Fighting for survival, Huawei is even stockpiling semi-finished chips that have not been packaged and tested, indicating two things

September 15 is the final execution time of the U.S. extreme containment strategy against Huawei, and after this day, theoretically, almost all chip companies will not be able to supply Huawei.

Huawei's high-end Kirin chips from Hesse will lose TSMC's production foundry capability, and access to 5G mobile processors from MediaTek is basically blocked. In addition to the mobile CPU chips needed for cell phone consumer electronics, Wi-Fi chips, RF and display driver chips, memory chips, and other components from other chip companies all play a key role in Huawei's product system, and the 5G base station accessories over the next two years appear to be more important than the components needed for consumer electronics.

Ramping up inventory! Huawei is currently even regardless of the cost, pay a very high price to actively stock up, is to survive, to win the precious time and space. To that end, word is getting out that some chip suppliers are even sending untested or unassembled semi-finished products as well as wafers to Huawei in order to meet the deadlines set by the US.

Encapsulation testing is the final stage of the chip manufacturing process, and generally accounts for more than 20% of the cost of the chip, and is full of unknown variables, Huawei is willing to accept such semi-finished products at the risk of unmeasured costs, which is sadly not necessary to say.

This probably also shows two points:

1, time can be exchanged for space, extreme inventory strategy will be more means of coping with a few more points of opportunity.

2, our semiconductor industry chain, involving EDA tools, materials, design capabilities, equipment, packaging and testing, in addition to the design capabilities, the current can be realized independently controlled, can form a dependence on the chip when the packaging and testing.

With the intensification of competition in the industry and the growing maturity of the packaging and testing process, IC packaging and testing link technology, gradually transferred to the packaging and testing process, production management, equipment manufacturing and raw material technology, professional packaging and testing companies began to appear, packaging and testing industry first from the industry independently.

Semiconductor testing throughout the design, manufacturing, packaging, application of the whole process. From the initial formation to meet the specific functional requirements of the chip design, through wafer manufacturing, packaging links, in the final formation of qualified products before the need to test the product is in line with a variety of specifications. Categorized by production process. Semiconductor testing can be according to the production process can be divided into three categories: verification testing, wafer testing, packaging testing.

Semiconductor testing is an important part of product yield and cost management, in the semiconductor manufacturing process has a significant position. In order to reduce test costs and improve product yields, test link technology upgrades are also at the core of the semiconductor industry chain, such as TSMC, not only is the world's leading foundry, but also a leader in wafer-level packaging, and in the encapsulation of the code packaging technology advances.

Moore's Law predicts that the number of components on a chip will double every 18 months, and that the cost of materials and manufacturing costs per unit of component will decrease exponentially, but that the complexity of the chip will keep the cost of testing increasing. According to ITRS, the test cost per transistor will equal the manufacturing cost around 2012 and finish surpassing it after 2014, occupying 35-55% of the total chip cost. In addition, as chip processes continue to break through physical limits and become more and more integrated, testing will become more and more important to monitor product yields.

Especially in the post-Moore era, when the process is approaching its limits, packaging and testing have become an indispensable part of the semiconductor industry chain to demonstrate strength.

Huawei receives such untested chips as a reserve, can be said to be a great risk, of course, this is a special strategy for a special situation, but also shows that: encapsulation testing in Huawei's supply chain system, not subject to the U.S. system of technical constraints, the degree of controllability can be relied on is very high.

On February 25, 2020, at Huawei's globally live-streamed Industry Digital Transformation Conference, Huawei's Vice President of Enterprise BG, Sun Fuyou, said that Business Continuity Management, or BCM for short, is a strategic issue that every enterprise that wants to be based on a long-lasting business needs to consider.

Business Continuity Management (BCM), an integrated management process, enables companies to recognize potential crises and related impacts, and to develop response, business, and continuity recovery plans, with the overall goal of improving their risk prevention capabilities. This is the magic formula that Huawei spent tens of millions of dollars to learn from the US-based technology company IBM.

