Rebirth 08: Rise from copycat phones

Chapter 538 Five-Year Strategic Plan for Semiconductors

In mid-September, Xu Shenxue convened an internal semiconductor industry meeting in Shenzhen. The meeting was attended by three semiconductor design companies under the Zhiyun Group: Zhiyun Semiconductor, Zhiyun Storage, and Weizhi Technology, as well as the semiconductor manufacturing company Zhiyun Microelectronics.

Then there are several companies, including Haiwan Technology, a subsidiary of Fairy Mountain Holdings, which provides semiconductor equipment and consumables.

The meeting, attended by executives from more than ten semiconductor design, manufacturing, and upstream companies under its umbrella, primarily focused on discussing the development and planning of the semiconductor industry over the next few years.

After all, the semiconductor industry is a holistic industry that requires design, manufacturing, and equipment supply companies to work together for development; no one can do without the others.

At the beginning of the meeting, Fu Zhengyang from Zhiyun Semiconductor introduced the current and future development trends and predictions of the semiconductor industry.

He said, "With the advancement of technology, the entire semiconductor industry is gradually upgrading from mature processes to advanced processes."

"Our group's core semiconductor businesses, such as mobile phone SOCs, personal computer and server CPUs, consumer-grade GPUs, server GPUs, and various computing chips, are transitioning from the 14-nanometer process node to the 7-nanometer process node!"

"Starting in the second half of next year, we will also launch the more advanced 5-nanometer S1103 mobile SOC chip to the market, as well as the APO6000 series graphics cards using the 5-nanometer process."

"In addition, the new generation EYQ7 chip and ZY40 chip will also gradually adopt the five-nanometer process!"

"It's not just advanced chips; other mature chips are also gradually shifting from mature processes to advanced processes!"

"For example, some of our industrial-grade chips, automotive-grade chips, and home appliance chips have gradually shifted from 45-nanometer process to 28-nanometer process in the past two years, and some have even shifted to 14-nanometer process!"

"Ten years ago, 65-nanometer technology was considered advanced, but today, 14-nanometer technology has become a mature technology!"

"These general industries have a huge demand for various types of chips. Although the unit price of our chips in the industrial, automotive, and home appliance sectors using mature technologies is not very high, the volume is large, and the overall contribution to our business is still significant!"

At this moment, Ding Chengjun from Zhiyun Microelectronics also spoke up: "That's right, the chip manufacturing process in the conventional industry is shifting towards 18-nanometer and 14-nanometer processes. In the past two years, the number of conventional chip foundry orders for these two processes has been gradually increasing!"

"It's not just the foundry orders from domestic semiconductor design companies, but also some orders from foreign semiconductor design companies. The overall volume is gradually increasing, which effectively offsets the impact of reduced capacity utilization from mature process orders within the group. Currently, our 28nm process capacity utilization rate has reached 95%, and the 14nm process capacity utilization rate has been maintained at over 98% for a long time!"

"This is the situation at Zhiyun Microelectronics. Other semiconductor companies, both domestically and internationally, are also operating at good capacity utilization rates in these two process nodes. The market demand for these two process nodes is expected to be quite strong in the future!"

At this time, Wang Daolin of Gulf Technology said: "Our company has received a lot of orders for DUV immersion lithography machines. The shipment volume this year is expected to reach 65 units, and it is gradually increasing. We judge that the sales volume of DUV immersion lithography machines will further increase, and it is expected to reach 70 units next year!"

"The main reason is that domestic semiconductor manufacturers have increased their orders for lithography machines. Not only Zhuyun Microelectronics, but also SMIC, Beiwei and other domestic semiconductor companies are actively moving into the 28-nanometer and 14-nanometer process nodes. This has led to a continuous increase in the order volume of DUV immersion lithography machines, and we predict that this order volume will be maintained for more than five years."

As Xu Shenxue listened to everyone's reports, he also flipped through a report on the overall development trend of the semiconductor industry.

