Tongfu Microelectronics: Launching a Dual-Pronged Strategy of Organic Growth and Strategic Acquisitions, Precisely Positioning for High-End Packaging and Testing

　　From a low-end small factory with annual revenues of 1 billion yuan, to a high-end packaging and testing enterprise generating over 8 billion yuan annually—ranking second in China’s industry and sixth globally—over the past decade plus, Tongfu Microelectronics has steadily strengthened its capabilities by relying on both organic growth and strategic acquisitions, making significant contributions to the development of China’s integrated circuit industry.

　　Investing $371 million to acquire AMD's packaging and testing assets, positioning itself in the high-end packaging and testing business.

　　2016 was a pivotal year in the development history of Tongfu Microelectronics. In that year, Tongfu Microelectronics, together with the National Integrated Circuit Industry Investment Fund, invested US$371 million to acquire 85% equity stakes each in AMD Suzhou and AMD Penang, gaining access to advanced packaging and testing technologies—as well as a large-scale production platform—for manufacturing CPUs, GPUs, servers, and other high-end products.

　　AMD is the world's only leading manufacturer with both CPU and discrete GPU design capabilities, and it ranks as the sixth-largest integrated circuit design company globally. Originally, the Suzhou and Penang factories were subsidiaries under AMD, specializing in internal packaging and testing services. Following the acquisition, Tongfu Microelectronics has established a strategic partnership with AMD through a powerful "joint venture + collaboration" model. Leveraging their existing technological strengths, the Suzhou and Penang facilities continue to provide advanced packaging and testing services not only to AMD but also to other new customers. Notably, these facilities have taken the lead globally in developing 7-nanometer packaging and testing technology, successfully achieving large-scale mass production.

　　Thanks to the combination of "advanced architecture" and "cutting-edge process technology," AMD's 7-nanometer chip products have achieved industry-leading performance and power efficiency, while also offering price advantages over competitors, leading to a significant increase in market share. Ruth Cotter, Senior Vice President of Global Markets at AMD, stated that AMD’s current goal is to capture 26% of the server market, 25% of the desktop market, and 17% of the laptop market—restoring the glory days of the Opteron processor era. This year, the stock performance of AMD and Intel has clearly mirrored each company’s respective growth trajectories, underscoring AMD’s remarkably strong momentum.

　　Suzhou and Penang factories, as AMD's key packaging and testing suppliers, have already seen— and will continue to experience—rapid business growth. Seizing the opportunity presented by AMD’s strong sales of 7-nanometer products, the company has ramped up R&D investments and is actively stepping up its packaging and testing services for AMD. As a result, orders for both Suzhou and Penang facilities have surged significantly. Building on a 33.36% year-on-year increase in revenue during the first half of 2019, the two factories achieved another impressive 33.66% year-on-year revenue growth in the first six months of 2020. Notably, over 60% of their output now consists of high-end 7-nanometer products, further solidifying the company’s leadership position in premium packaging and testing solutions. Meanwhile, the company is also vigorously advancing its R&D efforts toward 5-nanometer technology, laying a robust foundation for long-term growth. In addition, Tongfu Microelectronics has established dedicated CPU and GPU packaging and testing centers, providing critical support for the production of these cutting-edge processors. This strategic move has not only enabled the company to successfully onboard new customers but has also earned widespread recognition and praise from both industry peers and government authorities.

　　Through this acquisition, Tongfu Microelectronics has significantly enhanced its technological capabilities, advanced production capacity, revenue scale, and profitability, achieving a "1+1>2" effect. The project was named "Best Overseas Project" by *New Fortune* magazine.

　　Investment continues without pause, while fundraising accelerates the expansion of our core business.

　　On the internal front, Tongfu Microelectronics has never stopped advancing. From 2014 to 2015, leveraging the favorable policies introduced by the "National Outline for Promoting the Development of the Integrated Circuit Industry," and based on its assessment of the global trend toward shifting integrated circuit production to China, the company successively established new integrated circuit packaging and testing facilities in Nantong's Sutong Industrial Park and Hefei, Anhui Province. In 2017, the company partnered with the Haicang District Government of Xiamen to expand into South China, building a state-of-the-art packaging and testing plant in Xiamen.

　　In February 2020, Tongfu Microelectronics announced its plan to issue no more than 340 million shares in a non-public offering, aiming to raise up to 4 billion yuan. The funds will be allocated to the second phase of the integrated circuit packaging and testing project, the construction of an intelligent packaging and testing center for automotive components, various integrated circuit packaging and testing initiatives—including high-performance central processors—as well as to replenish working capital and repay bank loans.

　　Once fully operational, the three industrialization projects are expected to contribute approximately RMB 3 billion in annual revenue and RMB 500 million in combined profits. As a result, the company's revenue scale will see a significant increase of 36.29% compared to 2019. After replenishing working capital and repaying bank loans, the company’s asset-liability ratio will decrease, optimizing its asset structure and enhancing its risk-resistance capabilities. The company stated that these newly funded projects will help it capitalize on market opportunities in areas such as 5G, automotive electronics, servers, and big data, while actively providing advanced packaging and testing services to well-known domestic enterprises. By meeting growing market demands and driving the company’s further growth, this initiative also aligns closely with China’s call for domestic innovation, significantly boosting the country’s overall capabilities and expertise in integrated circuit packaging and testing.

　　The interim report reveals that in the first half of 2020, the company achieved operating revenue of RMB 4.67 billion, representing a year-on-year increase of 30.17%; net profit attributable to shareholders reached RMB 111 million, up 243.54% from the same period last year. Both the company's operating revenue and net profit hit record highs for the same period, delivering impressive results. At the end of the reporting period, the company's total assets amounted to RMB 17.694 billion. Additionally, the company announced its 2020 plan to achieve operating revenue of RMB 10.80 billion, marking a 30.64% growth compared to 2019.

　　Currently, Tongfu Microelectronics' non-public offering has received approval from the China Securities Regulatory Commission and is steadily advancing. Looking ahead, as AMD ramps up production and the company's fundraising projects begin to come online, Tongfu Microelectronics is poised to further enhance its market share, driving the continuous growth and development of China's packaging and testing industry. (Source: Securities Times Net·China)

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