Adhering to the leading investment philosophy, discovering continuously growing targets - China Zhongji Investment seizes investment opportunities in the semiconductor industry's cyclical fluctuations
In 2022, the global semiconductor industry was impacted by a cyclical downturn and unstable trade environment. Leading companies such as Intel, Nvidia, and AMD reported lower-than-expected earnings, with their core businesses experiencing varying degrees of decline. The United States enacted the "Chips and Science Act," continuing its efforts to contain the development of China's semiconductor industry towards high-end applications. In the secondary market, the Philadelphia Semiconductor Index experienced a maximum drop of 48%, with a cumulative decline exceeding 30%. In the primary market, many semiconductor-related entrepreneurs expressed the difficulty in securing funding.
Despite the numerous challenges in the broader market environment, China Zhongji Investment, based on its in-depth industry research, remains optimistic about the development of China's semiconductor industry and continues to invest in the sector at its own pace. In 2022, China Zhongji Investment not only invested in leading semiconductor companies in specific sectors such as Xican Microchip and Chenglian Keda, but also continued to add investments to its existing portfolio companies, including ESW and Louvain Instruments. In 2022, China Zhongji Investment also saw its first wave of returns in semiconductor investments: Haiguang Information, a domestic CPU manufacturer invested in by the company in 2020, went public on August 12, 2022, with a market capitalization exceeding 150 billion yuan at one point. In addition, ESW, a semiconductor materials company, and Louvain Instruments, a semiconductor equipment company, both completed new rounds of financing and share reforms, preparing for a listing on the STAR Market.
On August 12, 2022, Haiguang Information (688041.SH) listed on the STAR Market of the Shanghai Stock Exchange.
Amidst weak market demand, continuously declining stock prices in the secondary market, difficulty in securing funding in the primary market, and claims of a "capital winter" and a "downward cycle" in the semiconductor industry, China Zhongji Investment, based on its long-term, in-depth research and tracking of China's semiconductor industry, has come to the understanding that "cycles have their ups and downs; after a downturn, there will be an upturn, and the semiconductor industry in China still has a long development period overall. In addition, high-quality leading companies will have a more advantageous competitive position through sustained growth in the long term." Therefore, the company continues to invest in China's semiconductor industry, and its investments have achieved good results. The fundamental reason behind this is that each investment incorporates China Zhongji Investment's deep understanding of the industry and its deep commitment to its investment philosophy based on industry research.
China Zhongji Investment has always been optimistic about the development of the power semiconductor industry. From a technological perspective, power semiconductors do not rely on advanced processes, making domestic substitution highly feasible. From a market perspective, as a major electronics manufacturing country, China's high-growth demand in consumer electronics, industrial control traditional fields, and new economic fields such as new energy and the Internet of Things also provides a good foundation for the development of domestic power semiconductor manufacturers. Driven by new energy vehicles, photovoltaics, wind power, and energy storage, the global power semiconductor market is accelerating its growth. Against the backdrop of global "carbon peaking" and "carbon neutrality," power semiconductors have become crucial for renewable energy and efficient load energy networks. Based on its understanding and judgment of the future development of the power semiconductor industry, China Zhongji Investment actively completed investments in Xican Microchip and Chenglian Keda in 2022.
Xican Microchip is an international power semiconductor, radio frequency, and sensor IDM group headquartered in China. In 2022, Xican Microchip completed the acquisition of Ampleon, the world's second-largest mobile base station radio frequency semiconductor company in the Netherlands. Chenglian Keda is a leading Chinese vacuum welding equipment manufacturer whose major clients include semiconductor companies such as Huawei, BYD, CRRC, and Silan Micro.
Semiconductor equipment and materials are key links in the semiconductor industry. China Zhongji Investment recognized their importance in industrial development as early as 2019 and began investing in relevant companies. In 2021, global semiconductor equipment market sales reached US$102.6 billion, with China accounting for US$29.62 billion, making it the world's largest market for semiconductor equipment. In 2021, global semiconductor materials market revenue increased by 15.9% to US$64.3 billion, while the Chinese market reached approximately US$11.93 billion, a year-on-year increase of 21.9%. With policy support and continuous technological breakthroughs, the growth rate of China's semiconductor equipment and materials is clearly increasing. At the same time, as trade wars and restrictions on China's semiconductor industry development from advanced technology countries such as the US, Europe, and Japan continue to intensify, the importance of self-sufficiency in semiconductor equipment and materials in China is further highlighted. In the future, there is still huge room for domestic substitution of semiconductor equipment and materials in China. At the same time, based on the demand of the Chinese market, China will inevitably produce semiconductor equipment and materials manufacturers with global competitiveness. Against this backdrop, in 2022, China Zhongji Investment completed investment in Chenglian Keda, a semiconductor equipment company, and also added investments to Louvain Instruments and ESW.
Based on its strong investment performance, China Zhongji Investment also made further progress in cooperation with government-guided funds and project-based funds in 2022. In terms of government-guided funds, on the one hand, based on the support of current cooperating partners, it actively communicated with existing partners to establish a second-phase fund; on the other hand, it communicated with governments in Xi'an, Shaanxi Province, and other places on new cooperation in semiconductor industry funds. At the same time, the company has also gained recognition from market funds. In 2022, investments in Louvain Instruments and ESW were both completed through fully-subscribed project-based funds.
In the future, China's semiconductor industry still has a long way to go and huge potential for development. China Zhongji Investment will continue to conduct in-depth research on the semiconductor industry, support the development of the domestic semiconductor industry, and contribute to the development of China's semiconductor industry, which will also enable the company's investment philosophy to be better implemented.
