Author | Wu Zhanguo
Source | Wild Horse Finance
Ten years ago, due to a dispute with TSMC , the founder of SMIC , Zhang Rujing , was slightly depressed, and he had no choice but to choose to leave......
Now, SMIC , which undertakes the historical mission, has once again come to a critical moment of turning the corner of his destiny. Under the US blockade, domestic chips face huge opportunities, but they are also under tremendous pressure.
On the evening of June 1, the Shanghai Stock Exchange accepted the listing application for SMIC on the Science and Technology Innovation Board. It took only one month from the announcement of "return to A" to the acceptance. SMIC plans to raise 20 billion yuan, mainly for the research and development of 12-inch chip projects and mature processes.
The technology battle is imminent, and the "new cold war" set off by the United States is rampant. Against this background, SMIC is starting to list on the Science and Technology Innovation Board.
1905, Einstein completed the special theory of relativity in in Germany. At the same time, he further theorized quantum mechanics, which also became the theoretical basis for the development of computers and the third industrial revolution.
In the mid-20th century, Bell Laboratory invented transistors (i.e. " semiconductor ") based on the constantly improved quantum mechanics theory. From then on, the size of the computer began to enter the family of every ordinary person, and people's lifestyles also undergo earth-shaking changes.
After the founding of New China, it took 30 years to complete the industrialization of the West that took nearly 200 years. However, due to the technological blockade of the West, there is still a huge gap between the most advanced technologies, especially those developed by quantum theory, such as semiconductors, nuclear energy, lasers, electron microscopes, molecular biology, etc.
With the reform and opening up, China has introduced some technologies through opening up the market, but the West still imposes a harsh blockade on core technologies. In the semiconductor field, the Western world has changed from the " Batumi organization " before the collapse of the Soviet Union to the "Wassenal Agreement" after the collapse of the Soviet Union, resulting in China's semiconductor technology being about 10 years behind the world's most advanced. The technology blockade of
is gradually broken due to the emergence of a number of companies such as SMIC .
SMIC "Back to A"
From publishing "Back to A" to the Shanghai Stock Exchange accepting application for listing on the Science and Technology Innovation Board, SMIC has attracted much attention from the market in less than a month.
On June 1, 2020, the Shanghai Stock Exchange officially accepted the listing application for SMIC (00981.HK) on the Science and Technology Innovation Board. According to the prospectus, will issue no more than 1.686 billion shares, with a total fundraising of 20 billion yuan. The funds raised will be used for the research and development of 12-inch chip projects and mature processes.
A month ago, SMIC issued an announcement to apply for listing on the Science and Technology Innovation Board. Since then, the stock price of SMIC has continued to rise, with a market value exceeding 100 billion yuan.
Not only that, after the news was released, the stock price of SMIC rose sharply, and it also led to a sharp rise in the A-share related chip concept sector.
In recent years, after SMIC development has been on track, profits have gradually entered a stable period. In the fiscal year 2019, SMIC 's operating income was US$3.116 billion (equivalent to approximately RMB 21 billion), and its net profit was US$235 million. The peak profit of SMIC was in 2016. At that time, SMIC 's profit was as high as US$377 million and its operating income was US$2.914 billion.
Source: Oriental Fortune
In 2016, SMIC began to expand significantly. In the past, the net cash flow of investment activities has remained below the average annual average US$1 billion. From 2016 to 2018, the cash flow of investment activities was -2.443 billion US dollars, -2.662 billion US dollars, and -3.197 billion US dollars, respectively, and the external expansion has been accelerating.
Source: Oriental Fortune
Investment accelerates, corresponding to the launch of new factories in SMIC Shanghai, Tianjin, and Shenzhen, strategic investment in Changdian Technology, etc. At the same time, SMIC took the initiative to adjust its personnel when recruiting troops.In December 2016, Jiang Shangyi, former TSMC COO, became the executive director of SMIC; in May 2017, Mr. Zhao Haijun, , replaced Mr. Qiu Ciyun, as CEO; in October 2017, Mr. Liang Mengsong, former general manager of Samsung R&D department, became co-CEO.
There is no doubt that SMIC is already a leading company in China's chip field, and all this now starts with a man named Zhang Rujing.
Chinese chip godfather "Zhang Rujing"
Zhang Rujing, ancestral home is Nanjing.
In 1985, his "old friend" Zhang Zhongmou became the director of the Taiwan Institute of Industrial Technology. Two years later, he founded TSMC in the Hsinchu Science Park.
The emergence of TSMC has rapidly changed the operating model of the semiconductor industry chain. Previously, the integrated circuit manufacturers designed their own chips and produced them in their own chip factories, completing tests and packaging at the same time; while the TSMC has become the "central kitchen" of chip design companies around the world - focusing on chip manufacturing in the midstream links.
In 2002, TSMC wafer foundry entered the top ten in the world for the first time; it became the leader in global wafer foundry in just two times; and, TSMC 's global wafer foundry champion has been maintained to this day.
