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The FPGA market is almost monopolized by American companies, making the necessity for domestic substitution evident. Xilinx, Altera/Intel, Lattice, and Microchip are all American companies. In 2022, these four companies collectively held 90% of the global FPGA market share. Being placed on the list means no FPGA will be available, highlighting the strong need for domestic substitution. Particularly, technology companies represented by Huawei and Hikvision have a strong willingness for FPGA domestic substitution and actively support domestic FPGA manufacturers. Against this backdrop, domestic FPGA manufacturers are facing unprecedented development opportunities.
Currently, there is an objective gap between local FPGA manufacturers and overseas leaders, with ample room for catching up. Since 2018, when companies like ZTE and Huawei were successively placed on the U.S. Entity List, domestic FPGA manufacturers have begun to develop rapidly. The leading company, Unisoc, had a revenue of only 9.73 million yuan in 2018, which skyrocketed to over 1.5 billion yuan in 2022. However, the domestic substitution of FPGA is still in its early stages. Compared to the global leader Xilinx, local FPGA manufacturers still have significant room for improvement:
1) In terms of FPGA capacity, the highest level of domestic civilian FPGA can achieve about 400k logic units, while the largest FPGA globally is Xilinx’s VP1902 (Versal Premium), launched on June 27, 2023, with a logic unit count of 18,507k, which is 46 times that of domestic products;
2) In terms of process technology, the most advanced domestic process is currently at 14/16nm, while Xilinx released its 7nm heterogeneous FPGA product Versal in 2018;
3) In terms of revenue, in 2022, the revenue of domestic leader Unisoc was 1.5 billion yuan, with its global market share climbing from 0 to 2.6%. We estimate that Xilinx’s revenue in 2022 reached 4.2 billion USD (with a global share of over 50%), which is 20 times that of the domestic leader;
4) In terms of downstream applications, currently, the two most advanced FPGA fields—prototype verification and data center acceleration—still do not have any domestic FPGA products entering these markets;
5) In terms of gross margin, domestic FPGA products are mainly focused on low to medium capacity replacements in the consumer electronics sector, where the entry barriers are relatively low compared to the large-capacity FPGA market, leading to a certain degree of “involution.” The typical gross margin is between 35%-40%, while Xilinx has a significant competitive advantage in the high-end FPGA market, maintaining a gross margin of over 65% for nearly the past decade, and close to 70% in the last three years.
In summary, on one hand, we see that the gap between domestic and global leaders remains significant; on the other hand, this also indicates that domestic FPGA still has ample room for catching up, and the domestic substitution of FPGA has not yet reached a ceiling stage.As the domestic substitution of FPGA deepens into the high-end market, leading domestic FPGA manufacturers are expected to see improvements in both market share and profitability.
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