News briefing

The Shennan Circuits Company (state-enterprise of China-capital for circuit corporation) has positioned its focus on 5G circuit-board applications and substrate products with high added value for its future development. It is expected that these two products will not only drive overall revenue but will also improve the company’s profitability.

Impact analysis 

The revenue of the Shennan Circuits Company in the first quarter of 2019 was approximately RMB$2.163 billion, with an annual growth of 46%, compared to that of the same period last year, while its revenue scale is only second to Dongshan Precision (2019Q1), which is merged into M-Flex and Mutek. The revenue of Dongshan Precision Circuits was approximately RMB2.32 billion in the first quarter of 2019, ranking second in China. The possible reasons that the Shennan Circuits Company exhibits a high growth rate in the first quarter of 2019 include the following: first, since 5G mobile communications in China will be commercialized at the end of 2019, it explains why the three major telecom operators have begun to build up a large number of 5G base stations. Regardless of whether they are newly built 5G base stations or upgraded from existing 4G base stations, the transformation would have to be supported by the high-frequency circuit board. Due to China’s main supply of base stations coming from ZTE and Huawei (Shennan is the primary supplier of the circuit board for Huawei), it is arguable that the growth of circuit boards, prompted by 5G infrastructures, has become the main source of momentum for Shennan's growth.

Secondly, the Shennan Circuits Company’s Phase I new plant at Nantong has been completed and has already started mass production. Moreover, while the capacity utilization rate of the Phase I new plant at Nantong in the first quarter of 2019 reaches as high as 90%, this presents a significant gap to that of the Taiwanese manufacturers’ capacity utilization, which has generally dropped to 80% in the first quarter during the slack season. Furthermore, the contribution of revenue from the Phase I new plant at Nantong amounts to approximately RMB$220 million, which further accounts to about 10% of the overall revenue, therefore, becoming an important new production base for Shennan. In addition, Shennan has also invested RMB$ 1.245 billion on the Phase II Base at Nantong to further construct factory buildings as it works to initiate 5G operation projects, which should serve as a production base for 5G applications as the company aims to engage in long-term PCB opportunities.

The Shennan Circuits Company is one of the few manufacturers of China-capital with a production capacity for substrates and its main production base is at Wuxi. Although there were sample substrate products in the past, no real mass production has been carried out. At present, the company is scheduled to start mass production in 2019. Besides, the Shennan Circuits Company will surely have stronger support as it gears towards the development of substrates as a result of the Chinese government’s active nurturing of the semiconductor industry. The Shennan Circuits Company is also likely to become a new competitor in Taiwan in terms of the substrate market or may even be headed into the SLP market. Since the Shennan Circuits Company has always excluded itself from manufacturing products with a mobile phone application, the significance of the company’s expanding into new markets implies that the company will directly confront Taiwanese manufacturers, resulting in more intense competition.