Core ideas:

Power semiconductors are expected to usher in a high boom cycle in 2021. In 2018, driven by the rapid growth of demand for electric vehicles and the demand for other chips that occupied 8-inch production capacity, power semiconductors experienced a round of shortages and price increases; in 2019, affected by the decline of smartphones, the decline of traditional cars, and the steady development of electric vehicles, power semiconductors performed flatly; in 2020, affected by the epidemic, the demand for power semiconductors was not good in the first half of the year, but after the third quarter, it was affected by 5G power supply, smartphones, industry, electric vehicles and IOT Driven by equipment, etc., demand has increased significantly. The overseas epidemic has affected the production capacity supply of foreign manufacturers, and some products have experienced shortages and price increases. We judge that driven by multiple demands, power semiconductors will usher in a high boom cycle in 2021.

Industry perspective

In 2021, demand growth + price increase + domestic substitution will bring good development opportunities for power semiconductors: Affected by the global new crown epidemic, global power semiconductors will decline in 2020. QYResearch predicts a year-on-year decline of 9.1% in 2020. It is expected to grow by 8.1% year-on-year in 2021, driven by the demand for 5G mobile phones, electric vehicles and IOT. In Q4 of 2020, the delivery time of ON Semiconductor power semiconductor products from Infineon, STMicroelectronics, and Diodes was generally extended. The price increase trend of some MOSFET products was obvious, especially Infineon. Domestic brands also experienced shortages and price increases. MOSFET prices generally increased by 10-20%. In 2019, China has developed into the world's largest power semiconductor market, accounting for 35.9% of the world. However, the self-sufficiency rate is low. Taking IGBT as an example, the self-sufficiency rate in 2019 was only 16.3%. We believe that in 2021, power semiconductors will usher in good development opportunities driven by demand growth + price increases + domestic substitution, and the industry chain will actively benefit.

New energy vehicles are booming and the demand for IGBTs is growing rapidly. New energy vehicles are entering a period of rapid growth. In November 2020, the production and sales of new energy vehicles were 198,000 and 200,000 respectively, representing year-on-year increases of 75.1% and 104.9% respectively. It is predicted that the global number of new energy vehicles is expected to reach 11 million in 2025, with China accounting for 50%. New energy vehicles require a large number of new power semiconductors. A 48V mild hybrid vehicle requires an increase of more than US$90, and an electric vehicle or hybrid requires an increase of more than US$330. It is expected that the compound annual growth rate of automotive IGBT modules will reach 23.5% from 2018 to 2023. Automotive power semiconductors are difficult and highly concentrated, with European and American manufacturers occupying the core advantage. In 2019, the world's largest company was Infineon, with a market share of 25.5%, and the second largest company was STMicroelectronics, with a market share of 13.9%. The top five companies accounted for 62.1% in total, indicating a high degree of concentration. Chinese companies have a weak foundation in the field of automotive power semiconductors, but China's electric vehicles have developed rapidly in recent years, which has also driven the development of the IGBT industry. Infineon ranked first in China's new energy vehicle IGBT field in 2019, accounting for 49.3%, followed by BYD, which mainly supplies its own products, accounting for 20%, and Star Semiconductor ranked third, with a market share of 16.6% and rapid growth.

The performance of third-generation semiconductors is excellent and demand is increasing. SiC is mainly used in white goods, new energy (electric vehicles, wind power, photovoltaics), and industrial applications. It is predicted that the market size of silicon carbide power devices will exceed US$10 billion in 2027. In terms of automotive applications, SiC MOSFETs are clearly superior in terms of performance, which can reduce losses and reduce module volume and weight. Model 3 was the first to use SiC MOSFET, ushering in the use of SiC in electric vehicles. In 2020, BYD Han also used SiC modules, which effectively improved acceleration performance, power and endurance. The Toyota fuel cell vehicle Mirai model is equipped with SiC, reducing the volume of the power module by 30% and reducing the loss by 70%. We believe that with the decline in costs and the gradual maturity of technology, SiC has good application space in electric vehicles.

Key enterprises: Star Semiconductor, Hua Hong Semiconductor, China Resources Micro, Silan Micro, and New Clean Energy.

Risk warning: The development of electric vehicles does not meet expectations, the sales of smartphones do not meet expectations, and the progress of 5G is lower than expected.

1. Wide range of applications and steady development of the power semiconductor industry

1.1 The average annual growth rate of global power semiconductors from 2019 to 2025 is expected to be 4.3%

Power semiconductors are widely used in various electronic products. The power semiconductor market size in 2019 was US$17.5 billion. Yole predicts that the market size is expected to be US$22.5 billion in 2025, and the average annual growth rate from 2019 to 2025 is expected to be 4.3%.

The overall average annual growth rate of IGBT modules from 2019 to 2025 is 18%. Benefiting from the rapid development of new energy (electric vehicles, wind power and photovoltaics) and industrial control industries, it is predicted that the overall IGBT module will reach US$5.4 billion in 2025, accounting for 24% of the entire power semiconductor market.