In recent years, the semiconductor industry in China and even globally has continued to develop, and the development speed is quite fast. This includes not only top-level processes such as 7-nanometer and advanced processes such as 14-nanometer, but also the development of mature processes from 28-nanometer to 45-nanometer process nodes.

The development of advanced and mature technologies is very rapid, and their scale even exceeds that of top-tier technologies.

In the global semiconductor industry, top-tier processes actually only account for a small portion of the production capacity—a silicon wafer fab with a monthly capacity of 50,000 wafers using the 5-nanometer process requires an investment of at least 20 billion US dollars. Such expensive top-tier processes are currently unaffordable for most semiconductor manufacturers… Only a handful of top semiconductor manufacturers worldwide are using them.

Other semiconductor manufacturers mainly focus on the 28-nanometer and 14-nanometer process nodes... which offer high cost-effectiveness and have a large market demand.

Mature technologies have a large market share, which is not only reflected in logic chips, but also in various storage chips, semiconductor sensor chips, etc. For example, although the 10C process memory chips of Zhiyun Storage are excellent in many ways, they are expensive. Most mobile phones and computers currently on the market actually use 10B or even 10A process memory chips.

As for memory chips used in home appliances, industry, and other conventional fields, there are still a large number of memory chips using even more outdated 25-nanometer or 30-nanometer process nodes.

Of the large number of memory chips shipped by Zhiyun Storage each year, only a small portion are made using top-of-the-line processes. The majority are memory chips made using seemingly outdated 25nm and 30nm processes. These seemingly outdated memory chips are widely used in various large and small home appliances, and even electronic toys.

The market demand for chips using various mature technologies is enormous!
This is why, apart from Zhiyun Microelectronics, other domestic semiconductor manufacturers are actively expanding their production capacity for 14nm and 28nm processes... The market demand is huge, and it's very profitable.

This has led to a larger market for various semiconductor equipment and consumables under Fairy Mountain Holdings!

At the meeting, Wang Daolin of Gulf Technology reported on the company's lithography machine production and sales situation!
"Based on orders and production capacity, we expect to ship 30 EUV lithography machines this year, including 26 HEUV-300B lithography machines. We expect to start shipping the more advanced HEUV-300C lithography machine in October, and we expect to ship four sets of this lithography machine in the remaining five months of this year!"

At this time, Wang Daolin also introduced the more advanced HEUV-300C lithography machine to everyone!
"Compared to the first-generation mass-produced HEUV-300B lithography machine, our HEUV-300C lithography machine has a higher overlay precision, reaching 1.5 nanometers, which can meet the needs of higher precision chip production. Currently, it can support 20 layers of EUV exposure, which can very well support the production of chips with an equivalent 5-nanometer process, and even support the production of chips with an equivalent 3-nanometer process in the future!"

"Furthermore, the light source power is higher, and the production efficiency is also higher, increasing from 120 pieces per hour for the HEUV-300B model to 180 pieces per hour for the HEUV-300C."

"This will lead to an overall decrease in the manufacturing cost of advanced process chips and further increase production capacity!"

"Although the HEUV-300C lithography machine is more expensive to produce and sell, we believe it offers better value for money!"

Ding Chengjun from Zhiyun Microelectronics said, "That's right. We at Zhiyun Microelectronics will use this latest HEUV-300C lithography machine to mass-produce chips with an equivalent 5-nanometer process. The initial production of chips with an equivalent 3-nanometer process will also use this lithography machine!"

"Although the HEUV-300B lithography machine can also produce chips with an equivalent 5-nanometer process, the chip yield and production efficiency are not good, and the cost is too high, because chips with an equivalent 5-nanometer process require more layers. Therefore, we have suspended our plan to use this lithography machine to manufacture 5-nanometer process chips!"

The first-generation HEUV-300B lithography machine had a production efficiency of only 120 wafers per hour, which was much lower than the 180 wafers per hour of the HEUV-300C. In addition, the difference in overlay precision made it somewhat inadequate for producing 5-nanometer chips.

