(Report Producer/Author: Founder Securities, Chen Hang)
1、 Investment analysis
In this report, we mainly trace upstream raw materials for photoresists, including monomers, resins, photoinitiators, solvents, etc., analyze the current mainstream raw materials for semiconductor photoresists, study their industry barriers, and analyze the current market competition pattern.
We conclude that the photoresist and its raw material industry has the following characteristics: (1) high industry barriers, high requirements for formulation technology and quality control technology; (2) Formulation research requires time to settle, there is a gap between laboratory and mass production, which takes a long time, requires early layout, and there is no curve overtaking; (3) There are many types of photoresists, involving rich raw materials; (4) With the expansion of downstream wafer factories, the overall market scale has steadily increased, and market supply is in short supply; (5) High downstream certification barriers and high customer stickiness; (6) Policy driven industries often rely on special policies to promote the transformation of technological achievements.
2、 Photoresist Details: Explore the Formula and Explore Its Barriers
2.1 Exploring Photolithography Technology: Derived from Printing
Photoetching technology is a process technology that transfers patterns on a mask to a wafer using the principles of photochemical reactions and chemical, powerless etching methods. The principle of photolithography originated from photographic plate making in printing technology. Unlike printing, photolithography does not use ink as a medium, but relies on chemical changes in photosensitive substances that occur after exposure to light to complete the transfer of this information.
Lithography technology is mainly divided into optical lithography and particle beam lithography according to the exposure light source (common particle beam lithography mainly includes X-ray, electron beam, ion beam lithography, etc.). Optical lithography is the most important lithography technology currently, and it will still occupy the mainstream position in the next few years.
Under the guidance of Moore's Law, optical lithography technology has undergone changes in exposure methods such as contact/proximity, equal magnification projection, reduced step projection, and step scan projection. As the size of integrated circuit devices continues to shrink, chip computing speed and integration continue to improve, higher requirements are put forward for the exposure resolution of photolithography technology.
2.2 Introduction to photoresist: technology intensive industry
Photoresist, also known as photoresist, refers to a corrosion resistant film material whose solubility changes due to irradiation or radiation by ultraviolet light, electron beam, ion beam, X-ray, etc. Photoresist is currently widely used in the processing and fabrication of micro graphics circuits in the photoelectric information industry, accounting for approximately 6% of the total market for IC manufacturing materials, and is an important semiconductor material. Photoresist is the highest technical barrier material among electronic chemicals, characterized by high purity requirements, complex production processes, and long technology accumulation periods.
2.3 Photoetching Collagen Materials
The photoresist consists of a film forming resin (polymerization agent), a photoinitiator, a solvent, and additives. Film forming resins are used to aggregate different materials in photoresist to form the skeleton of the photoresist, determining the basic properties of the photoresist such as hardness, flexibility, and adhesion. Photoinitiators, including photosensitizers and photoacidogenic agents, are key components of photoresists and play a decisive role in the sensitivity and resolution of photoresists.
Solvent is the largest component in photoresist, which aims to keep the photoresist in a liquid state. However, the solvent itself has almost no effect on the chemical properties of the photoresist. Additives include monomers and other additives, which regulate the photochemical reaction of photoinitiators and are mainly used to change specific chemical properties of photoresists.
Data show that resin accounts for 50% of the total cost of photoresist, accounting for the largest proportion of photoresist raw materials, followed by monomers accounting for 35%, photoinitiators and other additives accounting for 15%. For high-end photoresists, resin accounts for a higher proportion of the cost. According to the announcement of Nanda Optoelectronics, ArF resin is mainly composed of propylene glycol methyl ether acetate, accounting for only 5-10% by mass, but its cost accounts for over 97% of the total cost of photolithographic collagen materials.
2.4 Equipment required for photoresist testing and production
Due to differences in the applicable wavelength, formulation, raw material quality, and other aspects of different semiconductor photoresists, their production equipment and testing equipment are also different.
The reaction kettle is the main production equipment for photoresist. The g/i line photoresist production equipment is a stainless steel reaction kettle, while both KrF and ArF photoresists are fluorine lined reaction kettles.
Photoresist involves a wide range of testing equipment, including lithography machines, defect analysis equipment, etc., which need to be imported from abroad. According to the announcement of Nanda Optoelectronics, the detection equipment involved in the ArF photoresist project includes photolithography machines, CDSEM, coating and developing machines, bright field defect scanners, defect analysis equipment, and gas particle meters.
