Semiconductor packaging and testing equipment: Looking at the industry’s upward momentum from the leading ASMP

Semiconductor packaging and testing equipment: Benefiting from downstream production expansion, advanced packaging development and increasing chip complexity, the economy is booming

1) Global sales of semiconductor packaging and testing equipment in 2017 were nearly US$6 billion , an increase of 3.3%. Judging from the trend, it is expected to start a new boom cycle, with further growth in the next 2-3 years.

2) In addition to cyclical factors, the growth drivers of packaging equipment are: a. The construction of domestic wafer fabs guides packaging and testing companies to increase production capacity and increase investment in packaging and testing equipment; b. The development of advanced packaging promotes the purchase of new packaging equipment; c. Increased chip complexity and diversity of downstream applications are driving demand for test equipment.

Semiconductor packaging and testing industry: sales have grown at a compound rate of 15% in the past 10 years, advanced technology + overseas mergers and acquisitions

1) Global packaging and testing sales have grown at a compound rate of 15% in the past 10 years. Packaging and testing account for the largest proportion (approximately 35%) of the domestic semiconductor industry chain, with the highest localization rate and the most internationally competitive link in the industry chain.

2) Through overseas mergers and acquisitions, the packaging and testing market in mainland China has grown rapidly, and its market share has ranked second in the world.

3) Yole predicts that the compound annual growth rate of advanced packaging in China will reach 18% by 2020. Domestic packaging and testing companies continue to strengthen research and development in the field of advanced packaging technology and accelerate their layout.

4) Semiconductor packaging and testing technology: Packaging technology is evolving from traditional wire bonding to advanced packaging technologies such as flip chip, through silicon via, fan-in/fan-out wafer-level packaging, and the level of integration Continuous improvement.

Semiconductor packaging and testing equipment: benefiting from the increase in the scale of wafer production expansion, there is huge room for localization of equipment

1) Driven by the expansion of wafer fabs, Changdian Technology and Huatian Technology, etc. The leading packaging and testing company has announced production expansion, and packaging and testing companies will also enter a new round of capital expenditure cycle, and upstream packaging and testing equipment companies will directly benefit.

2) ASMP, the leader in semiconductor packaging equipment (market share 25%); Teradyne, the leader in test equipment (market share 48%), Advant (market share 39%), Chinese enterprise market There is a lot of room for improvement in share

Global packaging equipment leader ASMP: operating income compound growth rate of 17% in the past 10 years

1) Global semiconductor packaging equipment leader, performance continues to grow, profitability Maintaining a high level: market value is nearly 33 billion yuan, with revenue compound growth rate of 17% in the past 10 years. In 2017, ASMP achieved sales revenue of 14.7 billion yuan, a year-on-year increase of 15%; net profit was 2.353 billion yuan, a year-on-year increase of 80%. Among the main businesses, the post-process business and SMT solution business have ranked first in the global market share for many years; in 2017, the overall gross profit margin reached a new high of 40%.

2) Focusing on the field of semiconductor packaging, the scale of R&D investment remains high: High-intensity R&D investment ensures that products consolidate their market position and keep up with cutting-edge demand. Since 2012, R&D expenses have accounted for more than 8% of revenue.

3) Continuous mergers and acquisitions to obtain external resources to maintain growth: In 2010 and 2014, the company acquired the SEAS surface mount business and the DEK printing press business, entering the surface mount SMT field. In 2018, the acquisition of NEXX and AMICRA was incorporated into the post-process equipment business segment.

4) Global layout in compliance with the trend of semiconductor production capacity transfer: ASMP focuses on the flexible layout of downstream production capacity transfer and enters the Chinese market. In 2017, its revenue in mainland China accounted for 42.6%, with a steady upward trend.

Focus on: ASMP, American Teradyne, Japan's Advant, Changchuan Technology, Jingce Electronics

1) ASMP (0522.HK): the world's leader in semiconductor packaging equipment , product advantages are obvious.

2) Teradyne (TER.N) of the United States: the world's leader in semiconductor testing equipment, with a market value of approximately RMB 55 billion.

3) Japan Advant (6857.T): Japan’s leader in semiconductor testing equipment.

4) Changchuan Technology (300604): A leading domestic testing equipment company, it is expected to be the first to realize import substitution.

5) Jingce Electronics (300567): The leader in testing equipment in the panel field, successfully entered the semiconductor testing equipment.

Our strategy is optimistic about the semiconductor packaging and testing equipment industry. Focus on ASMP, American Teradyne, Japan's Advant, Changchuan Technology, and Precision Electronics.

Risk warning: The semiconductor industry’s production expansion is slower than expected, and the progress of equipment import substitution is lower than expected.