It's not that it's impossible, it's just not worth it!
Ding Chengjun continued, "Many of our wafer fabs under construction or in the planning stages have already decided to adopt this HEUV-300C lithography machine. These wafer fabs will not only be able to manufacture chips using the 5-nanometer process, but we are also working on continuous technological upgrades and improvements to enable this lithography machine to also produce chips using the equivalent 3-nanometer process!"

"This will allow the high-profit lifespan of the Xianji Semiconductor factory to be extended!"

Building an advanced semiconductor factory requires considering future upgrade potential and adapting to more advanced processes as much as possible... After all, new semiconductor factories are too expensive now.

All the equipment used inside is ridiculously expensive!

For example, the HEUV-300C lithography machine, the latest type of EUV lithography machine, costs Gulf Technology $150 million per set... It's very expensive!

Zhuyun Microelectronics plans to build a 5-nanometer wafer fab with a monthly production capacity of 50,000 wafers, which will require about ten of these lithography machines... The procurement cost of just one of these lithography machines is $1.5 billion!
Then it also needs to be paired with several of the latest DUV immersion lithography machines, namely Gulf Technology's HDUV-600E lithography machine, which is not cheap, costing more than 70 million US dollars per machine.

At Zhiyun Microelectronics, this type of lithography machine is just a supporting machine, used to assist the EUV lithography machine in producing chips using advanced processes!
However, for other semiconductor manufacturers, this advanced DUV immersion lithography machine is a core main lithography machine, which is very useful for producing advanced chips with 10-14 nanometer process nodes.

The price is too high, so there aren't many manufacturers that can afford it. Currently, only Zhiyun Microelectronics is purchasing some, but in small quantities.

On the contrary, the slightly outdated HDUV-600B is more mature and relatively cheaper, costing only around US$50 million per set. Therefore, this lithography machine is very popular among domestic semiconductor manufacturers and sells very well.

It still manages to sell over fifty units a year, making it the top-selling lithography machine model among Gulf Technology's many lithography machine models!
Then it needs to be paired with a DUV dry lithography machine or a KRF lithography machine. These two types of lithography machines may seem outdated, but they are still top-of-the-line industrial equipment and very expensive...

Gulf Technology's new DUV dry lithography machine, the HDUV-250E model, costs around $20 million per unit. These machines offer good performance, capable of producing 55nm chips with high efficiency, stable performance, and simple maintenance. However, the 55nm market is relatively small, resulting in limited shipments of only about ten units. Among auxiliary lithography machines, the KRF lithography machine is the most popular among semiconductor manufacturers due to its affordability and sufficient performance… however, even the cheaper KRF lithography machine still costs around $7-8 million per set.

The aforementioned front-end lithography machines are just one type of the many pieces of equipment needed in the entire wafer fab.

Then there are back-end lithography machines, etching machines, sample injection machines, etc... The prices of these key semiconductor equipment are often tens of millions of dollars!
Those machines worth several million were considered cheap!
The aforementioned expensive equipment, coupled with the high costs of building advanced factories, results in an extremely high investment cost for advanced semiconductor factories.

Zhuyun Microelectronics is investing in a 5-nanometer process wafer fab with a monthly capacity of 50,000 wafers, with an investment scale that could reach more than 20 billion US dollars!
Even a company as powerful as Zhiyun Group wouldn't spend $20 billion to build an advanced wafer fab with HEUV-300C lithography machines as its core equipment, only to have it manufacture chips using 7-nanometer or 5-nanometer processes... They would have to find a way to make it manufacture future 3-nanometer process chips and strive to extend the fab's high-profit lifespan.

Wang Daolin of Gulf Technology continued, “This year, we expect to ship 30 EUV lithography machines of our two types. Next year, we will increase production capacity in order to reach 40 units, with the HEUV-300C lithography machine becoming the main shipment to meet the huge demand of Zhiyun Microelectronics for advanced EUV lithography machines.”

