The cottage winner in the feature phone era, it can become the next TSMC

In Shanghai, driving from Shanghai-Lu Expressway to Shengang Avenue, you can see a “miracle” artificially filled in the distance – Dishui Lake.

18 years ago, designers had an unimaginable long-term perspective, and they wanted to make a barren land hanging on the southeast coast into tall buildings. Taiwanese engineers heading north, the Tesla factory in Xidu, and the rising semiconductor industry in China flocked to the city, and the Lingang New City was built. This is not only the “core” of the free East, but also full of the hope of a new era of making great powers.

Musk isn’t the only foreigner here, but he must be the spotlight. At the beginning of 2021, the news of Model Y’s price reduction of 160,000 yuan has hit the Chinese Internet. Although this has nothing to do with most Chinese people, on the first trading day of A-shares, CATL became one of the biggest beneficiaries of Tesla’s dividends.

Some media clearly shouted the slogan, “Ningde era is bigger than PetroChina”. Just when the revolutionaries of the new era and the rulers of the old days were repeatedly competing in the center of public opinion. A piece of news is spreading silently: China’s first 12-inch automotive-grade power semiconductor wafer manufacturing center officially started construction in Lingang. This factory was built by Wingtech Technology with a heavy investment of 12 billion yuan, and it is only 19 kilometers away from the Tesla super factory.

Wingtech was originally a small workshop that made motherboards for copycat machines. Later, it became a smash hit “Spreadtrum Communications” and won a large market share with price wars. Later, in order to become bigger and stronger, it built its own OEM factory and realized one-stop service from design to production. Xiaomi is its important customer. Then, before the chip sanctions came, Wingtech ate Nexperia which was spun off by the European giant in a super-space-like manner.

Transformed from a cottage factory, Wingtech has become an important semiconductor investment target for A shares.

And this huge investment in the construction of the factory shows Wingtech’s ambition to enter Tesla’s supply chain. The main power IGBT produced after research and development is Tesla’s “brain”. The vehicle power system = battery + electric drive (motor + Electronic control), and the electronic control receives the instructions of the vehicle controller to control the movement of the vehicle. The electronic control is mainly an inverter, and the inverter is mainly an IGBT module, so the IGBT module is approximately equal to the “CPU” of the automotive power system.

Although IGBT has low technical barriers and fierce industry competition, it is called “transformer” by many people, but it does not affect its important position in the manufacture of new energy vehicles. Today, everyone’s attention to new energy vehicles is “true or not” focused on the discussion of batteries, selectively ignoring our weak “semiconductor”. Chen Hang, chief executive of Founder Securities Electronics, said in a WeChat message:

New energy = new energy acquisition (solar energy) + new energy control (power semiconductor) + new energy application (heterogeneous chip FSD), behind which are semiconductors. Based on the above analysis, we believe that “semiconductor: redefine new energy”. This is not based on the industry trend of three or five years, but the dimension of an era.

The half century after the epidemic is destined to be an era that has been written over and over again, a world where heroes and heroes, liars and traitors make history crazily. In the most important next semiconductor battle, there is a question that urgently needs to be answered by Wingtech: Do you really want to turn from a copycat in the era of functional machines to a “TSMC” in the era of smart cars?

The Charge: The Victor of the Chinese Shanzhai

In February 2006, when the temperature in Shenzhen turned from warm to cold, Zhang Xuezheng, a 31-year-old Cantonese native, walked out of Huaqiangbei carrying two computers and was relieved because he finally found three customers who were willing to represent his products.

At this time, Wingtech Technology was established in Shanghai for only 3 months, and it was unknown in the industry. Zhang Xuezheng threw 100,000 yuan of savings, built a team of 48 people, and designed a product to enter the mobile phone IDH (mainboard scheme design). ) “money grab”. Like most competitors in the market, Wingtech has neither core technology nor brand, but there are “big men” behind it.

Spreadtrum’s founder, Wu Ping, graduated from Tsinghua University with an undergraduate degree and studied in Silicon Valley in the United States. He is a typical turtle elite. Zhang Xuezheng was admitted to Guangdong University of Technology, a 211 Engineering University in Guangdong Province from Shangou at the age of 22. After graduation, he worked in ZTE and then came to Tsinghua University to read an MBA. The two only chatted for one afternoon in the cafe in Shiliyangchang, and Wingtech has been bound to Spreadtrum since then.