The automotive field accounts for the largest proportion, followed by motors. In 2019, the automotive direction (including EV, HEV, silicon MOSFET) was US$1.5 billion, the motor drive (Motor Drive, IGBT module) was US$1.4 billion, the smartphone and wireless equipment (silicon MOSFET) was US$1.3 billion, the computer technology (Computing) and storage (silicon MOSFET) was US$1.2 billion, the industrial direction (silicon MOSFET) was US$1.1 billion, and the EV and HEV direction (IGBT Modules) is US$600 million (others are US$10.4 billion. Judging from the proportion (amount) of various components in the power semiconductor market, silicon MOSFET accounts for 45%. Another major component is IGBT module, with a market size of US$3.7 billion in 2019. Applications in industry, energy regeneration inverters, EV, and HEV have attracted much attention (especially EV and HEV as the latest application direction).

? Rapid growth of automotive SiC MOSFETs. Due to the demand from car manufacturers such as Tesla in the United States and BYD in China, silicon modules are gradually replacing IGBT modules as the main inverter. It is predicted that the SiC MOSFET market will also grow due to the growth of EVs and HEVs. SiC discrete transistors will compete with MOSFETs in the future as efficient on-board charger systems.

1.2 China’s power semiconductor market ranks first in the world, and domestic leading companies are developing rapidly

In 2019, China's power semiconductor market accounted for 35.9% of the global market: China is the world's largest consumer of power devices, and the major products in the power device segment all rank first in China's market share.

The global market share of domestic leaders is still very low, and there is a clear gap with international giants: similar to the entire semiconductor industry, compared with overseas power device IDM manufacturers, the annual sales of domestic leading power device companies (China Resources Micro, Star Semiconductor, New Clean Energy, Yangjie Technology, China Microelectronics, Silan Micro, etc.) are very different from those of international giants, and the product structure is low-end, indicating the market size of China's power devices There is a serious mismatch between the model and the autonomy rate, and there is huge room for domestic substitution. At present, China's power semiconductor industry is developing rapidly. Wingtech Technology acquired Nexperia, and a number of power semiconductor companies such as Star Semiconductor, China Resources Micro, and New Clean Energy have been listed one after another and are growing.

2. Driven by demand, power semiconductors will usher in a high boom cycle in 2021

2.1 The delivery time of major international power semiconductor manufacturers is extended

In Q4 of 2020, the delivery time of Infineon's MOSFET, IGBT and other products has generally been extended, with the longest delivery time being as high as 30 weeks. Among them, the prices of low-voltage and high-voltage MOSFETs and military aviation transistors are on the rise. STMicroelectronics' power semiconductor product delivery times have shown a trend of overall extension, and prices have remained stable.

In Q4 of 2020, the delivery time of Diodes' MOSFET and transistor products was extended, with the longest delivery cycle reaching 20 weeks, and the price of low-voltage MOSFETs has an upward trend. The delivery time of ON Semiconductor's power series products has been extended, and the prices of high and low voltage MOSFET products have shown an upward trend.

2.2 The price increase trend of power semiconductor MOSFET is obvious

MOSFET price increases range from 10-20%. According to industry chain research information, from November to December 2020, overseas brands were out of stock, especially Infineon. Domestic brands also experienced shortages and price increases. MOSFET prices on the market generally rose by 10-20%.

China is a country with a large demand for MOSFETs, but it is highly dependent on imports. According to IHS data, the global MOSFET market size was US$7.6 billion in 2019, with the domestic market accounting for 39%. From the perspective of the MOSFET market structure, Infineon, ON Semiconductor, Toshiba, ST and Renesas together account for 61% of the domestic market share. Major international manufacturers are experiencing insufficient supply and obvious shortages.

Demand surged, and insufficient 8-inch production capacity caused shortages and price increases. The electrification of automobiles has brought huge increases to MOSFETs. The demand for energy conservation and environmental protection in downstream electronic devices has not only driven the growth of its demand, but also led to the rapid upgrade of the product structure. The beginning of the 5G commercialization process has driven the demand for MOSFETs to increase exponentially. In the fields of charging pile power supply and 5G communication power supply, demand is forecast to grow by 20-30% this year. The pent-up demand in the first half of the year for computers, home appliances, and fast charging has gradually been released. From the supply side, MOSFET mainly relies on 8-inch and 6-inch wafer foundry, with 12-inch and below accounting for more than 80%. According to industry chain research information, the 8-inch production capacity of major wafer foundries is currently full. For example, the capacity utilization rates of domestic 8-inch foundries such as Huahong and China Resources Micro are close to full capacity, and UMC's 8-inch wafer foundry capacity will be fully loaded until the second half of 2021.

Diodes (U.S. and Taiwan) will begin to increase prices on some products starting from January 1, 2021. Diodes (U.S. and Taiwan) stated in a price increase notice to customers that due to the impact of the COVID-19 epidemic, the company is facing challenges from increased costs and extended delivery times from suppliers. In view of this, it will increase the prices of some products starting from January 1, 2021.