Just as TSMC rose, Zhang Rujing also left because Texas Instruments gradually gave up wafer manufacturing. In 1997, he returned to Taiwan and founded "Shida Jiji" at the invitation of investors. Unexpectedly, just three years after the founding of company had just begun to make a profit, and the major shareholder sold the company to TSMC founded by his old leader for US$5 billion.
Zhang Rujing, who was unwilling to surrender, began to find a new way out.
Zhang Rujing met Jiang Shangzhou, deputy director of the Shanghai Economic Commission, while inspecting the mainland, so the two hit it off. In April 2000, SMIC was registered and established in the Cayman Islands and settled in Shanghai Zhangjiang High-Tech Industrial Park.
Twenty years after that, SMIC 's huge losses in the previous ten years were exchanged for a significant profit in the next ten years. When
SMIC was established, in order not to repeat the same mistake, Zhang Rujing stipulated in the company's articles of association that directors appointed by major shareholders can only serve as non-executive directors. This move is to avoid excessive intervention of major shareholders in daily operations and control the company.
Wilma Finance noticed that it was this move of that allowed SMIC to quickly emerge from the haze of future equity disputes.
complex shareholder composition
SMIC was registered and established as a foreign investment. The shareholders include Shanghai Industrial and Peking University Bluebird with state-owned backgrounds, as well as the United States' Goldman Sachs , Waden International, Taiwan's Handing Asia Pacific, and Singapore's Xiangfeng Investment.
raised about US$1 billion in the first phase. After the fundraising was completed, there were 16 shareholders, and the equity was very dispersed. Even Shanghai Industrial, as a major shareholder, only holds about 12% of the shares, while Zhang Rujing himself holds less than 1% of the shares. One of the reasons why
's equity is so dispersed and has many foreign shareholders is that it hopes to break through the US technology blockade against China. In fact, the rise of China's high-tech industry has always been accompanied by technological blockades in developed countries such as the United States.
During the Cold War, the United States, Western European , Japan and other Western camp countries established the "Patumi Organization" to restrict member countries from exporting strategic materials and high-tech products and technologies to Eastern camp countries. After the collapse of the Soviet Union, the Batumi organization was disbanded, but in 1996, the United States and 33 Western countries signed a replacement "Wassenna Agreement", and China is still under control.
According to the rules of the "Wasenna Agreement", Western countries generally export semiconductor technology to China two generations later than the most advanced technology, and the approval process will delay time. Basically, the technical equipment that can obtain will be three generations later than the most advanced technology. The third generation of late means that China's semiconductor technology will lag behind the international advanced level by about 10 years.
At that time, in order to break through the bottleneck of semiconductor production, China led the government to invest huge investment in the mid-to-late 1990s to establish the "908" and "909" projects, and successively established two core state-owned enterprises, Huajing and Huahong. However, they all encountered restrictions under the "Wasenal Agreement".
"Wasenna Agreement" has greatly hindered the upgrading of China's semiconductor industry chain. In 1999, the National Integrated Circuit "10th Five-Year Plan" Strategic Planning Seminar was held. Jiang Shangzhou, deputy director of the Shanghai Economic Commission at that time, said that only by looking for overseas investment can we try to break through the restrictions of the "Wasenna Agreement".
However, the equity dispersion also laid the groundwork for the later equity competition of SMIC .
is caught in a dispute over equity
Shanghai State-owned Assets, Zhang Rujing and many foreign shareholders jointly invested and established SMIC . Although it downplayed the government's background and gradually broke through foreign technological blockades, the interests of all shareholders are difficult to balance.
Among them, the core demand for state-owned assets with government background is to cultivate the domestic semiconductor industry as soon as possible through SMIC ; Zhang Rujing's core demand is to build SMIC into a company with a voice in the global semiconductor foundry field; and the core demand for other shareholders of is to obtain considerable financial returns by investing in SMIC . In the early days of the establishment of SMIC , Zhang Rujing has been narrowing the gap with the world's advanced semiconductor technology through huge investments. In March 2004, SMIC was listed in New York and Hong Kong. After raising nearly US$1.8 billion in financing, SMIC continued to expand.
After the global financial crisis broke out in 2008, the price of memory chips collapsed, and the funds for SMIC were in a gap, and they were in a dilemma of loss, and they urgently needed to supplement their capital. Although old shareholders are no longer interested in additional investment, several internationally renowned private equity firms including Blackstone and TPG are interested in acquiring SMIC equity.
Zhang Rujing asked for help from relevant departments, and eventually Datang Telecom invested and became the largest shareholder in the replacement of Shanghai Industrial. In the 10 months after Datang Telecom passed the approval process, global stock market plummeted, and the share price of SMIC fell from HK$1.4 to HK$0.4. In the end, Datang Holdings acquired 516.6% of the shares of SMIC html for US$176 million, becoming the largest shareholder.
