Looking For The "Soul" Of Domestic Chips: Xinyuan Shares From IP Authorization To Complete Service Ecology

[editor's note]

2021 is the first year of the 14th five year plan, which is the 100th anniversary of the founding of the CPC, and is also a key year for the strategy of strengthening the country and independent innovation.

The world is changing so much that it is hard to prevent China from rejuvenating. In such a period of great historical changes and opportunities, the 21st century economic report exclusively planned and launched a series of reports entitled "the road to greatness: Top 100 innovation in big countries" throughout the year. Through screening and reporting the key enterprises and outstanding entrepreneurs in the national strategic industries, it has helped China's magnificent journey to climb new heights.

This issue is the exclusive interview of Xinyuan shares and ZTE, please pay attention.

In the semiconductor industry, the more upstream, the fewer manufacturers. At present, there are not many Chinese enterprises in the upstream field.

According to the statistics of the third-party organization ipnest, among the top ten semiconductor IP authorized service providers (calculated by sales revenue) in 2020, only one enterprise from mainland China (688521. SH), ranking the seventh in the world, has been listed on the science and technology innovation board in 2020.

Dai Weimin, founder, chairman and President of Xinyuan, described the company's business development as a process of "building a house". The business development of Xinyuan starts from the standard unit library of "brick burning", to the provision of "kitchen or toilet" and other functional modules - Semiconductor IP authorization, and then extends to "building houses" - that is, chip design services.

"If we say that in the past 30 years, front-end semiconductor has solved the problem of capex (fixed cost) by manufacturing OEM, and created a number of fabless (chip design) companies; What we are solving today is the OPEX (operating cost) problem. By creating a "light design" model, we can make the design work of chip design companies more lightweight. " Dai Weimin explained to the 21st century economic reporter that Xinyuan's goal is to lead the next era of light design.

Building a good house, the next step of Xinyuan is "soft decoration". In 2020, the company established a new system platform solutions division to embrace the era of software defining everything.

However, Dai Weimin stressed to reporters that Xinyuan's model will not involve specific products. At present, the company's IP licensing business and mass production business have gradually shown scale effect, and other businesses will soon move to the development stage with scale effect.

From "burning bricks" to "building houses"

When it comes to semiconductor IP licensing, arm may be the most famous company. According to ipnest statistics, arm's market share in IP companies will reach 41% in 2020, ranking first.

"The success of arm proves that the business model of IP chip companies is feasible." Dai Weimin analyzed to reporters. However, Xinyuan did not take the same development route as arm, but chose the development mode of semiconductor IP licensing and chip design in parallel. Today, with the increasing complexity of semiconductor design, the chip design business is increasingly contributing to the performance of Xinyuan.

This makes Xinyuan different in a number of IP licensing companies. Dai Weimin said that Xinyuan's choice of IP and chip design is to meet the needs of the industry and promote the long-term development of the enterprise.

"If we compare chip design to building a house, then we start with the basic unit library, which is equivalent to starting from burning bricks, and then gradually developing to IP, similar to building kitchens and living rooms, and then building houses. If there are no bricks, no kitchen and living room, you can't build a house. So the road we chose is to follow the needs of the industry. " He pointed out that when the company developed to a certain stage, there was a strong synergy between IP licensing and one-stop chip customization“ Because sometimes, in addition to the kitchen and living room, customers also want us to help build the house. Customers of the two businesses can be transformed into each other. "

At present, the need for such integration is becoming more and more obvious. Dai Weimin, for example, told 21st century economic reporter that short video is one of the rising tracks in recent years, and many service providers / operators hope to complete their own chip design solutions instead of adopting traditional general solutions. However, the design of video processing and encoding and decoding is very difficult and has great design challenges. Driven by customer demand, Xinyuan participated in the chip design process of customers and provided complete solutions to customers.

"We don't lay out everything, but often it's because customers need an overall solution. If we don't have a part of the solution, the effect will not be good enough." He explained. This is like selling only kitchen, but the whole house also needs complete ecology to achieve a better user experience. From providing IP to providing chip customization services, and then to providing complete system solutions, Xinyuan is also following the trend.

The synergy effect of the two businesses has been very obvious. According to Dai Weimin, in 2020, revenue from multiple business collaboration accounts for about 2 / 3 of the company's overall performance, while that of a single business only accounts for about 1 / 3.

"The difference is that while we are studying IP chips, we are also studying IP. We may see things more comprehensively. It can also help maximize the value of the company's R & D results. " He added to reporters.

This mode is called silicon platform as a service (sipaas). Different from the traditional chip design service company's business model, the core of sipaas mode is the various processor IP, digital analog mixed IP and RF IP owned by Xinyuan.

"The advantage of this mode is that there is no need to sell after delivery, there is no need to go to the site for support, and there is no inventory. It can serve all walks of life. " Dai concluded.

Extending the industrial chain

The real reason why Xinyuan was not so well known to all of us came from its acquisition and merger in the third year after its establishment, which is also one of the reasons why it can be deployed to a more comprehensive industrial link.

"Innovation includes independent innovation and introduction digestion absorption re innovation, but there are not so many original works in the world. Sometimes we have to stand on the shoulders of giants, so M & A is very important." Dai Weimin told reporters.

Behind these mergers and acquisitions, there are not only the first deployment based on the development of the semiconductor industry, but also the consideration of the ecological needs of domestic industries.

Xinyuan, which was founded in 2001, acquired Zhonghua electronics in 2004, and began to have one-stop chip customization service capability; In 2006, Xinyuan acquired ZSP Department of LSI Logic company again, and added IP in DSP (digital signal processing) field, which is the core link of providing baseband chip support for domestic communication equipment manufacturers.

