In the dynamic landscape of the global semiconductor industry, March 29 witnessed a remarkable uplift in the semiconductor sector in China, signaling a wave of optimism and potential that is hard to ignoreHuagong Information Technology Co., a significant player in the domestic semiconductor equipment market, surged 20% to reach its daily trading limit, illustrating a broader trend where companies such as Chipone Technology, Zhongwei Company, Changchuan Technology, Huahai Qinke, Shenkong Co., Tuojing Technology, and Huafeng Meikong also experienced significant stock price increasesThis surge reflects not just company-specific successes but hints at an overall revitalization of interest and investment in the semiconductor domain.

Among these, Northern Huachuang stands out as a towering giant in the domestic semiconductor equipment landscape, with its market value eclipsing 140 billion yuan, translating to over 140 billion U.S. dollarsIts growth trajectory has caught the attention of investors and analysts alike, as the company boasts an impressive portfolio exclusively built through 100% self-developed technologyThis unique position allows it to manufacture a wide range of essential devices used in semiconductor manufacturing, including PVD (Physical Vapor Deposition), CVD (Chemical Vapor Deposition), etching machines, ALD (Atomic Layer Deposition), oxidation furnaces, and annealing furnaces.

Northern Huachuang's client roster reads like a who's who of the semiconductor industry, featuring prominent firms such as Taiwan Semiconductor Manufacturing Company (TSMC), Yangtze Memory Technologies Co., Ltd., Hua Hong Group, Longi Green Energy Technology Co., and Sanan OptoelectronicsTheir rapid growth is evident—revenue jumped from approximately 4.06 billion yuan in 2019 to nearly 9.68 billion yuan in 2021, complemented by a substantial uptick in net profits over the same period.

Recent projections from the company indicate that for 2022, Northern Huachuang expects to achieve revenue between 13.5 billion to 15.6 billion yuan, representing an impressive year-on-year growth of 39.41% to 61.10%. Additionally, net profits are anticipated to soar to between 2.1 billion to 2.6 billion yuan, yielding a year-over-year growth exceeding 94.91% and potentially touching 141.32% when excluding non-recurring items

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Such substantial figures denote not only the strength of the company but also the unfolding narrative of an empowered domestic semiconductor ecosystem.

The significance of semiconductor equipment in the entire semiconductor supply chain cannot be overstatedOperating at the upstream core of production, it serves as vital support for chip manufacturingStatistics reveal that, as of 2019, global semiconductor equipment market value surpassed 400 billion U.S. dollars, with the mainland Chinese market accounting for around 100 billion dollars—a figure that continues to grow steadily year on yearAmong various equipment categories, photolithography, etching, and deposition machines collectively account for roughly 75% of total wafer fabrication costs, underscoring their indispensable roles in the chipmaking process.

Photolithography machines, in particular, are essential since their precision determines the characteristics of the chips producedHowever, it's important to recognize that high-end photolithography technology remains largely under the control of foreign companies, creating a noteworthy gap that Northern Huachuang has yet to fillWhile the company has made significant strides in etching and deposition, the lack of penetration into the photolithography segment remains a blind spot in its product offerings.

Looking closely at the thin film deposition segment, both Northern Huachuang and Tuojing Technology are recognized as the front-runners in this areaNorthern Huachuang has successfully achieved important technological breakthroughs, notably in the 28nm and 14nm processes, with its equipment spanning PVD, CVD, and ALD technologiesFor example, in the realm of PVD, Northern Huachuang has developed tools capable of high-quality thin film deposition, meeting various manufacturing requirements of chipsAdditionally, in CVD, their machines excel in process control, permitting high-precision thin film development

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The advances in ALD are particularly exciting, allowing for atomic-level precision in layer growth which supports the fabrications of high-performance chips.

Despite these achievements, the company faces criticism for its perceived position of being substantial yet lacking in competitive prowess, described as "big but not strong" by industry observersIn the etching machine sector, for instance, Lam Research holds more than 50% of the global market share, marking it as the unquestioned leader in this fieldThe next tier of competitors includes Applied Materials, which captures around 30% of the market, while companies like Hitachi High-Technologies, TEL, Zhongwei Company, and Northern Huachuang collectively account for just over 20% in the lower tier.

However, against the backdrop of national policies favoring domestic replacements, Northern Huachuang's prospects appear brightThe company stands to benefit from the governments’ push for self-reliance in semiconductor productionBy 2025, policies advocate for ensuring that 70% of core semiconductor components and critical materials are produced domesticallyThis represents a significant leap from last year's figure of under 30%, illustrating a vast landscape for growth.

If domestic firms succeed in making the requisite technological advancements, the influx of orders could be practically guaranteedNotably, rather than focusing solely on substitutive markets, the burgeoning growth cycle for new chips should also garner significant attentionRecent industry statistics indicate that 70%-80% of capital expenditures from fabs are allocated for purchasing equipment, suggesting a particular expansion potential in orders for semiconductor equipment firms, including Northern Huachuang, as the demand grows.

Overall, the current state of the domestic semiconductor equipment industry shows great promise

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