24. A Chinese Tech Company — Anji Technology

【Answer 1】 Referring to the table above, Cabot and Anji Technology appear—on the surface—to each excel in distinct areas of slurry products; but in reality, is Anji Technology focused solely on copper CMP slurries? How do its product portfolio breadth and technical capabilities compare with those of global leaders like Cabot? Versum Materials (Huizhan Materials Technology), headquartered in the U.S., reported $1.372 billion in revenue and $198 million in net profit in 2018; its latest market capitalization stands at $5.667 billion, with a static P/E ratio of 24.83x. We conduct the most direct comparison possible between these two U.S. peers and Anji Technology, based on their respective 2018 annual reports: Dancing alongside global industry leaders—does Anji Technology still lag significantly behind? III. The Indispensable Customers Customer composition is shown in the table below: Ninety percent of Anji’s customers are based on the Chinese mainland, and only 10% overseas; SMIC is unquestionably its largest customer. (TSMC accounted for 8.15% of Anji’s 2018 sales revenue; Yangtze Memory Technologies Co., Ltd. (YMTC) accounted for 8%.) Given such high concentration of sales among major customers, does this pose material risk? IV. Long-Term Shareholders Reviewing the company’s development history: 2004: Shanghai Anji established; R&D center located in Zhangjiang Hi-Tech Park, Pudong New Area, Shanghai. 2006–2007: Anji Technology founded in Jinqiao Export Processing Zone, Pudong New Area, Shanghai—a wholly foreign-owned enterprise at inception. 2008: Launched its first chemical-mechanical polishing (CMP) slurry product, entering mass production; became one of SMIC’s core suppliers. 2009: Began supplying photoresist strippers to Semiconductor Manufacturing International Corporation (SMIC) and YMTC. 2014: Entered TSMC’s supplier network. 2015: Completed offshore restructuring, converting into a Sino-foreign joint venture; established a Taiwan subsidiary—Anji Microelectronics (Taiwan). 2016: Completed shareholding reform; China Integrated Circuit Industry Investment Fund (“Big Fund”) invested. 2017–2018: Following a series of equity structure adjustments, converted again into a Sino-foreign joint venture; construction commenced on Ningbo’s second production base. Currently operates three wholly owned subsidiaries (no equity investments in affiliated companies): Shanghai Anji, Ningbo Anji, and Taiwan Anji. July 2019: Listed on the STAR Market. Among the top ten shareholders, particular attention should be paid to the two largest. No other affiliations or concerted action agreements exist among the remaining shareholders. Due to highly dispersed shareholding, Anji Cayman has no controlling shareholder—and consequently, neither does Anji Technology. As shown in the table above, China’s Ministry of Finance holds an indirect stake. With highly fragmented equity and no controlling shareholder, and with major shareholders mutually constraining one another, could the company’s decision-making efficiency suffer amid the rapidly shifting landscape of industrial competition? V. R&D Prospects The company raised a total of ¥303.1 million through this offering, with funds earmarked for investment in science-and-technology innovation fields: The company asserts that its funded projects align with the development trends of the integrated circuit materials industry and face no risks of technological obsolescence or product redundancy. It further pledges that any excess proceeds will be used exclusively for core business operations—with priority allocation toward science-and-technology innovation—and will neither directly nor indirectly invest in entities unrelated to its principal business. Nevertheless, although Anji Technology’s R&D expenditure as a percentage of revenue has consistently remained high—around 21%—how substantial are its actual R&D outcomes? Anji Technology and its subsidiaries currently hold 190 authorized invention patents (all invention patents): 140 in mainland China, 42 in Taiwan, 4 in the U.S., 3 in Singapore, and 1 in South Korea. Yet why does the most recent patent application date trace back to December 2014?

An Emerging Semiconductor Materials Industry Giant

【Answer 2】 Let us now refocus on the company itself. Today’s Entegris is a firm specializing in semiconductor materials and equipment. Its business comprises three segments: Semiconductor Chemicals & Equipment Materials (SCEM), Microcontamination Control (MC) equipment, and Advanced Materials Handling (AMH) solutions. Strictly speaking, Entegris is not purely a semiconductor materials company—it also engages in equipment-related businesses, primarily providing contamination-control solutions for storage and transport of raw materials along semiconductor fabrication lines. Its customer base is highly diversified, and its product catalog is exceptionally broad—featuring over 20,000 distinct SKUs to meet varied requirements across industries and production lines. Over many years, Entegris has consistently achieved revenue growth exceeding the industry average: its 10-year revenue CAGR stands at approximately 12%, while its operating margin has risen from roughly 10% earlier to 24% today. In terms of stock performance, Entegris ranks among the strongest-performing semiconductor equities over the past decade. Notably, however, during the 2008 financial crisis—when the semiconductor industry contracted—and given Entegris’s then-fragile market position, limited scale, and modest revenue base, its financial results were severely impacted. Consequently, in 2009, the company hit an all-time low in share price—making its subsequent recovery and sharp rebound especially pronounced. Today, Entegris commands significant scale within the industry. Looking ahead, the company expects to sustain long-term annualized growth of approximately 15%, continuing its healthy expansion within the sector—driven by above-industry organic growth, strategic acquisitions with strong potential, and entry into new end markets. Organic growth relies primarily on product competitiveness and underlying demand growth in the semiconductor industry; meanwhile, expansion into new sectors centers on delivering materials and equipment solutions for the healthcare industry. On the external growth front, Entegris’s historical growth owes much to its outstanding acquisition strategy—numerous acquisitions have collectively forged its current competitive product portfolio. The most significant acquisition to date is Entegris’s recent acquisition of CCMP (Cabot Microelectronics). CCMP is a champion in its semiconductor niche—the world leader in CMP slurries—and also offers polishing pads and other electronic chemicals. Over many years, CCMP demonstrated robust growth. Post-merger, the new Entegris will achieve annual revenue of approximately $3.4 billion and EBITDA of around $1 billion, further strengthening its market share in the semiconductor materials space—and advancing its evolution toward becoming a mid-sized semiconductor materials and equipment manufacturer. The combined entity will cover the entire CMP process chain. Based on 2021 data, the new Entegris had already reached $3.4 billion in annual revenue; thus, following 2022’s growth, it is poised to exceed $3.7 billion in annual revenue. This acquisition employed substantial debt leverage—issuing nearly $4 billion in bonds—while diluting equity only modestly: approximately 10% in new shares issued. As a result, the new Entegris became a company with a $14.5 billion market capitalization and $3.4 billion in annual revenue.