On the evening of February 26, Shengmei Shanghai (688082.SH) released its 2024 annual report.

In 2024, the company's operating income will be 5.618 billion yuan, a year-on-year increase of 44.48%; the net profit attributable to the parent company was 1.153 billion yuan, a year-on-year increase of 26.65%; The net profit after deduction was 1.109 billion yuan, a year-on-year increase of 27.79%. The basic earnings per share is 2.64 yuan, in addition, it is proposed to distribute a cash dividend of 6.57 yuan (tax included) to all shareholders for every 10 shares.

Shengmei Shanghai said that the main reason for the increase in performance is the continuous recovery of the global semiconductor industry, especially the strong market demand in Chinese mainland, and the company has successfully grasped market opportunities and accumulated sufficient order reserves by virtue of its technological differentiation advantages; In addition, the company's sales, delivery, commissioning and acceptance work in this period were carried out efficiently, which effectively guaranteed the steady growth of operating performance.

Despite the significant growth, the capital markets do not seem to be buying it. As of the close of trading on February 27, Shengmei Shanghai's share price fell 1.71% to close at 111.16 yuan per share, with a total market value of 48.8 billion yuan.

There is still a gap between the technical level and the international giants

According to public information, Shengmei Shanghai is mainly engaged in the development, manufacturing and sales of semiconductor cleaning equipment, semiconductor electroplating equipment, vertical furnace series equipment, gluing and developing track equipment, plasma-enhanced chemical vapor deposition PECVD equipment, stress-free polishing equipment, post-processing advanced packaging equipment and silicon material substrate manufacturing process equipment that are vital to the integrated circuit manufacturing industry.

Among them, the operating income of semiconductor cleaning equipment in 2024 will be 4.057 billion yuan, accounting for 72.22% of the total revenue; The operating income of other semiconductor equipment (electroplating, vertical furnace tube, stress-free copper polishing equipment, etc.) was 1.137 billion yuan, accounting for 20.24% of the total revenue; The operating income of advanced packaging wet equipment was 246 million yuan, accounting for 4.38% of the total revenue.

According to the cumulative data statistics of the special report of Bank of China Securities, the market share of Shengmei Shanghai cleaning equipment in China is 23%; According to Gartner's 2023 data, Shengmei Shanghai's global cleaning equipment market share is 6.6%, ranking fifth.

According to the report of the Toubao Research Institute, the global cleaning equipment market presents an oligopoly pattern, with the total market share of overseas manufacturers DNS, Tokyo Electron (TEL), Lam Research Semiconductor (LAM) and SEMES (a subsidiary of Samsung) reaching more than 90%, of which SCREEN alone has a market share of more than 50%.

China's semiconductor cleaning equipment manufacturers mainly include Shengmei Shanghai, Zhichun Technology, North Huachuang and Xinyuan Micro, and the four manufacturers focus on different fields.

Toubao Research Institute believes that compared with photolithography, thin film deposition, etching and other processes, the technical barriers to cleaning equipment are lower, so it is easier for Chinese semiconductor equipment manufacturers to achieve a high degree of localization in cleaning equipment.

Shengmei Shanghai believes that the integrated circuit equipment industry has a high technical threshold, and there is still a gap between the company's technical level and international giants, and it is necessary to speed up the process of technology research and development and industrialization.

According to the announcement, leading international companies in the same industry have invested a lot of money in R&D, such as Lam Semiconductor's R&D investment in fiscal 2023 is US$1.727 billion, and Tokyo Electron (TEL) R&D investment in fiscal 2023 is US$1.349 billion, compared with Shengmei Shanghai's R&D investment of RMB 658 million in 2023, which is still far behind the world's leading semiconductor companies.

In order to improve the level of R&D investment, further narrow the gap with overseas giants in the same industry. Shengmei Shanghai announced on November 11, 2024 that the company plans to raise no more than 4.5 billion yuan for R&D and process test platform construction projects, high-end semiconductor equipment iterative R&D projects and supplementary working capital.

Shengmei Shanghai said that the investment project will help the company further enhance its R&D strength in the field of semiconductor special equipment, consolidate the company's technical barriers, and help the implementation of the platform strategy.

The investment of 245 million yuan in South Korea was terminated, and overseas revenue decreased by 35.83% last year

At the performance briefing of the third quarter report of 2024, Shengmei Shanghai said that it is currently in friendly contact and promotion with Korean customers, and the cooperation is progressing well. For other overseas customers, including customers in the United States, Europe, Singapore and other Asian markets, the cooperation is progressing relatively smoothly.