2.5 Classification of photoresists: positive photoresist and negative photoresist
According to the chemical reaction mechanism, photoresists can be divided into two categories: negative photoresists and positive photoresists. Both are widely used in PCBs, panels, and semiconductors. However, because negative photoresists are prone to deformation and expansion during development, the resolution can usually only reach 2 microns, so the application of positive photoresists is more popular, accounting for more than 80% of the total amount of photoresists. ArF photoresist and EUV photoresist are basically positive adhesives. Positive photoresist refers to a photoresist that, after exposure and development of a coating, dissolves the exposed portion in the development solution, while the unexposed portion remains to form an image. Negative photoresist is the opposite of positive photoresist, in which the unexposed portion is dissolved and the exposed portion forms an image.
Overview of photoresist technical barriers
Photoresist is the material with the highest technical barriers among electronic chemicals, characterized by high purity requirements, complex production processes, large investment in production and testing equipment, and long technology accumulation periods. From the perspective of related technologies, the core technology of photoresist includes formulation technology, quality control technology, and raw material technology. Formulation technology is the core of photoresist functions, and quality control technology can ensure the stability of photoresist performance. The quality of photoresist collagen materials plays a key role in the quality of photoresist.
According to the data of the Chinese Academy of Commerce and Industry, in 2020, China's photoresists mainly concentrated in PCB photoresists and LCD photoresists with low technical barriers, accounting for 61% and 35% respectively, while in semiconductor photoresists with high technical barriers, the proportion was only 29%.
2.7 Photoresist customer barriers: high barriers, long certification cycle
In terms of photoresist, according to industry practice, before photoresist is supplied, it is generally subject to verification of photoresist products and factory (production line) qualifications. According to the verification stage, photoresist verification is divided into PRS (photoresist performance test), STR (small test), MSTR (batch verification), and Release (pass verification); In terms of factory (production line) qualification verification, verification is mainly carried out in terms of quality system, supply stability, factory (production line) capacity, etc. After the factory (production line) qualification verification and product verification are passed, the formal supply to customers can be realized. The validation cycle is typically 6-24 months.
The main verification process of photoresist monomer is as follows: the manufacturer sends samples to potential customers for research and development, and the customers test various quality indicators and synthesize resin for verification; After passing the product verification, conduct factory inspection and quality system certification; Finally, conduct pilot level product order verification. The verification cycle of photoresist monomer is typically 6-24 months.
The next 2-3 years will be a critical window for the development of KrF and ArF photoresists and related companies as wafer factories accelerate the verification of domestic semiconductor materials. We believe that domestic enterprises should lock in opportunities to replace new production lines in wafer factories and avoid barriers to existing production lines. For new production lines, the early stage mainly focuses on seizing production lines, becoming the first, second, and third supply, and establishing a product moat. Lock in the first mover advantage through stable supply in the later stage.

3、 The industrial chain is monopolized by Japan and the United States, and the core raw materials are controlled by others
3.1 Global photoresist competition pattern: Japanese, American, and Korean enterprises monopolize the market
Global photoresist competition pattern: The photoresist market is mainly monopolized by Japanese, American, and Korean companies, with mainland companies accounting for less than 10% of the market. In the global semiconductor photoresist market, Japanese companies firmly occupy a leading position, accounting for at least 60%. The panel photoresist market in China is mainly occupied by foreign enterprises, accounting for 65%, with Japanese and Korean enterprises occupying the main market. China dominates the global PCB photoresist market, with a market share of 93.35% in 2019. In the domestic market, the market share of domestic enterprises has also exceeded half, making PCB photoresist the photoresist product with the highest domestic substitution rate.
3.2 Semiconductor photoresist market: steady growth, stable market
In 2019, the global semiconductor market sales reached 412.3 billion US dollars, a year-on-year decrease of 12%, mainly due to the cyclical nature of the storage market. According to data released by WSTS (Global Semiconductor Transaction Statistics) in June 2020, global semiconductor sales will reach $426 billion in 2020, which is less than expected. This is mainly attributed to the negative effect of COVID-19 on the global economy and supply chain. WSTS predicts that semiconductor sales will rebound to $452 billion in 2021.
According to statistical data from SEMI, the global market size of semiconductor photoresists increased from $1.5 billion in 2016-2019 to $1.8 billion in 2019. According to Research and Markets, the global semiconductor photoresist market size reached 2.04 billion US dollars in 2020, with a compound annual growth rate of 8% in the past four years.