Xu Shenxue reviewed Zhiyun Microelectronics' capacity expansion plan and nodded slightly. The shipment of forty EUV lithography machines per year was sufficient. It could meet the production needs of advanced logic chips and also supply some EUV lithography machines for the production of memory chips and flash memory chips!
Zhiyun Microelectronics is not only using EUV lithography machines in the logic chip field, but also in the memory chip and flash memory chip fields. The demand for EUV lithography machines is very large.

The annual production capacity of 30 to 40 EUV lithography machines at Gulf Technology can actually be handled by Zhiyun Microelectronics alone, leaving only a small amount of capacity for other domestic manufacturers.

Zhiyun Microelectronics alone is enough to support Gulf Technology.

In addition to EUV lithography machines, Wang Daolin also reported that Gulf Technology expects to ship about 60 DUV immersion lithography machines this year. Besides Zhiyun Microelectronics, many other domestic semiconductor manufacturers have also placed orders for this level of lithography machine. Among them, the HEUV-600B model is a mature, reliable, and reasonably priced lithography machine with very good sales.

The sales volume of DUV dry lithography machines is relatively small, with only fifteen units sold.

However, the KRF lithography machine, as an auxiliary lithography machine, has sold very well, with estimated sales of around seventy units.

Then there are the I-line lithography machines, with an estimated shipment of only forty units this year. Although Gulf Technology is doing well in the field of I-line lithography machines, Canon has a very strong technological foundation in the field of I-line lithography machines and has seized a large market share.

This year, Gulf Technology expects to ship 200 lithography machines. Although its shipment volume is slightly lower than ASML's globally, its revenue is quite good.

The main reason for the high sales volume is EUV lithography machines and DUV immersion lithography machines... There's no way around it, with Zhuyun Microelectronics as a super customer, it's hard for the sales of top-tier lithography machines not to go up!

The huge demand for lithography machines by Zhiyun Microelectronics is based on the massive shipments of its four semiconductor design companies: Zhiyun Semiconductor, Zhiyun Storage, Weizhi Technology, and Jiangcheng Storage.

The global sales of various smart terminals, APO graphics cards, various computing chips, memory and flash memory chips have driven the semiconductor manufacturing industry chain behind them, which in turn has driven the upstream semiconductor equipment and consumables industry.

In particular, the rise of Zhiyun Group's virtual equipment and robotics businesses has driven a huge demand for computing chips... Virtual equipment requires APO graphics cards and ZY series chips, while the robotics business requires EYQ computing chips and ZY series chips.

All of these together represent a massive demand in the tens of millions. These types of chips are typical large-area chips, requiring far more 12-inch silicon wafers than small-area mobile phone SOC chips.

Zhiyun Microelectronics' large-scale expansion of its 7/5 nanometer process capacity is not only to meet the demand for mobile phone SOC chips, but also to meet the huge demand for various computing power chips.

This huge demand directly boosted the semiconductor equipment and consumables business of Gulf Technology and even the entire Fairy Mountain Holdings.

However, on the other hand, it can also be said that only with Fairy Mountain Holdings and Haiwan Technology can Zhiyun Microelectronics confidently expand its production capacity... Otherwise, even with money, it would be impossible to buy core semiconductor equipment such as lithography machines, so how could it expand its capacity!
Today, many people within the Zhiyun Group, and even outside the company, understand why Xu Shenxue insisted on getting involved in semiconductor equipment and consumables back then!

We must keep this core equipment in our own hands; we can't trust others to handle it. How can others just stand by and watch you race ahead in the fields of advanced semiconductors and artificial intelligence? They'll definitely try every means to pull you down.

And card devices are the most convenient!
Unfortunately, they can't use the card now even if they wanted to.

Xu Shenxue, who holds Fairy Mountain Holdings, is not afraid of any blockade by overseas companies in the field of semiconductor equipment and consumables... In fact, let alone a blockade, Zhiyun Microelectronics, under Xu Shenxue's control, no longer imports semiconductor equipment and consumables.

