due to some irregularities in a number of key indicators such as business revenue, sustainable profitability, and research and development investment rate. Equity related and sector positioning issues; Some terminated enterprises also have been reported, started inspection and on-site supervision, and significant adverse changes in the industry. In this regard, the core Capital pointed out that the current semiconductor industry volume phenomenon is serious, the performance of most enterprises is under pressure, the operating pressure of enterprises is sharply increased, and the performance indicators and revenue growth can not meet the regulatory standards, so it has played a "withdraw". With the increase of active withdrawal of enterprises, exchanges have also promulgated policies to continue to consolidate the tripartite responsibilities of enterprises, sponsor agencies and regulators, emphasizing the need to improve the quality of practice and continue to strengthen the whole chain. The supervision of IPO projects is more detailed, and the "zero tolerance" regulatory situation continues to increase.
The above factors lead to many companies listed difficult, difficult to exit, valuation and market value upside down, resulting in the IPO threshold gradually increased, the investment in the primary market is facing greater uncertainty, into the "capital winter".
Chip mergers and acquisitions usher in a "golden age"?
02 Under the background of IPO stage tightening and stricter regulatory review, a group of IPO companies seek to realize capitalization through mergers and acquisitions, and some shareholders also have the need to exit by selling equity; At the same time, demand side listed companies and state-owned enterprises potential mergers and acquisitions demand is strong, mergers and acquisitions integration or become a new trend in the semiconductor industry. At the same time, policy support for mergers and acquisitions is increasing. In June this year, the CSRC issued eight Measures on Deepening the reform of the Science and Technology Innovation Board, Serving scientific and technological innovation and the Development of new quality Productivity, proposing greater support for mergers and acquisitions; The General Office of the State Council issued Several Policy Measures to promote the high-quality development of Venture Capital Investment, which clearly expressed its support for mergers and acquisitions in the field of hard technology. From the development history of foreign giants, the semiconductor industry itself has the attribute of integration and acquisition, and many semiconductor companies have experienced a large number of mergers and acquisitions to become the head enterprise. With the IPO channel tightening and related measures, Tianfeng Securities vice president and director of the Institute Zhao Xiaoguang said, "China's semiconductor industry is entering a key node, will enter the 'survival of the fittest' era of mergers and acquisitions." It may be a good opportunity for both parties." At the same time, the gradual integration of the domestic semiconductor industry chain helps to improve the localization rate of chips and form a benign ecosystem. According to incomplete statistics, there were more than 20 acquisitions in the semiconductor industry in the first half of this year. In the past two months, semiconductor companies such as Core Integration, Nano Micro, Xidi Micro, and Fuchuang Precision have disclosed merger and acquisition plans.
On June 21 and 23, Core Integration and Nano Micro announced plans to acquire 72.33% of the shares of Core Union and 79.31% of the shares of McGorn, and through the merger and acquisition of leading companies in the industry, the two companies will undoubtedly create more profits and expansion valuations in the field of segmentation.
On July 14, the semiconductor parts company Fuchuang Precision announced that it intends to acquire 100% of the equity of Yisheng Precision with no more than 800 million yuan, so as to make up for the non-metal parts technology gap of the listed company and extend customers to the terminal wafer manufacturing plant. On the same day, Xidi Micro, a power management chip and signal chain chip manufacturer, announced that in order to further promote the company's strategic layout and enhance market competitiveness, the second-level wholly-owned subsidiary HMI intends to acquire a total of 30.93% of the shares of Zinitix, a Korean chip design company, for about 109 million yuan.
At the same time, in the industry and the market, the amount of attention and discussion on the acceleration of resource integration of listed enterprises is also increasing. A person in charge of a listed company told the author that they have been paying attention to the target of mergers and acquisitions, and some semiconductor startups are willing to be mergers and acquisitions, and there are already some signs. Overall, the impact of the merger is clear. For small companies or companies with IPO failure, on the one hand, the situation of bankruptcy can be avoided by merger and acquisition, and on the other hand, the curve can be listed through merger and reorganization. For listed companies, as the A-share valve slowly closes on chip startups, these listed companies will have greater first-mover advantages, hoping to further increase research and development, expand the market, and enhance competitiveness, foreign acquisitions are A "fast track." At the same time, many start-ups are struggling to survive and are taking heavily discounted financing. It can be said that today is a good time for the market bubble to fade and the first listed companies to "pick up the bottom". In the past period of time, the domestic semiconductor industry has a serious "internal volume" phenomenon, especially in the low-end links and products, industrial development "quantity without quality", insufficient innovation, product supply structure imbalance. In the field of chip design, for example, a large number of enterprises lack differentiation in the product side, desperately fight a price war, and grab people and resources, resulting in great internal friction. Therefore, the integration of resources through mergers and acquisitions is conducive to breaking the low-end "internal volume" of the industry, focusing resources on key problems, and enhancing the competitiveness and discourse power of China's semiconductor industry. Driven by the current policy environment, capital market and enterprise ecology, domestic semiconductor industry integration is expected to usher in a "golden period". However, due to the lengthy semiconductor industry chain, companies in different segments may have different attitudes towards mergers and acquisitions. Zhu Jing, deputy secretary general of Beijing Semiconductor Industry Association, pointed out that the domestic chip design merger and integration of more tracks will appear in analog chips, RF front-end, MCU, display driver IC, EDA and IP and other fields, these tracks have several characteristics: the first existing start-ups; Second, there are many listed companies and they have the advantage of fault. Third, the price war and internal entanglement are very serious; Fourth, in what was once a capital rush, there is pressure on the capital side to promote consolidation; Fifth, the valuation level is relatively reasonable and has the prerequisite for merger and acquisition negotiations. In the past few years, the industry bubble has spawned thousands of domestic chip companies, while leaving the vast majority of companies with inflated valuations. Many of these companies have no business logic or value in themselves. The effective acquisition target companies can be divided into two categories: the first type is the overall revenue tends to be stable, the production of positive cash flow and other positive indicators, but the profit performance is poor semiconductor companies. Such targets often no longer need a large amount of investment to replenish blood, and can quickly achieve profitability through structural optimization and resource integration after merger and acquisition. The second category is semiconductor companies that have failed on the IPO road, and although there are certain compliance flaws, most of the targets have M&A value because their operations have gone through several rounds of reviews.
