Concept stocks have been hit hard! How can Huawei break through under the worst-case scenario of the new US regulation?

category:Finance
 Concept stocks have been hit hard! How can Huawei break through under the worst-case scenario of the new US regulation?


Huaweis concept index fell 0.22% at the beginning of the trading, down to 3% at one time, down 2.45% by the time of press release, and Goethe, Changying precision, Shengyi technology, Fenghua hi tech, Dongshan precision, Xinwangda, oufiguang, etc. fell more than 5%. But there are some domestic products to replace the expected Zhongxin international and Huachuang in the north.

Many investors are worried that Huawei may be caught in the lifeline by the United States, the first of which is the semiconductor manufacturing end, and the demand of related communication, consumer electronics and other sectors may also be restrained.

Xu Tao, chief analyst of CITIC Securities electronics industry, believes that in the past year, Huawei has basically realized self-study substitution or non US supplier switching at IC design end, while Huawei at manufacturing end still highly relies on TSMC, and upstream semiconductor equipment and EDA software are still monopolized by US manufacturers, so it has become the focus of US pressure. Under extreme deduction, Huawei may face short-term supply cut after the implementation of the regulations.

Influence deduction

Specifically, the U.S. blockade restrictions focus on Huaweis upstream chip supply chain, including many links in the chip manufacturing process including wafer foundry.

1) Huawei or its affiliates on the entity list (such as Hisilicon) use products designed using software and technology from the control list (CCL), such as semiconductors. (mainly limited to EDA)

2) Chips and other products designed by Huawei or its affiliated companies (such as Hisilicon) on the entity list, such as those manufactured outside the United States, also use equipment in the control list (CCL). It is necessary to apply for a permit at the time of import and export. (mainly for wafer factories)

At the same time, in order to avoid the impact on semiconductor equipment companies and wafer factories, the U.S. Department of Commerce said that the products (initiated any production step forward projects based on Huawei design specifications as of may 152020) that have been launched on May 15, 2020 will not be affected by the shipment to Huawei within 120 days after the effective date of these regulations. (this also means that its not possible to place an order temporarily, and those who have already cast films will not be affected.)

Specifically, Fang Jing believes that the restriction plan introduced by the U.S. to Huawei has relatively limited impact on software. Because the U.S. EDA (Electronic Design Automation) company stopped cooperation with Huawei last year and cut off the upgrade, Hisilicon is now using the old version of EDA for product design without restriction. At the same time, Huaweis early chip design cooperation with Italian French semiconductor, to some extent, can solve EDA problems through outsourcing.

For the fabs, it may be a bigger challenge. Of course, we cant be too pessimistic. First of all, after the regulations come into effect on May 15, there will be a 120 day buffer period during which TSMC and other manufacturers can deliver goods to Huawei. Second, Fang Jing also emphasized Huaweis order addition and other issues in the early stage of the competition, and the company has a plan in advance.

So from an optimistic point of view, on the one hand, the U.S. restriction plan leaves more room for mediation. At the same time, the U.S. restrictions on wafer factories are more to apply for licenses, rather than one size fits all, which will probably extend the supply license of wafer factories for a certain period of time.

Fang Jing pointed out: although all kinds of measures of the US side are more and more extraordinary, we still think that the US side will not cut off the supply chain of Hisilicon immediately. In 2018, Huaweis share in the global base station market reached 30.9% , and there are many layouts in the European market. On May 5, Deutsche Telekom publicly supported Huawei, saying that if Germany wants to achieve the goal of building 2000 LTE base stations by the end of this year, it needs Huaweis participation. If Huawei is rejected, Deutsche Telekom will not be able to quickly solve the 5g signal coverage problem. If the US abruptly cuts off Huaweis supply chain in an all-round way, it will bring irreparable losses to the 5g layout of European operators, which will also bring a global rebound.

Industrial chain affected

However, the 21st century economic reporter learned that there are also market views that Huawei is cut off and will bring certain opportunities for domestic substitution in the medium and long term.

Fang Jing pointed out: we are worried about the impact on Huaweis industrial chain. First of all, we emphasize the 120 day buffer period. Huawei can adjust its design. We believe that it will increase the proportion of domestic chips used and find a spare tire for Hisilicon. For example, Hisilicon used to make a lot of PMUs for power chips and mobile phone processors, which was originally made by Hisilicon itself. Next, it will increase the proportion of enterprises such as Shengbang and help them to make some more meaningful chips. In the short term, there will definitely be an impact. When the inventory consumption is completed, the transition period will be a little difficult, but it will certainly promote the domestic substitution later.

In addition, Fang Jing also pointed out that of course, we have also had exchanges with the company. In the most pessimistic situation, Huawei Hisilicon will eventually become an IP company, retaining the core IP authorization business, and the R & D personnel will be divided into parts to support other domestic chip companies.

The analyst team of Guosen Securities electronic industry also pointed out that in the short term, before the implementation of the US governments list restriction, there is still a 120 day window period for Huawei to use its own technical capabilities to speed up the preparation of goods for the sustainable development of existing businesses.

In the long run, driven by Huawei and other domestic downstream core high-quality enterprises, the upgrading of domestic science and technology industry needs to be accelerated to achieve breakthroughs in high-end fields in all links of the industrial chain. Under the guidance of the government and reasonable planning, domestic enterprises increase investment in R & D, introduce international high-end talents, train core talents and reserve talents, and develop and expand downstream industries that take full advantage of domestic advantages by obtaining support from key customers and combining domestic demand. While the midstream wafer manufacturing industry is actively preparing for mass production of 14nm, it should reserve the equipment, manufacturing process and talents as soon as possible, increase the introduction of international top talents, and continue to promote the high-end processes such as 7Nm and 5nm. In the downstream sealing test supporting field, we should strengthen the refined operation, optimize the internal management process, and actively improve the service ability, so as to make full preparation for serving the worlds top customers. On this basis, strive to domestic packaging test industry chain, to achieve the world-class level.

It is worth mentioning that Chinas Ministry of Commerce has also responded to the extreme behavior of the United States.

Everbright Securities also pointed out that under the big logic of independent control, it is suggested to pay attention to the leading companies in various subdivisions of the domestic semiconductor industry, such as design: Weil, Zhaoyi innovation, Zhuosheng micro, Lanqi technology, Shengbang Co., Ltd., starsemiconductor, huiding technology, Ziguang Guowei, Beijing Junzheng, hengxuan technology, siripu, Xinyuan Co., Ltd.; manufacturing: Zhongxin international, Huahong Semiconductor, etc.; storage: Changjiang storage, Hefei Changxin, etc.; power: Wentai technology, China Resources micro, jiejie micro electricity, Yangjie technology, etc.; sealed test: Changdian technology, Huatian technology, Tongfu micro electricity, Jingfang technology, etc.; equipment: medium micro semiconductor, North Huachuang, etc.; materials: Shanghai silicon industry, Anji technology, Huate gas, etc.

Source: responsible editor of 21st century economic report: Yang bin_nf4368