Dai Weimin told reporters that he was considering acquiring Zhonghua electronics because it was the first SOC company in the mainland market at that time. "We later completed the capability upgrade from IP licensing to chip design, and this team played a great role. And until now, the main people of the original team are still in xinhara. "

At that stage, the local market did not fully realize the importance of getting involved in the SOC link, which enabled Xinyuan to acquire Zhonghua's capabilities at a relatively competitive price.

The acquisition of ZSP department is based on the consideration that the core business of LSI Logic at that time was digital signal processor, which was a big market of five digital IP besides CPU and GPU. Moreover, domestic head communication equipment manufacturers need to use these capabilities of LSI Logic company, but ZSP department needs to be sold due to strategic adjustment, which attracts the attention of the industry.

"The acquisition of the ZSP Division also played an important role in our upgrading from bricks to kitchens." Dai Weimin analyzed that the competition at that time was very fierce. With the support of investors, Xinyuan successfully won this part of the business, which also caused more international investment institutions to pay attention to Xinyuan.

"This does not mean that the company is blindly thinking about becoming bigger, but is related to the company's own ability to constantly upgrade." "Today, the company has chosen to set up a new business unit (system platform solutions division), which is based on the same logic," Dai explained

"Today is the era when software defines everything. Software can define chips, define architectures, etc. So after building the house to do software, that is, software, is a very natural process According to Dai Weimin, doing IP requires software services, and chip designers are less involved in software. However, if the IP licensing company has no common language with the system company and cloud company, it can not promote the work.

This can also be seen from the composition of the company's customers. According to reports, in 2020, 1 / 3 of Xinyuan's downstream customers come from system manufacturers, Internet companies and cloud service providers, rather than chip design companies. Moreover, the volume of the former is still growing, which means that the requirements for the company's software capability are higher and higher.

"The core competitiveness of the industry is changing, and now the competitiveness may focus on software and architecture. That's why chip companies are starting to swim up the river. The demand of downstream industries such as Internet companies is also changing. From using third-party universal chips to customized chips, the role of Xinyuan is also changing accordingly. " Dai Weimin told the 21st century economic report that once we become a partner of downstream system manufacturers who need customized chips, we will get stronger customer stickiness. Xinyuan needs to be more closely connected with downstream industrial links, such as from chip companies to system companies, Internet and short video companies; At the same time, Internet companies increasingly need customized services from upstream. This is the reason why Xinyuan has chosen to continue to extend its industrial chain capability in view of the great changes in the industry structure.

Explore chiplet

With the development of semiconductor manufacturing process, Moore's law has gradually moved to a stage where it can not continue to support the original iteration speed. It is the next step for all industry chain companies to solve the process problems.

Therefore, chiplet has become the focal point of breakthrough in various industrial chain links. According to Dai Weimin, in fact, all architectures will face development bottlenecks at a certain stage. The reason is that some traditional components are not out of date, but the cost of other components with high requirements on process is increasing. Is it possible to no longer require all components to be matched in one process?

The industry believes that AMD has been able to catch up with Intel in the manufacturing process, to a certain extent, because the former took the lead in realizing the landing of chiplet.

"When people who originally made big chips began to advocate small chips, it was a very important signal, similar to a preview. We found that we can package chips with different processes, such as 12NM and 5nm, into a single chip. For example, GPU and CPU are manufactured by 5nm process, and other parts are manufactured by 12NM process. The implementation of chiplet provides a new development idea for the industry Dai explained.

He has repeatedly stressed that chiplet can help the downstream electronic industry chain to iterate more efficiently. For example, considering the threshold of vehicle regulation certification, automotive electronics does not want to replace the components every year. When there is a function that needs to be iterated, the chiplet method can be used to increase or decrease the configuration more flexibly.

Especially for the semiconductor industry in mainland China, the promotion of chiplet application will be of great benefit. At present, the industrial chain in mainland China can not adopt the most advanced process technology, but when the technological capability of packaging industry is close to that of mainstream echelon, chiplet will also better promote the evolution of domestic semiconductor industry.

"Chiplet has proved that it can be done, and it is not very difficult. The reason is that chiplet needs a unified interface standard. Docking between different Chiplets takes time, but this is not a technical problem. Because this development trend has become the industry consensus, Xinyuan has begun to invest in the layout of chiplet. " Dai Weimin pointed out.

Dai Weimin told the 21st century economic report that on the whole, some businesses of Xinyuan have shown scale effect. The company's annual revenue in 2020 will reach 1.506 billion yuan, of which, the revenue from intellectual property licensing fees will increase by 46.94%; Chip production revenue also increased by 22.49%.

"In recent years, with the improvement of capacity, the advanced technology of Xinyuan's business and the increase of the proportion of large customers, it should be said that the improvement of mass production of products will be better, and it can be predicted that some businesses of mass production will grow faster." He stressed that the gross profit margin of the one-stop chip service business looks low, but because in the process of providing one-stop chip customization service, Xinyuan was entrusted by customers to carry out chip design in the early stage, so it could obtain corresponding income, cover the cost of chip design, and complete the production management work at the stage of mass production according to the number of customer orders in the later stage, and did not directly face the product terminal market, There is no need to sell chip products, no inventory risk, and no terminal technical support. Therefore, the gross profit generated by Xinyuan's chip mass production service can contribute to the net profit to a greater extent. When the scale of chip mass production service continues to grow, it can reflect the scale advantage of Xinyuan business model. Therefore, there is no need to worry about whether Xinyuan must rely solely on high margin IP licensing business to grow healthily.

When the platform company develops to a certain stage, it needs to start to compete with the scale effect. After the effect is obvious, the competition barrier is raised and the cost is reduced, and it is difficult for the latecomers to compete with it. And xinhara has been on this stage of the road.