Silan Micro SGT MOS products increased by 20%. On December 9, Hangzhou Silan Microelectronics stated that due to the rising prices of MOS wafers and packaging materials, as well as the impact of production capacity, the cost of our company's related products continues to rise. In order to ensure the supply of products and maintain good business relationships, the company has carefully studied and decided that from now on (December 9, 2020), the price of our SGT MOS products will increase by 20% this month.

Xinjie Energy will increase the prices of some products starting from January 1, 2021. On December 21, 2020, Wuxi New Clean Energy also issued a price adjustment notice to customers. The notice stated that due to the continued increase in upstream raw material and packaging costs, tight production capacity, and extended production cycles, product costs have increased significantly, and the original price is difficult to meet supply needs.

Power semiconductors are expected to usher in a high boom cycle in 2021. In 2018, driven by the rapid growth in demand for electric vehicles and the demand for other chips that occupied 8-inch production capacity, power semiconductors experienced a round of shortages and price increases; in 2019, affected by the decline of smartphones, the decline of traditional cars, and the steady development of electric vehicles, power semiconductors performed flatly; in 2020, affected by the epidemic, the demand for power semiconductors was not good in the first half of the year, but after the third quarter, it was affected by 5G power supplies, smartphones, fast charging, industry, electric vehicles, and Driven by IoT equipment, etc., demand has increased significantly, and some products have experienced shortages and price increases. We judge that power semiconductors will usher in a high boom cycle in 2021.

3. Strong demand for electric vehicles + driven by demand in multiple fields + domestic substitution, IGBT has a promising future

3.1 IGBT - the crown jewel of power devices, CPUs in power electronic devices and systems

IGBT is an integrated power semiconductor device with complex working principle. Structurally, IGBT integrates almost all basic structures of semiconductor devices, such as diodes, BJTs, junction field effect transistors JFETs, MOSFETs, and SCRs. Changes in the structural parameters of IGBT will cause corresponding changes in its performance. In terms of process technology, IGBT uses MOS integrated circuit technology for large-area power integration. The design shows that the unit cell size is reduced. The more cells integrated in parallel, the on-state voltage drop (conduction loss) gradually decreases.

IGBT technology has been invented for more than 30 years and has mainly gone through 6 generations of technology and process improvements. Structurally speaking, IGBT can be divided into vertical structure, IGBT gate structure, and silicon wafer processing technology. The main development trend is to reduce losses.

IGBT is suitable for high-voltage fields: IGBT is a composite power semiconductor device composed of BJT and MOSFET. It not only has the advantages of MOSFET's high switching speed, high input impedance, small control power, simple drive circuit, and small switching loss, but also has the advantages of BJT's low on-voltage, large on-state current, and small loss. It is unmatched by other power devices in terms of high voltage, large current, and high speed. Therefore, It is an ideal switching device in the field of power electronics and is the main direction of future application development. The stability of IGBT is slightly worse than that of MOSFET and stronger than that of BJT. However, the withstand voltage of IGBT is easier to make higher than that of MOSFET, and it is not easy to fail due to secondary breakdown, making it suitable for high-voltage applications.

As a core device in the field of industrial control and automation, IGBT modules are widely used in many fields such as motor energy saving, rail transportation, smart grid, aerospace, household appliances, automotive electronics, new energy power generation, new energy vehicles, etc. With the development of new energy vehicles and the popularity of variable frequency white appliances, the IGBT market continues to heat up. It not only improves the automation level and control accuracy of equipment in industrial applications, but also greatly improves the application efficiency of electrical energy, while reducing product volume and weight and saving materials.

IGBT has strong advantages above 600V and can currently be applied to 6500V high voltage. In the high-voltage field, SiC MOSFET is a competitor of IGBT, but the cost is still high.

With the continuous upgrading of applications, new requirements have been put forward for IGBT chips and modules. The chips are required to reduce the area and achieve fast switching. IGBTs are required to carry higher voltage and current, and have low loss and high reliability.

Automotive-grade power modules require higher electrical operation reliability, higher lifespan, better energy saving, strong anti-interference, light weight, compactness, etc.

In order to cope with various application needs, power module packaging technology is also constantly developing, mainly including new technologies for Si devices, reducing thermal resistance, new chip welding methods, double-sided heat dissipation, improving integration, etc.

3.2 New energy vehicles are the main driving force for the growth of IGBT modules

The value of power semiconductors for new energy vehicles has increased significantly: the value of new power devices mainly comes from the "three power" systems of automobiles, including power control, electric drive and battery systems. In the power control unit, IGBT or SiC modules convert high-voltage direct current into alternating current that drives the three-phase motor; in on-board chargers AC/DC and DC/DC converters, IGBT or SiC, MOS, and SBD single tubes are used; in high-voltage auxiliary controllers such as electric power steering, water pumps, oil pumps, PTC, and air conditioning compressors, IGBT single tubes or modules are used; in ISG start-stop systems, electric vehicles MOS single tubes are used in low-voltage controllers such as window wipers.