3.3 Photoresist: Industrial Chain Analysis
The photoresist industry chain covers a wide range, with upstream raw materials being an important part of the photoresist industry. The quality of raw materials determines the quality of photoresist products, including resins, photoinitiators, solvents, and monomers; The middle reaches include various types of photoresists, mainly including PCB photoresists, LCD photoresists, and semiconductor photoresists; Downstream is the application field, where photoresist is mainly used for manufacturing printed circuit boards, flat panel displays, semiconductors, etc. The barriers to the photoresist industry chain are high, including raw material barriers, formula barriers, equipment barriers, and downstream certification barriers.
3.4 Tokyo Yinghua: EUV photoresist leader
Tokyo Yinghua was founded in 1936. At the beginning of its establishment, its main business was the development and production of high-purity reagents. In the 1960s, it began to enter the semiconductor manufacturing field and was the first Japanese company to enter the photoresist field. After developing negative photoresist and positive photoresist in 1968 and 1972, it has been developing for over 50 years in the field of photoresist research and development.
In 2006, the company took the lead in investing in the research and development of the technology required for ArF immersion photoresist. In 2019, the company was also one of the companies leading the EUV photoresist process below 10 nm. In 2019, the company won multiple "firsts" in the global semiconductor photoresist market, highlighting its industry leadership position. In the future, the company will focus on the era dividend of 5G, AI, power devices, and vigorously develop high-end photoresists such as EUV, ArF, and advanced packaging photoresists.
3.5 Taking Japan as a Example: Three Transfers of the Semiconductor Industry
In the development history of the integrated circuit industry, European and American manufacturers have led the early research and development of photoresist products. In the 1970s, the semiconductor industry center began its first migration, which resulted in many well-known Japanese enterprises. Japan took the opportunity to rise and quickly enter the photoresist market.
In the 1980s and 1990s, Japan's semiconductor industry began to decline under the trade friction between Japan and the United States, and the semiconductor industry center moved to South Korea and Taiwan, China, China. However, Japan's photoresist industry has seized the opportunity of process development, preemptive advantages in materials and equipment, and regional advantages with South Korea and Taiwan, China, China, to become the market leader. IBM pioneered KrF lithography in the early 1980s. However, at this time, Intel's 1982 process node is still 1.5 μ m. "It can be achieved using lower cost i-line lithography, so KrF photoresist has not been produced in a timely manner and has not been massively scaled up.". In 1995, TOK of Japan broke through KrF photoresist and achieved commercial sales, breaking IBM's monopoly on KrF photoresist, and the semiconductor process node at that time developed to 0.25 - 0.35 μ m. It approaches the limit of i-line lithography. At the same time, the lithography market has evolved into an era where Canon and Nikon are the leading players.
After the third transfer, the Japanese photoresist industry, relying on high technical and market barriers, still occupies a monopoly position in the high-end market in the wave of global division of labor in the semiconductor industry. Japanese photoresists have further consolidated their dominance in the high-end ArF and EUV photoresist markets.
4、 Localization Urgently Drives Domestic Enterprises to Catch Up
4.1 The domestic photoresist market has huge potential in the future, with downstream capacity expansion driving demand growth
In recent years, with the vigorous development of the semiconductor industry, there is a strong demand for semiconductor materials, and the demand for photoresist market has maintained a good growth trend. According to the Jingrui Electric Materials Announcement, the size of China's photoresist market in 2019 was about 8.8 billion yuan, and it is expected that the market will continue to grow at an average annual rate of 15% in the next three years. By 2022, the size of China's photoresist market will exceed 11.7 billion yuan.
The wafer factory capacity in Chinese Mainland is about to explode, and the photoresist is expected to continue to grow at a high rate. According to the data of major fabs, at least 29 new fabs will be built in Chinese Mainland in the next five years. In terms of 12 inch wafers, according to statistics from IDC and Chippinghts, as of 2019, the installed capacity of China's 12 inch wafer manufacturers was about 900000 wafers per month. It is expected that by 2024, the capacity of China's 12 inch wafer factories will reach 2.73 million wafers per month under full production, with a compound annual growth rate of 25%. In terms of 8-inch chips, it is estimated that the production capacity will be 1.87 million chips per month in 2024, with a compound annual growth rate of 14%.