Source: China National International 2019 Annual Report
Due to the huge shrinkage of financing amount and the excessive dilution of the equity of the original shareholders, Zhang Rujing aroused strong dissatisfaction among the original shareholders. Unlike other financial investment shareholders, Datang Telecom is the first industrial capital to enter the market. It is developing 4G business and intends to control a semiconductor company to enhance its own strength.
At that time, SMIC and TSMC were sued, and Zhang Rujing lost the lawsuit, which was the last straw that led to him leaving SMIC .
After Zhang Rujing left, Jiang Shangzhou became an important figure who could balance the forces of all parties. In the post- era of Zhang Rujing, Jiang Shangzhou became the only key figure in balancing the relationship between all parties within SMIC.
In order to balance the voice of Datang Telecom and to further enrich the capital of the company, Jiang Shangzhou used the political resources accumulated by his years of politics to convince China Investment Group, a national sovereign fund nature, to invest in SMIC . However, due to the strong opposition of Datang Telecom, China Investment Corporation finally invested only US$250 million, accounting for 11.6% of the shares, and Datang Telecom still firmly occupies the position of the largest shareholder.
As Zhang Rujing's substitute, Jiang Shangzhou successively found Wang Ningguo to take over the position of executive director and CEO of SMIC , and found Yang Shining to serve as COO of SMIC . Due to the different backgrounds of the two and historical reasons, two major factions have been formed within the company.
The major shareholder Datang Telecom has always wanted to support its own people as CEO. On June 27, 2011, Jiang Shangzhou passed away unexpectedly due to cancer, which led to the increasingly complexity of shareholder relations. Due to internal strife among shareholders, Wang Ningguo and Yang Shining both resigned one after another. In 2011, SMIC suffered another unexpected loss.
Qiu Ciyun serves as executive director and CEO of SMIC , and is described by industry insiders as "a blessing in disgrace".
TSMC incident
2010 is a key year to reverse the losses of SMIC for many years.
At that time, the global financial crisis triggered by the United States had just passed, countries started to print money in large-scale money, and the economy began to gradually recover. That year, SMIC ushered in a long-lost profit.
Just a year ago, Zhang Rujing, founder of SMIC , was still full of confidence. After years of hard work, the company finally obtained the world's most advanced technology and looked forward to a full profit in the second year. However, the company achieved profitability, but Zhang Rujing could only leave sadly.
The incident originated from a dispute over commercial secrets between TSMC and SMIC .
In 1952, Gordon K. Thiel of Bell Laboratory joined Texas Instruments (Texas Instruments), and since then Texas Instruments has gradually become a major semiconductor manufacturer.
In the 1950s, the United States set off a wave of McCarthyism. During the White Terror period of the United States, many Chinese were "persecuted". In this context, Zhang Zhongmou, who graduated from Harvard University, became a member of the semiconductor industry and joined Texas Instruments in 1958.
20, Zhang Rujing, who graduated from the State University of New York, joined Texas Instruments and became an engineer. Zhang Zhongmou was his indirect leader. These two colleagues who worked together in Texas Instruments , and then founded wafer manufacturers in the semiconductor industry chain - TSMC and SMIC . When
SMIC was just established, due to the lack of high-end semiconductor talents in mainland China, the original team was basically Zhang Rujing who dug up a group of original subordinates from Yuanshi Daji Electric (which already belonged to TSMC at this time). For a long time after that, the core of the management team of SMIC were all Taiwanese.
However, when SMIC was about to be launched at the end of 2003, TSMC began to file a lawsuit with US court , suing SMIC for infringing patent rights and stealing trade secrets.
The intellectual property dispute between the two parties lasted for nearly two years, and an out-of-court settlement was reached in January 2005. SMIC compensated TSMC for approximately US$175 million. Since the settlement was reached in 2005, SMIC has been working hard to build its own operating system. Zhang Rujing said, "The process is much more difficult than imagined."
In 2006, just over a year after the settlement agreement was reached, TSMC sued SMIC again on the grounds that SMIC did not comply with the settlement agreement. The lawsuit lasted for 3 years. In November 2009, the US court sentenced to SMIC to lose the case.
In the end, SMIC had to choose an out-of-court settlement again. In the end, SMIC compensated 200 million US dollars in cash to TSMC in four years, and paid 8% of the equity to TSMC , plus granting 2% of the equity. Zhang Rujing had to resign from SMIC , and since then SMIC has entered the post-Zhang Rujing era. Due to the strong points, the development of SMIC has gradually accelerated.
On the evening of May 13, 2020, SMIC released its first quarter results. The report shows that the company's operating income in the first quarter was US$905 million, an increase of 35.3% over the same period last year; the net profit attributable to the company's owners was US$64.164 million, an increase of 422.8% year-on-year.
Overview of the twenty-year history of SMIC , we can see that since its birth, how broke the technological blockade and completed the breakthrough of domestic chips is one of its important missions.
Now, facing the ever-elevated new round of bans, what do you think SMIC will perform, and how do you view 's "return to A"? Welcome to leave a message at the end of the article.