? (1) Electric speed control system: There are two main forms of power devices in the new energy vehicle motor speed control system: choppers for DC motors and inverters for AC motors. (1) Chopper: For DC motor speed control systems, choppers are generally used. The power circuit is relatively simple and the efficiency is relatively high. With the development of power devices, the frequency of the chopper can reach several thousand hertz, so it is very suitable for DC traction speed regulation. New energy vehicles are driven by DC motors. Whether they are series motors or separately excited motors, choppers are used as power converters. The power devices of choppers mostly use MOSFETs and BJTs. (2) In the DC/DC conversion mode of the inverter, there are generally two methods: DC chopper plus inverter and DC/DA inverter. Since the power supply voltage of new energy vehicles is low, if the former method is used, there will be too many energy transmission links, which will reduce the efficiency of the entire system. The use of PWM voltage inverter has simple circuit, few links and high efficiency. In addition, resonant DC link converters and high-frequency resonant AC link converters have now appeared. Due to the use of zero-voltage or zero-current switching technology, the resonant converter has the advantages of small switching loss, small electromagnetic interference, low noise, high power density and high reliability.

? (2) Energy converter: The main component of the energy converter of new energy vehicles is the power device. Currently commonly used power devices include CTO, BJT, MOSFET, IGBT, SITSITH, and MCT. Among them, CTO and MCT have high switching speed, high energy transmission capability, superior dynamic characteristics, and high reliability. They are very suitable for driving electric vehicles. At the same time, power devices can affect the structure of the energy converter. DC-DC and DC-AC converters are used in DC motors and AC motors respectively.

(3) On-board charging device: The development of on-board chargers is a necessary condition for the development of new energy vehicles, because it can effectively supplement the power from the AC grid into the battery of each electric vehicle. The function of the charger is to convert alternating current into direct current, which requires the use of power devices such as IGBTs. New energy vehicles have put forward new requirements for these power devices. They not only require constant current and constant voltage two-stage charging, but also require high efficiency, lightweight, multiple protection functions such as self-checking and automatic charging, and the ability to program the charging time curve, monitor battery temperature, and have no pollution to the power grid.

? (4) Charging piles: As an indispensable basic supporting facility for new energy vehicles, my country's charging pile industry is also in a construction period of rapid growth, and the future market space is broad. Infineon statistics indicate that a 100 kW charging pile requires a power device worth US$200-300, and the IGBT module is the core device of the charging pile.

? Different electrified vehicles require different quantities of power semiconductor devices. As the number of pure electric vehicles increases, automotive power semiconductor devices will see both volume and price rise.

? According to Infineon data, in 2020, 48V mild hybrid vehicles will need to add $90 of power semiconductors, and electric vehicles or hybrids will need to add $330 of power semiconductors.

? In 2019, the global number of electric vehicles reached 2.21 million, a year-on-year increase of 10%, and China’s new energy vehicle sales were 1.206 million, a year-on-year decrease of 4.0%.

? In November 2020, the production and sales of new energy vehicles were 198,000 and 200,000 respectively, a year-on-year increase of 75.1% and 104.9% respectively. From January to November 2020, the production and sales of new energy vehicles were 1.119 million and 1.109 million respectively, of which output decreased by 0.1% year-on-year and sales increased by 3.9% year-on-year.

?BloombergNEF predicts that the global number of new energy vehicles is expected to reach 11 million in 2025, with China accounting for 50%. It is expected to reach 28 million in 2030 and 56 million in 2040. By then, electric vehicle sales will account for 57% of all new car sales.

? Automotive power semiconductors are difficult and highly concentrated, with European and American manufacturers occupying the core advantages. In 2019, the global automotive semiconductor market reached US$37.2 billion. Infineon ranked first with a market share of 13.4%, and the top five companies combined accounted for 49.1%. The world's largest company in automotive power semiconductors is Infineon, with a market share of 25.5%. The second largest company is STMicroelectronics, with a market share of 13.9%. The top five companies account for a total of 62.1%, indicating a high degree of concentration.

? Star Semiconductor is rising rapidly. Chinese automobiles have a weak foundation and slow development in the field of automotive power semiconductors. However, China's electric vehicles have developed rapidly in recent years, which has also driven the development of the IGBT industry. According to Zos Automotive Research data, according to sales data, Infineon ranked first in China's new energy vehicle IGBT field in 2019, accounting for 49.3%, followed by BYD, which mainly supplies its own products, accounting for 20%, and Star Semiconductor ranked third, with a market share of 16.6%.

3.3 Industrial control, new energy, home appliance frequency conversion and other fields promote the stable growth of IGBT

Power semiconductor devices are increasingly used in the power management industry. In the future, industrial control, new energy, variable frequency home appliances, data centers, 5G, IOT and other fields will be the core areas for rapid growth of power semiconductor devices, and the demand for IGBTs will continue to increase.