However, the annual report shows that the main business income of Shengmei Shanghai in Chinese mainland in 2024 will be 5.410 billion yuan, a year-on-year increase of 47.51%; The main business income outside Chinese mainland was 30 million yuan, a year-on-year decrease of 35.83%.

In addition, on January 11, Shengmei Shanghai announced that the company's board of directors and board of supervisors recently deliberated and approved the termination of the over-raised capital investment project "Shengmei Korea Semiconductor Equipment R&D and Manufacturing Center", and changed the 245 million yuan of raised funds to be invested in the project to the IPO fund-raising project "Shengmei Semiconductor Equipment R&D and Manufacturing Center".

In this regard, SEM Shanghai stated that the project of "SEMEI Korea Semiconductor Equipment R&D and Manufacturing Center" needs to transfer funds overseas and deposit them in overseas banks, and issuers, sponsors and subsidiaries of issuers need to sign a four-party regulatory agreement with overseas banks. After several rounds of negotiations between the parties since March 2023, the signing of the Quadripartite Regulatory Agreement was completed at the end of June 2024.

In the first half of 2024, as the global business environment changes, the company has been prudently evaluating the risk of investing in fixed assets in its Korean subsidiary under the "SEMEI Korea Semiconductor Equipment R&D and Manufacturing Center Project". On December 2, 2024, the company and Shengmei Korea were included in the "Entity List" by the U.S. Bureau of Industry and Security (BIS), which also confirmed the company's previous prediction, so it did not invest in raising funds for the project.

After the change, the raised funds will be used to invest in fixed assets for the civil decoration and equipment of the "Shengmei Semiconductor Equipment R&D and Manufacturing Center Project", which is not a non-capital expenditure.

Regarding the impact of the termination of 245 million yuan of investment in South Korea on the company's global development, on February 27, a reporter from Times Weekly called the staff of Shengmei Shanghai, and the other party asked the reporter to send an email interview. The reporter then sent an interview letter to the company's mailbox, but has not received a reply as of press time.

The number one supplier is an affiliated company, and 358 million restricted shares have been lifted

The Times reporter noticed that the number one supplier of Shengmei Shanghai has an affiliated relationship with the listed company. In 2024, the purchase amount from this supplier will be 383 million yuan, accounting for 11.96% of the total annual procurement.

Image source: Shengmei Shanghai 2024 Annual Report

According to the "Announcement on Confirming the Routine Connected Transactions in 2024 and the Expected Routine Connected Transactions in 2025", Shengmei Shanghai will accept products and services provided by three related parties in 2024, including Ninebell, Shengyi Semiconductor Technology (Wuxi) Co., Ltd., and ACMR, of which the actual amount incurred with Ninebell in 2024 will also be 383 million yuan.

It is worth noting that on October 8, 2020, J Capital Research (JCAP), a short-selling institution, released a short-selling report on ACMR, the controlling shareholder of Shengmei Shanghai. JCAP said that the robot arm sold by Ninebell to ACMR was purchased by a Japanese supplier, ACMR, for $8.9 million, and that it could not even buy half of the robot arm components from Ninebell. After a lengthy interview, JCAP learned that the assembly cost was about $650,000. At this price, the 2019 purchase price will allow for up to 14 robot arms, while the company will use at least 32 of them.

In response, on December 15, 2020, Shengmei Shanghai said that Ninebell purchased some of the motors in the robot arm accessories from the Japanese supplier YASKAWA. The main parts of the robot arm include the main control platform system, the conveyor and the system, and the robot arm and system. The motor provided by YASKAWA is only one of the accessories in the robot arm that provides the power drive function.

It is worth noting that on November 18, 2024, 358 million initial restricted shares held by ACMR, the controlling shareholder of Shengmei Shanghai, were listed and circulated, accounting for 82.01% of the total share capital. On the issue of whether the controlling shareholder of the company intends to reduce his holdings. On February 27, a reporter from Time Weekly sent an interview letter to the email address of the listed company, but has not received a reply as of press time.

Previously, at the performance briefing of the third quarter report of 2024, Shengmei Shanghai responded, "ACMR attaches great importance to Shengmei Shanghai and is optimistic about the company's future development for a long time. ”

According to the annual report, as of February 26, 2025, the total shareholding ratio of the top ten institutional investors in Shanghai reached 88.76%. Compared with the previous quarter, the total shareholding ratio of the top 10 institutions decreased by 1.13%.