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After enduring the harsh winter of 2021-2022, the storage market is filled with a pessimistic sentiment. When will the decline stop, and when will the market warm up, has become the most concerned issue in 2023.

Institutions and manufacturers have indicated that storage prices are expected to hit rock bottom in the second quarter of this year, and the market is expected to rebound in the third quarter. The booming Internet of Things (IoT), smart cars, and industrial robots, the demand for AI computing power, as well as the pull of ChatGPT, are expected to clear the gloom in the second half of 2023 and rapidly warm up and grow the storage market.

As the market warms up, demand becomes strong again, and prices rise, this is a rare opportunity for domestic manufacturers. Can manufacturers seize the opportunity, take advantage of this east wind, and rise with the trend to welcome the second spring of development?

Focusing on small and medium-capacity NAND, NOR, and DRAM chips, Dongxin Semiconductor recently released its 2022 financial report. In this financial report, we may be able to glimpse the confidence of domestic storage manufacturers.

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Market and Product Layout

On April 14, Dongxin Semiconductor Co., Ltd. (hereinafter referred to as Dongxin, stock code 688110) released the 2022 annual performance report. The report shows that in the 2022 fiscal year, the company achieved a total operating income of 1.146 billion yuan, an increase of 1.03% over the same period last year. The net profit attributable to the shareholders of the listed company was 185 million yuan, and the net profit attributable to the shareholders of the listed company after deducting non-recurring gains and losses was 165 million yuan.

Although in terms of profit, under the influence of the current state of the industry, the company cannot be detached. However, as Dongxin said in the financial report, the company actively responds to challenges, continuously improves R&D technology strength, continuously develops new products, strengthens quality and service management, and develops new markets and new applications, with overall development being stable and progressive.

"The company highly values and always maintains a high level of R&D investment, insists on technological innovation, and ensures the technical advancement of the company's products. In 2022, the company adhered to the development of new products and technology upgrades." Dongxin emphasized in the financial report.

As one of the few domestic companies with a variety of storage chip technology reserves, Dongxin's storage product layout can be described as rich. From NAND to NOR to DRAM, the more comprehensive horizontal layout allows Dongxin to fill and replace the effect in the segmented market of mature products, forming a differentiated competition with industry-leading companies.

First, let's look at the NAND Flash aspect. As stated in the financial report, Dongxin's SLC NAND Flash mass-produced products are mainly based on the 38nm, 24nm processes of SMIC, and the 28nm process of Powerchip. In terms of storage capacity, it covers from 512Mb to 32Gb, and can flexibly choose SPI or PPI type interfaces, widely used in 5G communication modules and terminal system operation modules with higher integration requirements.In addition, Dongxin continues to develop new products in the 28nm and 24nm processes, constantly expanding its SLC NAND Flash product line, and some new products have reached mass production standards during the reporting period. The company's advanced process 1xnm NAND Flash products have completed the first round of wafer flow and have completed functional verification.

According to Dongxin's financial report, the company's independently designed SPI NOR Flash storage capacity covers from 64Mb to 1Gb and supports various data transfer modes, widely used in wearable devices, mobile terminals, and other fields. From a technical composition perspective, the company's NOR Flash products continue to develop higher-capacity new products on the 48nm process of Powerchip, and currently, 512Mb and 1Gb large-capacity NOR Flash products are available for samples to customers.

At the same time, Dongxin has also advanced the NOR Flash product process from 65nm to 55nm at SMIC, and the first round of wafer flow for this process has been completed. The company will continue to provide customers with a more diversified and highly reliable product selection based on existing products.

In terms of DRAM, Dongxin stated that the company's R&D of DDR3(L) series is a DRAM product that can transmit double data flow, featuring high bandwidth and low latency, widely used in communication equipment, mobile terminals, and other fields. In response to the low power consumption requirements of the mobile Internet and the Internet of Things, the company's independently developed LPDDR series products feature low power consumption and high data transfer rates, suitable for use in smart terminals, wearable devices, and other products.

"The company's LPDDR4X and PSRAM products designed and developed have all completed engineering samples and have passed customer verification. The company will continue to develop new products in the DRAM field, helping the company's product diversity development," Dongxin emphasized in the financial report.

As an IC design company, Dongxin has been adopting the Fabless model since its establishment, focusing on integrated circuit design and the final sales link, and outsourcing the wafer manufacturing, packaging, and testing links to specialized wafer foundries, packaging, and testing manufacturers.

Entering mid-2022, Dongxin continues to optimize its industrial chain structure, strengthening cooperation with SMIC and Powerchip, two world-class manufacturers, in terms of scope and depth. In terms of packaging and testing, it has established stable cooperative relations with Hongmao Micro, China Resources Anxin, Nan Mao Technology, AT Semicon, and other well-known domestic and foreign packaging and testing factories. In the foreseeable future, the sound global supply chain built by Dongxin can meet the needs of different customers and form its own advantages in the market.

At the same time, in order to better promote market sales, Dongxin's product sales also adopt a "distribution and direct sales combined" sales model. Under the distribution model, the company adopts a buyout sales method with distributors; under the direct sales model, end customers directly place orders with the company. Under the distribution model, as the link between the upstream and downstream industries, distributors have advantages in market development, customer maintenance, and accelerating capital turnover, which effectively drives the sales growth of Dongxin.