To sum up, the future development of the semiconductor industry will rely more on mergers and acquisitions, and companies and investors need to pay close attention to market dynamics to adapt to the challenges and opportunities brought by industry changes.
Why is it taking so long?
03, although mergers and acquisitions phenomenon is heating up.
However, in theory, the strong demand for M&A withdrawal, in practice, there are not many M&A cases, and there is no expected M&A tide in the industry. As mentioned above, there were more than 20 industry acquisitions in the first half of 2024, but this is only the tip of the iceberg of potential M&A attempts in the industry, and successful cases are still only occasional events. Out of sight, there are countless failures at the same time. For example, a GPU startup in Jiangsu Province failed to seek mergers and acquisitions for several months after encountering a serious business crisis; A southern wafer manufacturing plant, in the hopeless case of listing, commissioned a third party to find a merger object is also repeatedly hit a wall. Not long ago, an engineer of Nanjing Li Arithmetic Technology confessed to the media, "The process of seeking merger and acquisition financing of the company has been delayed, and after experiencing the abnormal operation of the company for 16 months and nearly half a year of unpaid wages, I have been moderately depressed." Recently, Nano Micro is directly announced that after careful study by the company, after a year of negotiations, decided to terminate the intention to acquire shares of Kunteng Microelectronics. Looking back over the past year or two, many IC design companies have tried to seek acquisitions because of poor management, and ultimately failed to do so. Some industry insiders said to the core tide that for chip design companies, how to evaluate the value and the team personnel are difficult problems. Because the core asset of a design company is talent, some companies believe that the patents they have accumulated are of great value. But the reality is that interested companies rarely take over the whole thing, preferring to wait until the company collapses or employees voluntarily leave to bring in the right team. As for the so-called patents and intellectual property rights, most of them are mainly for defense purposes, and there are very few patents with real trading value. At the same time, the idea of shareholders is not unified will also have an impact on mergers and acquisitions, some shareholders want to die and wait for the policy to recover to continue the IPO, some feel that the merger price is not ideal. In any deal, price is always the number one factor that makes it difficult to get a deal done. Since 2018, the semiconductor industry began to pour a large amount of capital, resulting in a lot of bubbles, a large number of repetitive projects at the same time, the valuation is generally high, many investors are entering with a high valuation, which leads to the sale of the company's price expectations are too high, and the merger and acquisition party can not agree on the price.
In addition, for most entrepreneurs, as long as they can solve the problem of survival, in fact, they do not want to really sell the company and lose control, and such a mentality will also cause certain obstacles to mergers and acquisitions. Overall, M&A in the semiconductor industry is full of opportunities and challenges. The dual promotion of policy support and market demand will help enterprises to improve technology and expand market by optimizing merger and acquisition strategy, so as to achieve overtaking in global competition. However, how to control risks in the process of M&A, how to balance the interests of all parties, how to deal with the international environment, target selection, regulatory level, and how to achieve the integration of technical teams after the completion of M&A are all key issues to focus on and solve before the upcoming "industrial M&A tide". Industry research consulting agency core research has published some views on this, the author here to quote you again: "China semiconductor mergers and acquisitions are difficult, both institutional reasons, but also cultural and capital market reasons." Taking stock of the truly successful mergers and acquisitions in China, it is precisely the cases of Chinese enterprises' mergers and acquisitions of international enterprises such as Wentai's acquisition of Anshi, Junzheng's acquisition of Silicon, and Weil's acquisition of OmniVision. Those projects with low energy level, insufficient funds, insufficient talents, and no hope should have a set of merger and acquisition mechanisms that are loosened from the policy, innovative in the process, and legally escorted. In addition, it is also necessary to start from the capital market to find ways to reduce the threshold of mergers and acquisitions of listed companies, and can not get a gold medal on listing.