3.3.1 Industrial control is the largest application field of IGBT, with steady growth in demand

? IGBT modules are core components in traditional industrial control and power supply industries such as frequency converters and inverter welding machines, and have been widely used in this field. As the industrial control and power supply industry markets gradually recover, it is expected that the market size of IGBT modules in this field will also gradually expand.

? 1) Frequency converter industry: IGBT modules not only play the role of traditional transistors in frequency converters, but also include the rectifier part. The sine wave signal generated by the controller is isolated by the optical coupling and then enters the IGBT. The IGBT converts the 380V (220V) rectified DC power into AC power for output again according to the change of the signal.

? The market size of my country's frequency converter industry is generally on the rise. Frequency converters have entered the field of new energy and will maintain steady growth in industrial fields such as metallurgy, coal, and petrochemicals. Against the background of increasing urbanization rates, the demand for frequency converters in public utilities such as municipal administration and rail transit will continue to grow, thus promoting the expansion of the market size. In the next few years, the market for high-voltage inverters with high-efficiency and energy-saving functions will continue to grow driven by policies. By 2023, the market size of high-voltage inverters will reach about 17.5 billion yuan.

? 2) Inverter welding machine industry: Inverter arc welding power supply, also known as arc welding inverter, is a new type of welding power supply. This kind of power supply generally converts the three-phase power frequency (50 Hz) AC network voltage into DC through rectification and filtering by the input rectifier, and then inverts it into an intermediate frequency AC voltage of several thousand hertz to tens of thousands hertz through the alternating switching action of high-power switching electronic components (IGBT). At the same time, it is reduced to a voltage of tens of volts suitable for welding through a transformer, and then rectified again and filtered by a reactance to output a fairly stable DC welding current.

? According to data from the National Bureau of Statistics, my country's electric welding machine production in 2018 was 8.533 million units, an increase of 584,600 units compared with 2017. The continued heating up of the welding machine market will also ensure a gradual increase in demand for IGBTs.

3.3.2 Photovoltaic and wind power generation grows rapidly, and IGBT welcomes new growth drivers

? Since the electric energy output by new energy power generation does not meet the requirements of the grid, it needs to be rectified into DC power through a photovoltaic inverter or wind power inverter, and then inverted into AC power that meets the grid requirements before being input to the grid. IGBT modules are the core components of photovoltaic inverters and wind power inverters. The rapid development of the new energy power generation industry will become another driving force for the continued growth of the IGBT module industry. Global power generation in 2015 was 6414 GW, and it is expected that global power generation will reach 8647 GW in 2025, with a 10-year CAGR of 3.0%, of which renewable energy power generation has a faster growth rate, with a CAGR of 5.9%; further broken down, the growth rate of solar power generation and wind power generation is higher than the compound growth rate of renewable energy power generation, and the 15-25 year CAGR of solar power generation is The CAGR of wind energy power generation is 16.4%, which is much higher than the average growth rate of the industry. From a regional perspective, wind power is growing rapidly in China, Europe and the United States, while solar power is growing rapidly in China, Europe, the United States and other Asia-Pacific regions.

Wind power: Wind power is mainly actively developed by China and the United States. In the medium to long term, wind power generation is growing steadily. Compared with thermal power generation, the demand for semiconductors per 1MW of wind power plants is 30 times that of thermal power plants. The power of wind turbines was 1.5 MW in 2011 and has grown to 2-3 MW in 2017. The steady growth of wind power generation will place new demands on power semiconductors.

? Solar power generation: IHS predicts that the compound growth rate of demand for IGBT modules from solar power generation will be 9.0% from 2016 to 2021. In order to effectively meet the needs of green energy solar power generation and inverter grid connection, a correct combination of control, driver and output power devices is required. IGBT is an inevitable choice as a power switch, and PV inverter will also be one of the first batch of SiC-based devices, which will significantly increase the value of IGBT.

? China’s photovoltaic inverter manufacturers are on the rise, and IGBT is on the rise. At present, local manufacturers, mainly Huawei and Sungrow, continue to make breakthroughs in the photovoltaic inverter market. According to SolarEdge statistics, in 2018, Huawei's share of the global inverter market reached 22%, ranking first in the world in market share, and Sungrow's market share was 15%, ranking second in the world. Especially in the three-phase string inverter market, Huawei's market share reached 56% in 2017, with a prominent market advantage. The rapid development of Chinese photovoltaic inverter manufacturers has brought significant localization advantages to the substitution of domestic IGBTs.

3.3.3 Frequency conversion in global household appliances is accelerating penetration, and IGBT is facing good development opportunities

? The IGBT module is the core component of the variable frequency home appliance inverter. IGBT high-frequency opening and closing function can bring the following advantages: 1. Small conduction loss and switching loss; 2. Excellent EMI performance, which can meet EMI requirements by changing the size of the driving resistor while keeping switching losses within a reasonable range; 3. Strong short-circuit resistance; 4. Small voltage spikes (to protect home appliances). As the world's largest home appliance market and production base, China is also nurturing a large-scale IGBT market. Taking the air conditioning industry as an example, China, as the world's largest home appliance market and production base, is also nurturing a large-scale IPM market.