Patents and Technology R&D

From the financial report, we can see that Dongxin Semiconductor has independent intellectual property rights, which is the foundation for the company to break through in the fiercely competitive domestic market. It is reported that Dongxin has mastered various core technologies related to NAND/NOR/DRAM, and through its own R&D team, it has formed a relatively complete technical matrix. Relying on its own technology, Dongxin can provide customized design services and overall solutions for NAND, NOR, DRAM, and other storage chips according to customers' specific needs, enhancing business richness and customer stickiness.In response to the changing market demands, the company is also increasing its investment in research and development to fully prepare for the new round of market changes. According to the financial report disclosed by Dongxin, the company's R&D investment in 2022 was 110 million yuan, a year-on-year increase of 47.46%, accounting for 9.63% of the current period's operating income.

To ensure the output of products, Dongxin also absorbed talents through various means such as social recruitment, campus recruitment, and internal recommendations in 2022. During the reporting period, the number of company employees increased from 184 to 234, a growth of 27.17%. Among them, the number of R&D and technical personnel increased from 87 to 130, a significant increase of 49.43%, and the proportion of R&D personnel increased from 47.28% to 55.56%.

With the support of this competitive team, Dongxin has achieved innovation in many technologies. For example, the 1xnm NAND Flash and 48nm NOR Flash designed and developed by the company are leading flash memory chip process technologies in China, achieving a technological breakthrough in domestic flash memory chips. Among them, the NAND Flash products have obvious core technical advantages, especially the SPI NAND Flash. The company has adopted the industry-leading single-chip integration technology, integrating the storage array, ECC module, and interface module into the same chip, effectively saving chip area, reducing product costs, and enhancing the market competitiveness of the company's products.

As of the end of last year, the company's research projects included 1xnm NAND Flash series products, 24nm NAND Flash series products, 28nm NAND Flash series products, 48nm NOR Flash series products, 55nm NOR Flash series products, and 25nm 4Gb LPDDR4X. In addition, the company is also investing in the research and development of DRAM products and automotive-grade products.

It is reported that Dongxin's SLC NAND Flash based on SMIC's 38nm process platform and NOR Flash based on Powerchip's 48nm process platform have passed the AEC-Q100 test, suitable for the more demanding automotive-grade application environment.

During the 2022 financial report period, Dongxin applied for 63 invention patents, 1 software copyright, and 13 integrated circuit layout design rights.

As of the end of the report, Dongxin has a total of 70 valid patents, 13 software copyrights, 68 integrated circuit layout design rights, and 11 registered trademarks at home and abroad. It has applied for a total of 150 patents at home and abroad, and has been granted 69 patents. The patents involve the core links of NAND Flash, NOR Flash, DRAM, and other storage chip designs, and the company's momentum of accumulation and thin hair is becoming more and more obvious.

Based on these independent and complete intellectual property rights, Dongxin can also customize the required storage chip design services and overall solutions according to customer needs, helping customers reduce product development time and costs, and improve product development efficiency. In the process of customizing products for customers, Dongxin continuously deepens its understanding of market demand, receives customer feedback, and has established a "R&D-Transformation-Innovation" technical development cycle, which is conducive to further enhancing the company's R&D strength.

Looking forward to the future, Dongxin said that first of all, the company will continue to shrink the product process and adhere to a stable supply chain layout.

According to the introduction, the company will continue to cooperate with SMIC to develop and produce 1xnm NAND Flash chips based on the existing storage chip design capabilities, achieving further breakthroughs in domestic storage chip advanced process technology, thus opening up space for designing higher-capacity, more cost-effective products in the future, and providing a guarantee for advanced process technology.Secondly, continuously optimize the product structure and explore diversified markets. Based on the current product line, Dongxin will leverage its strong R&D capabilities to continuously introduce new products, promptly iterate and enhance key product performance, covering mainstream small and medium capacity storage chip products in the market.

For instance, in the area of SLC NAND Flash, the company will continuously improve the yield of 2xnm products; in the NOR Flash product area, the company will gradually achieve mass production of 55nm process products; in the DRAM field, the company will continue to develop DRAM products under more advanced process technologies, further expanding the company's storage product variety and scale.

The company will also focus on high value-added products, in line with the layout of intelligent networking functions in the automotive industry, and vigorously develop automotive-grade storage chips with higher requirements in process technology, usage environment, vibration resistance, and reliability than traditional consumer electronics storage chips, achieving the industrialization goal of automotive-grade flash memory products.

New opportunities for domestic storage

How to seize the opportunity of domestic substitution in the fluctuating storage market, and under the industry's overall trend, achieve the transformation of semiconductor "regionalization" and "independence", which is not only a national-level issue but also a new challenge faced by domestic storage manufacturers.

As a new force in the niche market, Dongxin Semiconductor has stood firm in the cold winter of 2022 with its strong R&D capabilities and stable supply chain system. The financial report it released for 2022 is undoubtedly a high-scoring answer that satisfies investors.

Currently, the domestic demand for integrated circuits is still strong, but the self-sufficiency is insufficient. In this situation, there is a lot to be done for domestic substitution in the integrated circuit industry. Dongxin, which focuses on small and medium capacity NAND, NOR, and DRAM chips, has been determined since its inception, and has successfully stood firm in the market through differentiated competition. In the 2022 financial report, we can see that Dongxin still maintains a spirit of enterprise, continues to invest heavily in R&D technology, and continuously consolidates its unique advantages.

In the rapidly developing new energy automotive industry in 2023, Dongxin, which has already started to lay out the automotive chip market, will bring us what kind of surprises, which is very much worth looking forward to.