The photoresist market continues to differentiate, with ArF and KrF driving high growth in the photoresist market. In 2020, the market share of ArF photoresist in Chinese Mainland will be 40%; KrF photoresist accounted for 39%; G/I line photoresist accounts for 20%. As the manufacturing process continues to shrink, the demand for KrF and ArF photoresists in the market has rapidly increased, becoming a major factor driving the rapid growth of the photoresist market.
4.2 Chinese photoresist upstream material: resin
Although the proportion of resin quality in photoresist raw materials is not high, it controls the main cost of photoresist. According to the announcement of Nanda Optoelectronics, ArF resin is mainly composed of propylene glycol methyl ether acetate, accounting for only 5-10% by mass, but its cost accounts for over 97% of the total cost of photolithographic collagen materials. Currently, most manufacturers of photoresist resins in China, except Bokang Chemical, mainly produce mid to low end resins, while high-end resins are dominated by foreign companies such as Japan, South Korea, and the United States. From the perspective of major suppliers, Bokang Chemical covers medium to high-end semiconductor photoresist resins. Strong new materials have certain advantages in PCB photoresist resin. Shengquan Group is a leading manufacturer of panel display photoresist resin and semiconductor photoresist resin in Chinese Mainland.
According to Fuji economic data, the selling price of KrF adhesive resin is stable at 5000 yuan/kg, and the selling price of ArF adhesive resin is nearly 30000 yuan/kg. It is expected that the future price trend will be slightly downward. The reason for the high price of semiconductor photoresist resin is the increasing demand for ArF/KrF photoresist worldwide and the lack of core preparation technology in China. It is estimated that the global ArF and KrF resin scale will reach 4 billion yuan in 2023.
The industrialization of semiconductor photoresist resins faces many difficulties. The first is the synthesis technology. The synthesis technology of photoresist resins can be divided into free radical polymerization, anionic polymerization, and active free radical polymerization. Currently, the most commonly used is free radical polymerization, which is easy to control the molecular weight of resin and easy to industrialization. However, the disadvantage is that the PDI (degree of dispersion) is difficult to control, resulting in its inability to achieve some photolithographic performance. Other challenges include the stability of amplification and removal of metal ions, stable supply of raw materials and resins, long customer certification and procurement processes, and the need for customized products to achieve scale effects.
4.3 The state vigorously supports finished photoresist and its raw materials
In order to further complete the pilot work of insurance compensation for the first batch of application of key new materials, the Ministry of Industry and Information Technology released the "Demonstration Catalogue for the First Batch Application of Key New Materials (Version 2021)" in 2021, in which the selection of photoresists and their raw materials covers semiconductor photoresists and their raw materials and positive photoresists for LCD.
4.4 Chinachem Technology: the leader in the overall layout of upstream materials
Founded in 2002, Chinachem Technology focuses on the field of automotive safety, with product lines covering passive safety system components such as airbag cloth, airbag bags, and seat belts. In 2020, the company invested in Xuzhou Bokang to enter the core circuit of high-end photoresist.
As a leading enterprise in China that integrates the production of photoresist monomers, resins, solvents, and finished adhesives, it has significant independent and controllable advantages in the entire industrial chain. Photoresist monomer is one of Bokang's main businesses. In addition to self use, photoresist products are mainly exported to relevant enterprises in Japan and South Korea. As a mature supplier of photoresist monomers, the company has significant advantages in the resin field, including stable quality of self-produced monomers, complete categories, and recognition by key customers, which can ensure the safe and stable supply of raw materials for resin; The industrial chain is complete, and Bokang has both a monomer foundation and a self developed photoresist series of products; The process level of resin synthesis is stable, the level of scale-up production is high, and the quality and batch stability are good. Currently, Xuzhou Bokang has successfully developed 50+types of semiconductor photoresist resins, including 10+types of ArF photoresist resins, 20+types of KrF photoresist resins, 10+types of i-line photoresist resins, 5-6 types of packaging photoresist resins, and about 10 types of electron beam photoresist resins. Among them, more than 20 types have been finalized and mass produced. The company has a wide range of photoresists, including i-line, ArF, and KrF photoresists.
Bokang's revenue has shown a significant upward trend, doubling its performance in 2020. The photoresist monomer achieved a revenue of 59.4317 million yuan, accounting for 27.76% of the total revenue; The photoresist business achieved 3.9763 million yuan, accounting for 1.86%.

Excerpts from the report: