A radio frequency switch disturbed a pool of spring water.
With a small radio frequency switch, Zhuosheng Micro has a market value of 150 billion yuan, a gross profit of more than 50%, and annual sales exceeding 5 billion yuan. These figures are so impactful and incredible to the domestic chip industry and capital market.As a result, more and more companies are joining the RF switch track, and more and more people are dreaming of becoming the second Zhuoshengwei.As the old saying goes: There are specializations in the field of study, and there are priorities for admission. It is also the best comment on RF switch chips. I write this article to express my personal opinion. Domestic RF switches, after Zhuo Shengwei, there will be no second child. Maybe one day, Chun Meng will feel alarmed and respond as if it were the past.Looking at RF switches from the perspective of chip technology, supply chain and customersIt is not difficult to make RF switches, but it is difficult to make the performance of RF switches bigger. It is even more difficult to make a company profitable through RF switches. The answer is from three aspects:1. RF switch chip technologyBack in 2014, radio frequency switches were still a high-end product, and there were very few domestic R&D personnel who could do it, let alone do it well.By 2020, RF switches have become a regular chip product, and many domestic RF engineers can make them, and they do them very well. If anyone compares domestic RF switches with Skyworks and Qorvo, then this person must be an outsider. The comparison should be with Zhuo Shengwei.Zhuo Shengwei not only achieves the best performance, but also achieves the ultimate cost. When making RF switches in China, the best reference is Zhuosheng Micro. If it cannot achieve the performance and DIE area of Zhuosheng Micro RF switches, it is recommended not to do it again, which is a waste of resources.You don't need a few people to make a radio frequency switch. One or two radio frequency R&D engineers are enough. You don't need much money, tens of millions are enough. It is useless to pile up people and money, but it is useful to find the right RF R&D engineers and product managers.When a mobile phone PA company makes RF switches, its technology, R&D personnel, supply chain and customers are all incidental. Just like Sanwuwei, a WiFi FEM company, it also makes RF switches easily. R&D personnel can design discrete switches when they are free, and wafers are cast together when the wafer is cast. If the product is competitive and there is customer demand, mass production will be decided, and it will cost almost nothing.The WiFi switch and the 5G mobile phone RF switch are very similar in performance indicators. Once the PIN pin is changed, it can become a 5G mobile phone RF switch. It is easy to make, but it is not easy to make RF switches in large quantities and make money. Through product analysis and market research, Sanwu Micro has certain technical advantages in making 5G mobile phone RF switches. It can reduce the DIE area by 30% while improving performance (refer to Zhuosheng Micro), so Sanwu Micro is preparing to make a 5G mobile phone RF switch to impact the market.When there is no threshold for technology, the supply chain becomes the core competitiveness.There are not many technical upgrades and iterations for RF switches. The most work is to reduce the DIE area, which is also the advantage of Chinese companies. Without innovative thinking, it will be difficult for new entrants to find opportunities.Radio frequency switches have become an operational product. The unit price of widely distributed products is between 1.5 and 4 cents, and a very large volume is required to support sales. The cost of wafers accounts for a small part, and the cost of packaging and testing is the bulk. Without quantity, there is no bargaining power.Zhuosheng Micro has the lowest cost in the entire supply chain. The SOI wafer volume is large and the cost is the lowest. The packaging and testing end purchases and deploys a large number of machines by itself, and the cost is also the lowest.Next is the mobile phone PA company, which consumes a large amount of SOI wafers in the module to make switches and LNAs. The wafer price is also competitive, estimated to be second only to Zhuosheng Micro. In the packaging and testing factory, the PA company is also a big customer, and the packaging and testing price of switches should be good. Overall, the cost is at least 10~20% higher than Zhuosheng slightly.Judging from the current shipments of other domestic RF switches on the market, the overall cost of the supply chain is at least 20~30% higher than that of Zhuosheng Micro.Large customers are a very important threshold for RF switches. The more brand-name customers, the higher the price, followed by several major mobile phone design companies, and the most cost-sensitive is the module company. More than 95% of the demand for radio frequency switches is concentrated among mobile phone customers.Zhuo Shengwei has become the main supplier of RF switches for all major mobile phone customers except Apple mobile phones. In 5 years, no other company will be able to do this. Zhuoshengwei has become the number one supplier for these customers due to the right time, place and people. As the first supplier, the client supply ratio is generally between 50% and 80%.All customers know that Zhuoshengwei's gross profit is very high. Why don't the customer purchasers slash the price of Zhuoshengwei? Zhuosheng Micro's RF switch gross profit should have reached its peak. Production capacity is in short supply this year, and the customer's main job is to ensure delivery and production. Once production capacity is no longer tight, prices will still be suppressed. But if Zhuoshengwei's gross profit drops from 50% to 30%, other companies will basically have no gross profit. Therefore, Zhuo Shengwei's gross profit will still be maintained at around 40% for a period of time.Looking at RF switches from product classification and market demandRF switch products can be divided into three categories: discrete switches, antenna tuners, and switch modulesHow big is the market size of radio frequency switches? The information given by some market research institutions and online often gives people wrong perceptions. For example, the picture below:According to the figure above, RF switches will have a market size of more than 2 billion U.S. dollars in 2020. The Chinese market has at least 50% of the market share. It seems that Zhuoshengwei accounts for up to 40% of the market share. Other domestic switch manufacturers combined are less than one-fifth of Zhuoshengwei. So where are the other half of the RF switches? In fact, it is in the mobile phone PA module, and there will be more and more switches integrated in the mobile phone PA module.Looking at RF switches from the perspective of mobile phone models, mobile smartphones need to continuously increase the number of RF switches to meet the needs for signal reception and transmission in different frequency bands. As the number of 5G frequency bands increases and the penetration of metal casings increases, the demand for stand-alone RF switches increases. The demand for stand-alone RF switches increases. It is expected that the number of stand-alone 5G mobile phones will reach 12-18, and the use of stand-alone phones will double. The picture below is from the Internet:
As can be seen in the figure above, from 2G to 5G, the usage of radio frequency switches has increased significantly. The number of these switches includes the switches in the mobile phone PA module and the receiving module. From 4G to 5G, the number of discrete switches has not increased so significantly. In the 2G and 3G era, discrete switches were basically not used, and Zhuo Shengwei also came up with 4G mobile phones.2021 may be the peak of market demand for discrete switches, and PA modules and receiving modules will integrate more switches. It is learned from the market that a new 5G mobile phone PA module will integrate four more discrete switches. These four discrete switches were originally hung outside. This new 5G mobile phone PA module will be launched at the end of the year.The demand for receiving modules will continue to increase, but the difficulty of module design integrating switches, LNAs, and filters will increase, and the requirements for company size and investment will also increase. Zhuoshengwei is the largest receiving module supplier in China, followed by mobile phone PA companies. From several 5G disassembly reports, we can see that mobile phone PA companies not only provide PA modules, but also provide receiving modules.From the perspective of technology, supply chain and customer resources, apart from Zhuo Shengwei, no domestic manufacturer can compete with PA Mobile Phone Company. Other RF switch companies can make discrete switches, but once they make receiving modules, the technical, supply chain and customer thresholds will be higher.Therefore, when making RF switches, you must not only look at Zhuo Shengwei, but also the mobile phone PA company. Nowadays, mobile phone PA companies’ discrete radio frequency switches and receiving modules are getting better and better.Looking at RF switches from the perspective of Zhuosheng Micro’s product layout and response capabilitiesIn the first half of 2021, Zhuoshengwei achieved revenue of 2.359 billion yuan, a year-on-year increase of 136.48%, and net profit attributable to the parent company was 1.014 billion yuan, a year-on-year increase of 187.37%.In the first half of the year, Zhuosheng Micro Discrete Devices maintained a stable growth rate, achieving revenue of 1.661 billion yuan, a year-on-year increase of 70.57%, and an increase of 11.57% compared with the second half of last year. This rapid growth was brought about by the 5G mobile phone switch. The radio frequency receiving module business was the main driver of high revenue growth in the first half of the year. Radio frequency receiving modules began to be sold in the second half of 2020, mainly from the receiving end LFEM.At the same time, Zhuosheng Micro continues to enrich the receiving module products suitable for 5G NR. The transmitter has launched the main module L-PAMiF in the 5G NR frequency band. Market clients have already had some comments on the product.In order to maintain growth in the discrete device market, Zhuosheng Micro has built its own production lines and improved its modular product layout:(1) Zhuosheng Micro continues to promote product iterations of discrete devices based on market demand, while continuing to optimize product manufacturing costs. In the chip design process, we design cost-optimized products based on demand. In the chip manufacturing and packaging and testing processes, we establish long-term and stable cooperative relationships with suppliers, negotiate to lock in production capacity, participate in the research and development of key processes and technologies, and at the same time purchase key equipment ourselves to improve product yields.(2) In order to deal with the low domestic production rate of filters in RF modules, the company signed a strategic cooperation with the Wuxi Liyuan Economic Development Zone Management Committee to jointly build a semiconductor industrial production base for the construction of filter and RF module packaging and testing production lines. The initial total investment was 800 million yuan in November 2020, and an additional 2.7 billion yuan was invested in March 2021. As of June this year, the main structure of the construction project has been successfully capped and is planned to be put into use before the end of the year.In fact, Zhuosheng Micro's RF switch performance began to grow rapidly in 2017. Before 2015, RDA, Feixiang Technology, and Weijie Chuangxin all provided RF switch products. To this day, the RF switch products of these companies are still promoted in the market. There is little growth in the RF discrete switch business, and clients are gradually marginalized, leaving Zhuoshengwei alone as the dominant player.
As of today, there are more than 15 domestic RF switch manufacturers. According to market information, except for Zhuosheng Micro, there is no company with annual sales of discrete switches exceeding 100 million yuan. For example, Xiaomi, domestic RF switch suppliers include Zhuoshengwei, Onruiwei, Weijiechuangxin, Awinic, Weir and other manufacturers. Except for Zhuoshengwei, the others have a very small share. With the reduction of discrete switches and lower prices, it will be difficult for any company to achieve RMB 100 million in RF switches in the future. On the one hand, Zhuosheng Micro will not give such an opportunity. On the other hand, the strategy of major customers to use Zhuosheng Micro as the first supplier will not change. The remaining part will be divided among more than 10 companies, and no one can take the majority.It is difficult to beat the market and even harder to defend the market. Zhuosheng Micro will maintain its market share in radio frequency switches and guard against the emergence of second-tier players. It will continue to work hard on technology research and development, supply chain optimization, and customer relations.Zhuosheng has a complete range of micro RF switches/LNAs and receiving FEMs, a guaranteed supply chain, and strong customer relationships. Without a price war, it will be difficult for other companies to have big opportunities. If there is a price war, only mobile phone PA companies have this ability. However, mobile phone PA companies have to go public and will not invest a lot of resources in RF switches and reduce profits, let alone lose money. Awinic and Weill are listed companies and need to pursue reasonable profits. The cost gap between other RF switch start-up companies is too big. Even if Zhuoshengwei maintains a profit of more than 50%, there is no profit margin. If Zhuoshengwei's price drops, they will face losses. There is no chance of spending money to make radio frequency switches.Since I started making radio frequency switches in 2015, I have experienced, seen and understood them. With the existence of Zhuoshengwei, radio frequency switches can only be used as additional products and as a product line of the company; if you start a business with radio frequency switches as the main product, the result is doomed. Similarly, if you start a business using radio frequency receiving modules as your main product, it can only be a wrong decision.Because of the domestically produced radio frequency switches, there is no second person after Zhuo Shengwei.
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