Business continuity management is mainly aimed at achieving business continuity even in extreme situations where the upstream can't guarantee delivery, and is a set of management processes that identify potential threats to the business, and the impact that these threats may have on business operations should they occur

Ren Lao said: The key to moving towards the Free Kingdom is management. .

Huawei's BCM strategy in recent years has consisted of:

1) A large amount of inventory in the early stage, after ZTE was put on the US denial list in 2018, Huawei has started to make corresponding preparations; first of all, it is to make a large amount of components in stock, Huawei's net cash flow from operating activities, which has long led net profit and trended in the same direction, spent CNY167.4 billion ($23.45 billion) in 2019 stockpiling chips, components, and materials, up 73% from 2018. The main increase here was again in raw materials, which reached a peak of 37.5% of inventory in recent years.

2) Supply chain switching, Huawei has been stockpiling BCM (Business Continuity Management) programs since the very beginning of its business, which in terms of specific implementation includes switching of non-U.S.-based technologies or vendors, and in-house R&D.

Now is the moment of survival of Huawei, the strength and determination of the stockpile beyond the imagination of the general public is normal, that sense of crisis from the beginning of the flow in the blood of Huawei.

Chip packaging and testing in the traditional impression of the general has a "labor-intensive", "lower technical content" and "lower profitability" label, the semiconductor industry development. At the beginning of the development of the semiconductor industry, Malaysia, China and Taiwan's comparative cost advantage is prominent, and the local government to support and encourage the development of the IC industry, so the global IC industry packaging and testing links, a large number of transfers to these areas. However, as Moore's Law enters the "deep water" and chip design and manufacturing becomes more and more complex, the importance of advanced packaging technology is also becoming more and more prominent.

Currently, the semiconductor industry in the mainland region in the testing industry overall strength is not bad, the market share is also noteworthy, the leading enterprises in the long power technology, through the rich microelectronics, Huatian technology, crystal square technology market size continues to improve, compared to the Taiwan region, the mainland testing industry has been the overall growth potential not to lose out to the wind, Taiwan's well-known IC design companies MediaTek, United Wing, RuiYu, and other enterprises have been the local The company has already shifted its local packaging orders to its mainland counterparts.

Encapsulation industry presents Taiwan, the United States, the mainland region of the three-legged state, in which Changdian Technology, Tomfoolery Microelectronics, Huatian Technology has been operated through capital mergers and acquisitions, the market share among the world's top ten (Changdian Technology market size is ranked third in the world), the level of advanced encapsulation technology and the basic synchronization of overseas leading enterprises, BGA, WLP, SiP and other advanced encapsulation technology can be successfully Mass production. Huatian Technology has already indicated that it has 5nm chip-based packaging and testing capabilities: this is a happy news.

The U.S. market share in the packaging and testing industry is general, and among the top ten packaging and testing vendors, there is only one company, Amkor, and it should be said that the trade war has a smaller impact on the overall industry of packaging and testing, and the possibility of replacing the business of Amkor is higher from the short-medium to long-term perspective.

Inventory strategy is to time for space strategy, Huawei behind the powerful motherland, is struggling to catch up with the world level of the whole industry. There are still a lot of variables, especially in front of the test of time:

1, our chip supply chain pattern with the increase in sustained investment, is breaking the cocoon, some equipment such as etching machine, some links such as packaging test already have the world's advanced level, with the ability to replace.

2, the U.S. containment strategy, their own semiconductor suppliers have a tendency to expand the inventory, the U.S. technology is not trusted by the destructive effects have begun to appear, how long can they afford?

3. Semiconductor vendors in other countries and regions, to what extent will they endure?

Ren Zhengfei, founder of Huawei, recently said, "The desire to survive has invigorated us to look for a way to save ourselves. We still have to stick to the same path of self-improvement and openness. You have to learn from everything, including your own enemies, to be truly strong."