? Frequency conversion of home appliances can significantly save energy. Compared with traditional home appliances, variable frequency home appliances have obvious innate advantages in terms of energy efficiency, performance and intelligent control. In recent years, frequency conversion home appliances are in a stage of comprehensive development and are mainly used in air conditioners, microwave ovens, refrigerators, water heaters and other appliances that consume large amounts of power. For example, compared with non-variable refrigerators, variable-frequency refrigerators have a longer service life, less noise, and can save 40% of energy consumption.

? It is predicted that the frequency conversion penetration rate of home appliances in 2022 will be 65%. According to IHS statistics, global home appliance sales in 2017 were approximately 711 million units, of which 467 million were non-variable frequency appliances, accounting for 66%, while the number of variable frequency appliances was 244 million units, accounting for 34%. It is expected that the sales volume of variable frequency home appliances will reach 585 million units by 2022, accounting for 65%, and the sales CAGR from 17 to 22 will be 19.1%, while the sales volume of non-variable home appliances will drop to 317 million units, accounting for 35%.

? The stand-alone value of power semiconductors for frequency conversion home appliances has increased significantly. The rapid increase in the volume of variable-frequency home appliances will significantly increase the value of semiconductors per unit of home appliances. Infineon predicts that the value of semiconductors will increase from 0.7 euros for non-variable home appliances to 9.5 euros. The increased semiconductors are mainly power semiconductors. Assuming that 9.5 euros is the average semiconductor value per unit of variable-frequency home appliances, it is expected that the home appliance semiconductor market will grow from 2.645 billion euros in 2017 to 2.645 billion euros in 2022. 5.779 billion yuan, with a CAGR of 16.9% from 17 to 22 years.

? According to IHS data, the household power semiconductor market size is expected to grow from US$1.44 billion in 2017 to US$2.67 billion in 2021, with a compound growth rate of 1

? With the vigorous promotion of global energy conservation and environmental protection, the penetration rate of frequency conversion for white home appliances will gradually increase, and power semiconductors, as the core components of frequency converters, will benefit significantly.

3.4 Growth in various fields: IGBT modules for automobiles are expected to have a compound annual growth rate of 23.5% from 2018 to 2023

? The global IGBT market size reached US$6.21 billion in 2018. According to IHS data, the global IGBT market size was US$5.255 billion in 2017, a year-on-year increase of 16.5% in 2016. The global IGBT market size in 2018 was approximately US$6.21 billion.

4. Driven by the demand for electric vehicles, silicon carbide faces new development opportunities

4.1 Excellent performance, the third generation of semiconductors emerged at the historic moment

? SiC and GaN-based MOSFETs have broken through the performance limits, and technology upgrades are imperative: Compared with the first and second generation semiconductor materials, the third generation semiconductor materials have a wide bandgap, high breakdown electric field, high thermal conductivity, high electron saturation rate and higher radiation resistance, and are therefore more suitable for making high-temperature, high-frequency, radiation-resistant and high-power devices. In pursuit of smaller device size and better performance, power device manufacturers are gradually promoting next-generation technology solutions for SiC and GaN-based MOSFETs. For example, 1) SiC-based MOSFETs have a highly stable crystal structure compared to silicon-based MOSFETs, and the operating temperature can reach 600°C; 2) The breakdown field strength of SiC is more than ten times that of silicon, so the blocking voltage of SiC-based MOSFETs is higher; 3) The conduction loss of SiC is much smaller than that of silicon devices, and it changes very little with temperature; 4) The thermal conductivity of SiC is almost 2.5 times that of Si materials. The saturated electron drift rate is 2 times that of Si, so SiC devices can operate at higher frequencies.

? SiC is mainly used in white goods, new energy (electric vehicles, wind power, photovoltaics), industrial applications, etc.

4.2 Silicon carbide is expected to play a major role in the field of electric vehicles

? In terms of automotive applications, SiC MOSFET is obviously superior in terms of performance, which can reduce losses and reduce module volume and weight. IGBT is superior in terms of reliability and robustness. Silicon carbide devices are used in vehicle charging systems and power conversion systems, which can effectively reduce switching losses, increase the ultimate operating temperature, and improve system efficiency.

? Model 3 was the first to use SiC MOSFET, pioneering the use of SiC in electric vehicles.

? Tesla’s inverter module was the first to use 24 silicon carbide SiC MOSFETs, which were provided by STMicroelectronics. Later, Infineon also became Tesla’s SiC power semiconductor supplier. The entire power module unit is composed of single-tube modules, using a standard 6-switches inverter topology. Each switch is composed of 4 single-tube modules, with a total of 24 single-tube modules. The device has a withstand voltage of 650V. Model 3's SiC single-tube module design is consistent with Model S/X's use of Infineon IGBT single-tube ideas. The advantage is that it can achieve scalability at different power levels, while also improving module packaging yield and reducing semiconductor device costs.