Wingtech’s initial office location was inside Spreadtrum, and its flagship products W100 and T658 are based on Spreadtrum’s solutions. The 21st Century Economic Review used weak cooperation to describe the relationship between the two sides. The reason is that MediaTek is taking Huaqiangbei’s cottage army with MTK chips and sweeping the world. Spreadtrum was beaten and retreated, while Wingtech was barefoot and not afraid to wear shoes.

Therefore, Wingtech has become Spreadtrum’s strange move to the copycat market.

This trick is strange to Zhang Xuezheng. He is a born entrepreneur. He describes himself as someone who uses a knife to go up the mountain to cut roads. He was born in a rural area. He went to Guangzhou to study but was able to become the president of the student union. He would win over his subordinates. He was familiar with Mao Xuan, and Wingtech established a party branch very early. I often forget the birthdays of my relatives, but I can remember the birthdays of my employees and their families.

Studying the culture with Chinese characteristics so hard, he discovered a market vacancy at that time – a single-chip dual-SIM dual-standby mobile phone. Most of the dual-SIM dual-standby mobile phones at that time had a dual-chip structure, which was thick and bulky. As a result, Wingtech and Spreadtrum developed a single-chip dual-card dual-standby motherboard, coupled with the low-price strategy formulated by Zhang Xuezheng, which wiped out the entire market at once.

In 2007, Wingtech sold 18 million motherboards, completing the transformation from a cottage workshop to a first-tier IDH manufacturer. However, due to the price war, Wingtech seemed to be prosperous at this time, but in reality it was full of crises. First, the profit level of pure design mode is increasingly meager. Second, the mobile phone industry chain of Huaqiangbei has been perfected in place, and the finished product can be seen within a month as long as the customer submits a quotation and a general idea.

Zhang Xuezheng took a fancy to this business, which is called “virtual production” by industry insiders.

For a long time, the opponents of the copycat were only the copycat. Because in October of that year, the “mobile phone license” system that had been implemented for 9 years was cancelled, and some ambitious copycat companies surfaced and became the regular army. The Jiaxing mobile phone factory, built by Zhang Xuezheng with a huge investment of 70 million US dollars, happened to complete the first phase of the project two months before the “bandits turned regular army”.

At this time, Wingtech is transforming to ODM (from design to production is completed by itself), stepping on the tuyere of 2G to 3G replacement. Spreadtrum, which is bound to Wingtech, helped China Mobile develop “TD-SCDMA” chips that meet the 3G standard, which also allowed Zhang Xuezheng to catch up with the three major operators. “Every time China Mobile bids, at least two or three of the ten mobile phones are made by Wingtech, but the brand is someone else’s.”

In 2008, when the financial crisis was swept away, Spreadtrum’s Wu Ping looked haggard: the company spent hundreds of millions in research and development of TD chips, but it was “put pigeons” by China Mobile and could not be commercialized for a long time; in the domestic mobile phone market, MediaTek and Shanzhai are still forever. Drop God. Zhang Xuezheng is very proud, because he signed a cooperation agreement with MediaTek, and he will be invincible in the low-end market.

A supplier called and questioned MediaTek: “Do you know what Wingtech does? He’s here to lift the table.”

Faction: Capitalists are on both sides

Spreadtrum, founded by Wu Ping, has always been in the hands of American capital.

In 2013, his Tsinghua alumnus Zhao Weiguo brought Tsinghua Unigroup and bought Spreadtrum back to China. A year later, Zhang Xuezheng came to Tsinghua to read an MBA. Because Tsinghua high-end in China’s semiconductor circle occupies half of the country, so does the integrated circuit investment circle. The alumni who graduated from Tsinghua University have a characteristic: they are resolutely united, the elders are orderly, the seniors are respected, and the alumni are both sides.

At that time, with the rapid development of Internet mobile phones, Wingtech became an important partner of many brands. In addition to helping Xiaomi launch the most revolutionary Redmi 1, it also helped Meizu make Meizu Note 2 and Note 3. The customers on hand are dazzling, as well as Lenovo, Huawei, China Mobile and TCL. Even Samsung’s vice president brought the mobile phone department to visit Zhang Xuezheng.

But helping people OEM is time-consuming and labor-intensive, and it doesn’t make money. Zhang Xuezheng has a bigger ambition, “I want to bring Wingtech to the peak of glory.” An industry most related to mobile phones has entered his field of vision-semiconductor. In 2014, when he decided to go to Tsinghua for an MBA, the Chinese semiconductor industry knew a news: big money was coming. In September, the National Integrated Circuit Industry Fund with a scale of 100 billion was established.

From the bottom of the industry to the most upstream, Zhang Xuezheng must “seek both sides”.

In 2014, Zhang Xuezheng decided to go public through the backdoor, and he took a fancy to the real estate company Zhongyin. The market originally thought that he was the most fashionable real estate business, and wanted to transform from an industrialist to become a local tyrant boss. In December, Zhongyin Co., Ltd. announced that it had entered into the suspension procedure for major asset restructuring. In the next year, Zhang Xuezheng made Wingtech a wholly-owned subsidiary of Zhongyin Co., Ltd. through two capital operations, which is equivalent to a roundabout listing.

In the same year, Tsinghua created a Chinese consortium to make an offer to acquire the image sensor giant OmniVision. In May 2015, Coway was acquired for US$1.9 billion and became a subsidiary of Beijing Coway. This is a feast of Tsinghua University. Zhuhai Rongfeng controlled by Zhang Xuezheng holds 11.79% of the shares of Beijing Haowei and is the largest single shareholder.

In 2016, Zhang Xuezheng was elected as the director and president of Zhongyin Co., Ltd. In the announcement, the future Zhongyin Co., Ltd. will take Wingtech’s industry as its main business, and conduct capital and industrial layout around Wingtech. This is equivalent to not wanting golden egg real estate and continuing to engage in “losing money” OEM mobile phones. The data shows that the gross profit margin of Wingtech’s mobile terminal business from 2017 to 2019 was only 7.63%, 7.56%, and 9.36%, respectively.

Note: 2019 data consolidates Nexperia’s two-month performance

Zhang Xuezheng’s Tsinghua senior Liu Qiang fell in love with Haowei, but because Beijing Junzheng failed to raise enough money, he was out of the game.

Yu Renrong, the founder of Weir Shares, also graduated from Tsinghua University, and he also plans to acquire Beijing Haowei. Compared with Liu Qiang, a big man who participated in the research and development of Ark-1, Yu Renrong, who is known as a “senior villain”, is obviously unable to convince the public. Therefore, Zhang Xuezheng came out to strongly oppose, causing the acquisition of Weir to be stranded. After that, with the coordination of Chen Datong, an alumnus who participated in the founding of Spreadtrum, Yu Renrong got his wish.

This gluttonous feast is only the tip of the iceberg of Tsinghua University’s power. Zhang Xuezheng’s “home” has been replaced by another big cake.

Infighting: There is no savior

Sometimes, school is more important than birth, and choice is more important than school.

In 2017, Qualcomm established a joint venture with Datang Telecom and Jianguang Assets, targeting the low-end market where Spreadtrum is located. This caused Zhao Weiguo, who acquired Spreadtrum, to scold the traitor in the circle of friends, and pointed the finger at Li Bin, the actual controller of Jianguang Assets and a Tsinghua alumnus. And Zhang Xuezheng, a man who started his business with Spreadtrum, did not have both sides this time, but firmly joined Li Bin’s camp.

At that time, Jianguang Assets acquired NXP’s divested standard parts business, Nexperia, for $2.75 billion. In many press releases, Anshi is known as China’s only world-class IDM semiconductor company and China’s only automotive-grade automotive electronics semiconductor company. After that, Zhang Xuezheng will buy the company at a sky-high price of 33.8 billion yuan, and alumni Li Bin made a net profit of about 15.7 billion yuan in this transaction.

In 2018, in order to eat An Shi, Zhang Xuezheng introduced Dong Mingzhu and major local SASACs as shareholders. In the bidding in April of that year, Wingtech Group won a 33.66% stake in Anshi at a high price of 11.435 billion yuan, while the market value of Wingtech was only 19.4 billion yuan at this time. Zhang Xuezheng used a variety of methods such as borrowing, pledging, and introducing investors to raise funds.

Yiou.com questioned the technology content of Anshi, and based on the scale of revenue, the average unit price of its products was only 0.12 yuan, which was lower than that of its domestic counterpart, China Resources Micro.

Industry insiders also told the capital detective: Strictly speaking, what Anshi does is not a chip, but NXP’s divestiture of the bottom-end business. But everyone is not Zhou Jintao, who did not expect that 2020 will become the first year of the explosion of new energy vehicles. Relying on Nexperia’s power semiconductors, Wingtech Technology has turned from an OEM factory into an A-share semiconductor giant in one fell swoop.

From the start of the acquisition in 2018 to the completion of the absolute holding of Nexperia in 2020, Wingtech’s stock price has risen from 17.69 yuan to 171.71 yuan, and the highest market value has reached 190 billion yuan. This has also become a game of drumming and spreading the flowers. Investments have replaced borrowings and capital injections with Wingtech stocks in large quantities. Coupled with the constant stimulation of news from the outside world, they have formed a continuous surge.

Data source: Snowball

This acquisition was also publicized with great enthusiasm: “If I break my chip, I will accept your company.” There are also many investors who questioned that there is something tricky, but they all shut up after the ZTE and Huawei incidents.

The fanatical national atmosphere is superimposed on the stimulation of the skyrocketing stock price, and many investors will forget the risks of the semiconductor industry – which requires a lot of capital and talents. According to the third quarterly report of 2020, the total assets of Wingtech are 61.02 billion yuan, the net assets attributable to shareholders of the listed company are 28.721 billion yuan, the book value of the company’s goodwill is 22.697 billion yuan, and the proportion of goodwill in net assets is about 79%. .03%.

Recently, Wingtech has two projects that have come to fruition. One was the 9 billion yuan convertible bonds that sought help from the capital market, and received feedback from the China Securities Regulatory Commission: Wingtech was asked to further explain the high book value of goodwill and the high amount of inventory at the end of the period. This obviously can’t get the capital veteran Zhang Xuezheng. After all, there are 2.2 billion yuan of money raised to repay the bank loan.

The other is the launch of the 12 billion yuan semiconductor factory invested in Lingang, and many big leaders came to stand for Zhang Xuezheng that day. He really has a high sense of smell for the wind of the times, from Huaqiangbei in Shenzhen back then to Lingang in Shanghai today. He started out on a copycat machine, mixed into the Tsinghua alumni circle and made his fortune, and then he became the helm of a 100 billion company relying on semiconductors.

Can a market value of 100 billion yuan support Zhang Xuezheng’s ambition? It seems not. Ge Weidong, a private equity tycoon, is also very optimistic about Wingtech’s stock price. In 2019, he was allocated about 300 million yuan to Wingtech, and the following year, he was allocated 500 million yuan in the fixed increase of Wingtech. The history of Samsung’s counterattack tells a truth: in order to surpass your opponent, you must have the madness and the guts to gamble.

Both of these are clearly visible in Zhang Xuezheng.

The year before last, an investor leaked a Q&A on Wingtech Technology on Snowball. Someone asked: What is the future business direction of Nexperia? Got a crazy answer – TSMC in the analog circuit industry.

Conclusion: Can it become TSMC?

For Wingtech, it is almost impossible to become TSMC, even if the founders are all surnamed Zhang.

TSMC did not become a vassal of American technology due to two factors. The first is the technological breakthrough, the counterattack of the copper process and the breakthrough of the lithography machine. The second is a historical accident. In the war between Samsung and Apple, it sided with the latter, thus moving from a foundry to the top. These two can’t be seen at all in Wingtech.

The first is the third-generation semiconductors that the market has great expectations for. Wingtech did not achieve self-breakthrough, but brought Nexperia’s gallium nitride power devices, but Nexperia is not outstanding globally. In the competition for Tesla’s industrial chain, Wingtech is not an opponent of Infineon. Maybe there will be opportunities after the Shanghai factory is completed. But smart cars are not necessarily a win for Tesla.

Therefore, if you invest in Wingtech Technology for a long time, it is more like a big gamble. In terms of the founder’s character, Zhang Xuezheng, who was born in 1975, is not satisfied with producing power semiconductors for new energy vehicles only. After a breakthrough in technology and a certain right to speak in the industry chain, he is likely to copy the story of the transformation of the “cottage machine” and become an OEM new energy vehicle. His higher dream is to become “TSMC”.

Can Chinese semiconductor manufacturers in the new era win? There is actually only one answer in front of Zhang Xuezheng: you can’t lose, and you can’t lose if you don’t have any bones left.

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