Even though some semiconductor consumable suppliers are still overseas companies, these overseas companies have partnered with Fairy Mountain Holdings to build factories in China to supply the products locally in order to retain their super customer, Zhiyun Microelectronics.

Fairy Mountain Holdings, relying on its numerous wholly-owned subsidiaries and some joint ventures with overseas semiconductor equipment and consumables companies, has established a complete semiconductor equipment and consumables supply chain in China, capable of providing a full range of equipment and consumables from mature to advanced and even top-of-the-line!

Establish a self-sufficient supply chain for advanced semiconductor equipment and consumables!
This is the sole purpose of Fairy Mountain Holdings' existence, and the core reason why Xu Shenxue has been continuously pouring money into Fairy Mountain Holdings over the years...

And so far, the results have been excellent!
Of course, the reason why this level of achievement was not only because Xu Shenxue spent a lot of money... but more so because Xu Shenxue allocated a large number of high-level scientific research positions to the technical personnel of various subsidiaries and research institutions under Fairy Mountain Holdings.

Otherwise, with the investment over the past years, it would be good enough to acquire a small portion of advanced equipment and consumables; it would be impossible to achieve a comprehensive solution from start to finish!

The massive funding and the number of research positions were the two core factors that enabled Xu Shenxue to build up the entire semiconductor equipment and consumables industry chain in just ten years.

Both are indispensable!

After the meeting, Xu Shenxue had a relatively clear understanding of the semiconductor industry of his various companies, and subsequently finalized the strategic development plan for the semiconductor industry for the next five years.

The strategic plan is relatively simple: to continuously promote the development of advanced semiconductor processes, strive to complete the capacity construction of 7/5 nanometer processes within five years to meet the needs of various chips, complete the large-scale mass production of equivalent 3 nanometer processes, and strive to complete the capacity construction of 300,000 wafers per month within five years.

At the same time, we strive to complete the technical verification of the equivalent two-nanometer process and carry out small-scale production within five years!

While completing the aforementioned capacity plan, we must also strive to gradually reduce the cost of 7/5 nanometer processes. The current 7 nanometer process and the 5 nanometer process, which is expected to be put into production next year, are still too expensive, which seriously restricts the sales of a series of end products of our various subsidiaries.

The most typical example is virtual machines... Virtual machines cost mainly APO graphics cards and ZY series chips, and then you also need to add an X series graphics card and advanced server CPU, DDR5 memory and high-performance enterprise-grade flash memory chips.

The cost of these advanced chips alone accounts for more than half of the hardware cost of virtualization devices!

If the cost of these chips can be reduced, then Zhuyun Group may be able to launch cheaper virtual devices with a price of less than 200,000 yuan in the next few years!
This will greatly expand the market for virtual devices and drive the entire virtual industry!
The smooth development of the entire virtual industry and the heights it can reach depend directly on the sales volume and existing stock of virtual devices.

The sales volume and inventory of virtual devices depend on their selling price!
Even the cheapest virtual devices currently cost 450,000 yuan, and even if they are targeted at the global market, their market capacity will be limited.

To drive down the price of virtual devices and expand market capacity, the first priority is to reduce the cost of a range of advanced chips!

This requires the joint efforts of the entire semiconductor industry chain under Xu Shenxue's leadership, from equipment to chip manufacturing and chip design!

Xu Shenxue also has high expectations for this!

In addition, Xu Shenxue also gave his various companies a new task plan: within three years, he wants to see advanced computing chips using three-nanometer technology, and within five years, he wants to see advanced computing chips using two-nanometer technology!
These top-of-the-line computing chips are intended to be used in conjunction with next-generation superconducting quantum computers to build next-generation supercomputing centers!
Zhiyun Group needs more advanced computing centers to continuously drive the rapid development and large-scale deployment of artificial intelligence technology!

To achieve this, the next generation of LC series superconducting quantum computers is essential, as is the next generation of advanced computing chips used in conjunction with them.

After all, the advanced artificial intelligence that Zhiyun Group is developing is not an ordinary technology; it requires enormous computing power!
(End of this chapter)