? BYD Han uses SiC MOSFET to improve acceleration performance, power and endurance.

? In 2020, BYD's Han EV motor controller used BYD's independently developed and manufactured SiC MOSFET control module for the first time, which greatly improved motor performance.

? Silicon carbide has good acceleration performance. The most direct benefit of the wide bandgap is higher breakdown field strength, which means it can withstand high voltage, which means it can control higher system voltage. BYD Han is able to use the 650V voltage platform, which is also due to silicon carbide. High voltage means low current, which reduces losses in equipment resistors. For motor design, it is also easier to achieve higher power in a small size. Therefore, BYD Han can easily achieve 0-100 acceleration performance of 3.9S.

? Silicon carbide can achieve high probability and high battery life. In addition to the advantages brought by the wide bandgap, silicon carbide also has two major advantages, one is higher saturated electron speed, and the other is higher thermal conductivity and higher temperature resistance. Saturated electrons are fast, which means they can pass larger currents. The electron saturation speed of silicon carbide material is twice that of silicon material. Therefore, when designing the device, it is easier to match the current intensity away from the saturation current of the device, thus achieving lower resistance in the on state. This can reduce power loss, help reduce device heat, and simplify heat dissipation design. Especially under the condition of instantaneous high current, the temperature accumulation of the equipment is reduced, coupled with the increased temperature resistance and the stronger thermal conductivity of the material itself, it also makes it easier for the equipment to dissipate heat. The vehicle can also explode with greater power. This is the reason why BYD Han can achieve 363Kw power. Using lithium iron phosphate, the cruising range can reach 605 kilometers, which is obviously also due to silicon carbide.

? Toyota fuel cell vehicle Mirai model uses silicon carbide modules

? Denso has begun mass production of a new generation of boost power modules equipped with SiC (silicon carbide) power semiconductors, which will be used in the Toyota fuel cell vehicle Mirai model. Denso and Toyota's SiC power modules have been used in HEVs, fuel cell buses and fuel cell passenger cars. The new Mirai's next-generation solid-state fuel cell core component, the Toyota FC Stack, is paired with an FC boost converter using multiple SiC power semiconductors. The function of the boost converter is to output a voltage higher than the input voltage.

? The size of the power module is reduced by 30% and the loss is reduced by 70%. According to Denso's calculations, compared with products using Si-based power semiconductors, the new boost power module equipped with SiC power semiconductors (including diodes and transistors) is about 30% smaller in size and reduces losses by about 70%. It achieves miniaturization of the power module while improving the fuel efficiency of the vehicle.

?The new Mirai equipped with SiC modules has a 30% increase in cruising range. Toyota said that by using SiC semiconductors in the FC step-up transformer and using lithium-ion low-voltage batteries, it can reduce system energy consumption losses. At the same time, on the basis of improving the performance of FC stacks, the power generation efficiency is improved by using catalyst active regeneration control technology. As a result, Toyota has achieved a maximum cruising range of about 850km in the new Mirai WLTC operating condition, which is about 30% higher than the previous generation model.

4.3 It is predicted that the scale of silicon carbide power devices will exceed 10 billion US dollars in 2027

? It is predicted that the market size of silicon carbide power devices will exceed US$10 billion in 2027. The market size of silicon carbide power devices was approximately US$390 million in 2018. Driven by the huge demand for new energy vehicles and power equipment and other fields, IHS predicts that the market size of silicon carbide power devices will exceed US$10 billion by 2027. Starting from 2021, driven by electric vehicles, SiC MOSFET will maintain rapid growth and become the best-selling discrete SiC power device.

5. More than 80% of power semiconductors rely on imports, and domestic companies are trying to catch up.

5.1 European, American and Japanese companies have obvious advantages in the field of power semiconductors

? According to Infineon statistics, the global power semiconductor device and module market size in 2019 was US$21 billion. Europe, the United States, and Japan showed a three-legged trend. Infineon ranked first, accounting for 19%, followed by ON Semiconductor, accounting for 8.4%. The top ten companies had a combined market share of 58.3%.

? In 2019, the global MOSFET market reached US$8.1 billion. Infineon ranked first with an absolute advantage, with a market share of 24.6%, and the market share of the top five companies reached 59.8%. Nexperia Semiconductor acquired by Wingtech and China Resources Microelectronics, which grew up in China, entered the top ten, accounting for 4.1% and 3.0% respectively.

? In 2019, the IGBT module market size was US$3.31 billion. Infineon ranked first with a market share of 35.6%, and the top five companies accounted for 68.8% in total. Star Semiconductor, a leading IGBT company grown in China, has developed rapidly in recent years and entered the top ten. In 2019, it ranked eighth with a market share of 2.5%.

? In 2019, the discrete IGBT market size was US$1.44 billion. Infineon ranked first with a market share of 32.5%. The top five companies accounted for 63.9% in total. Chinese manufacturer Silan Micro entered the top ten with a market share of 2.2%.

? In 2019, the IPMs market size was US$1.59 billion. Japan's Mitsubishi ranked first, with a market share of 32.7%. The top five companies accounted for 76.9% in total. Chinese manufacturers Silan Microelectronics and China Microelectronics entered the top ten, with market shares of 1.1% and 0.8% respectively.

5.2 Chinese power semiconductor companies are catching up and ushering in a period of rapid development

? China is the world’s largest power semiconductor market. A large portion of the revenue of leading international companies comes from China. Taking Dal Technology and NXP as examples, more than 50% and 40% of their revenue come from mainland China. China is a big country of electric vehicles. Infineon's IGBT accounts for more than 60% of the Chinese electric vehicle market. It can be seen that my country's power semiconductor market has huge demand, and local manufacturers have a very large room for import substitution.

? China’s IGBT self-sufficiency rate continues to increase. According to Zhiyan Consulting data, since 2015, my country's IGBT self-sufficiency rate has exceeded 10% and has gradually increased. It is predicted that the self-sufficiency rate will increase from 10.1% in 2015 to 18.4% in 2020. It is expected that my country's IGBT industry output will reach 78 million units in 2024, with demand of approximately 196 million units, and the self-sufficiency rate reaching 40%. Overall, there is still a huge gap between supply and demand in my country's IGBT industry, and "domestic substitution" will be an important development direction of the IGBT industry in the future.

? Mid- to high-end power semiconductor products rely on overseas markets. Chinese companies such as BYD, Huawei, CRRC, and Sungrow are the world's leading power semiconductor customers. However, these companies still rely heavily on overseas suppliers such as Infineon, Fuji Electric, and Mitsubishi Electric for power semiconductor procurement. China is the largest market for electric vehicles and hybrid vehicles, but overseas supply chains still provide power semiconductor modules for most systems in China. In the global power semiconductor market, mid- to high-end product manufacturers are mainly concentrated in Europe, the United States and Japan. Most power semiconductor manufacturers in Europe, the United States and Japan are IDM manufacturers. Infineon, ON Semiconductor, STMicroelectronics, Mitsubishi, Toshiba, etc. are leading companies in the industry. Taiwan, China, is also a relatively large producer of power semiconductors. Most of the manufacturers are Fabless manufacturers, and their products are mainly concentrated in the low-end field. my country's power semiconductor market accounts for about 36% of global demand. In the field of high-end products, about 80% relies on imports.

? China’s power semiconductor industry is developing rapidly. my country's semiconductor manufacturers are mainly based on the IDM model, and the production chain is relatively complete. Products are mainly concentrated in low-end fields such as diodes, low-voltage MOS devices, and thyristors. IGBTs have gradually made breakthroughs. The production technology is mature and has cost advantages. The profitability of leading companies in the industry is much higher than that of manufacturers in Taiwan, China. In the fields of high-end products such as new energy, electric power, and rail transit, only a handful of domestic manufacturers have production capacity. The high-end product market is mainly monopolized by European, American and Japanese manufacturers such as Infineon, ON Semiconductor, Renesas, and Toshiba.

? At present, the domestic and foreign IGBT markets are still mainly occupied by foreign companies. Domestic IGBT companies led by Star Semiconductor are developing rapidly, gradually making breakthroughs in the fields of industrial control, electric vehicles, wind power, photovoltaics, electricity and high-speed rail, and continuously increasing their share. In 2019, according to the shipment volume, Infineon has the largest share of IGBTs for electric vehicles in China, with a market share of 49.3%, followed by BYD, which accounts for 20%. (Mainly supporting itself), Star Semiconductor ranks third, accounting for 16.6%. Star Semiconductor has a high chip self-sufficiency rate in the field of electric vehicle IGBT, exceeding 90%.

? In my country's power semiconductor market, local manufacturers have begun to substitute imports in the field of low-end products. Nexperia, Star Semiconductor, China Resources Micro, Xinjie Neng, Lion Micro, China Microelectronics, Yangjie Technology, Silan Micro, Sanan Optoelectronics, Jiejie Microelectronics, etc. acquired by Wingtech Technology are high-quality enterprises in the industry, but their market share is still low.

6. Optimistic about industry segment leaders

At present, the domestic power semiconductor industry chain is becoming increasingly perfect, and technology is also making breakthroughs. China is the world's largest consumer of power semiconductors, accounting for 35.9% of global demand in 2019, and the growth rate is significantly higher than the world. In the future, with the demand for new energy (electric vehicles, photovoltaic, wind power), industrial control, frequency conversion home appliances, IOT equipment, etc., China's demand growth rate will continue to be higher than that of the world, and the industry will grow steadily+ For domestic substitution, we are optimistic about the leaders in the segmented industries: Star Semiconductor, China Resources Micro, Hua Hong Semiconductor, Silan Micro, New Clean Energy, Leon Micro, Sanan Optoelectronics, Wingtech Technology, and CRRC Times Electric.

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