Rebirth 08: Rise from copycat phones

Chapter 179: 4 Billion US Dollars Cash Flow
After entering December, Zhiyun Technology reached procurement agreements for the next-generation flagship chips with Qualcomm and Texas Instruments after some negotiations.

The use of dedicated chips has initially solved the problem.

However, this also stimulated Xu Shenxue further, forcing him to use a large number of achievement points to exchange for more high-level scientific research places for the chip design team.

At the same time, it also made Xu Shenxue pay more attention to the security and control of the supply chain!
In the original time and space, he had seen some news reports that large companies such as Apple and Warwick had very strong control over the supply chain, causing many supply chain manufacturers to suffer.

In the past, I was standing from the perspective of a bystander, and even expressed a certain sympathy for the plight of those suppliers out of a mentality of leaning towards the weaker party.

But now, after becoming a mobile phone manufacturer, I deeply feel the importance of controlling the supply chain!
It is necessary to ensure the price of spare parts in the supply chain and continuously lower prices to control hardware costs and maintain one's own hardware profits.

We must also ensure that there are no problems with the supply chain, that is, a continuous supply and no quality issues... At the same time, we must urge those suppliers to continue to carry out technological research and development, upgrade and iterate spare parts, and thus meet the technical requirements of the next generation of new products.

However, these are actually contrary to the interests of supply chain companies.

From the supplier's perspective, when they develop a new product, they naturally hope to sell it forever, and at a very high price.

At the same time, they are unwilling to invest most of the profits from selling products into research and development.

Then the cycle goes on round after round... the profits from developing new products and selling them are used again for research and development... isn't it all in vain?

Therefore, in addition to mutual dependence, there are huge conflicts of interest between OEMs and supply chain manufacturers.

Once the OEM's control over the supply chain weakens, huge troubles will arise.

The homogeneity problem of mobile phone SOC this time is a typical manifestation of insufficient control over the supply chain.

But Xu Shenxue will not allow such problems to arise in the future!
Not only in the SOC field, in order to prepare for the future, Xu Shenxue proposed in an investment and supply chain strategy meeting held in late December that the independent capabilities of core components should be further strengthened, while at the same time, investment and control over suppliers of non-critical components should be strengthened.

"We must have a firm grasp on the entire supply chain and ensure that it can operate in accordance with our strategic vision!"

“We need to avoid supply chain companies causing conflicts of interest with us for their own benefit.”

“Therefore, the strategic investment department should increase investment in external supply chain companies. If they can hold a controlling stake, they should do so. Even if they cannot hold a controlling stake, they should obtain a seat on the board of directors and have a certain level of opposition!”

“We should vigorously acquire some supply chain companies that we can control, those with potential and strength… Of course, in order to maintain the motivation of the management and technical teams, we should leave sufficient shares for the management and technical teams even if we acquire them, and adopt appropriate equity incentive measures. We will not pursue a one-size-fits-all approach such as 100% shares!”

"The most important thing is that when purchasing external parts and components, we must firmly implement the 80-20 principle and never allow a situation where there is only one supply chain company for a certain type of part!"

"Two supply chain companies are the bottom line, and it would be best if we could have three. By tilting orders, we can support and stimulate them to continue to reduce costs and increase efficiency, innovate in research and development, and keep up with our pace."

"For supply chain companies that fail to meet requirements or are unwilling to cooperate, we must take positive, bold and proactive measures to punish and warn them by reducing order shares, lowering purchase prices and other means. If they still refuse to cooperate, we must directly and decisively change suppliers!"

"This is why we need to implement the 82 principle. We always need one or even two alternative plans!"

“The security and control of the supply chain must be raised to the strategic level of corporate security!”

After the meeting started, Xu Shenxue raised a lot of demands on the supply chain issue. Gu Zhiming, who had been working in the supply chain field for more than 20 years, also felt deeply about this.

He immediately said: "Don't worry, Director Xu, our supply chain department has been advancing in an orderly manner based on the basic supply chain security principles that Director Xu proposed before!"

"At present, in our supply chain, whether it is major or minor parts, except for self-produced parts, all externally purchased parts are purchased according to the 80-20 principle!"

"In terms of strategic investment and acquisition, we have acquired 13 relatively important supply chain companies and made strategic investments in 76 companies, of which 23 have become controlling shareholders. We will continue to increase our acquisition and investment efforts in the future!"

“Most of them are domestic companies, and a small number are foreign companies!”

The entire supply chain system of Zhiyun/Weiku is very large, involving many companies.

In the beginning, there weren’t that many, because at the beginning, Zhiyun/Weiku Electronics purchased parts for finished products.

But later, in order to meet the design needs of their own mobile phones, Zhiyun Technology and Weiku Electronics began to make various requirements for finished spare parts and delve into the field of spare parts design and manufacturing.

In this case, the purchase of finished parts and components has changed to purchasing small parts and even raw materials from upstream, and then handing them over to a supply chain company for integrated design and production of qualified parts and components, and finally handing them over to the mobile phone assembly factory for final assembly.

Like the fuselage!
A typical example is batteries. Zhiyun Technology does not directly purchase finished batteries.

We designed the battery management chip ourselves, then outsourced it to a chip foundry for production, and then handed it over to the battery factory to make the battery pack based on the technical requirements put forward by Zhiyun. The battery is then combined with the battery management module provided by Zhiyun Technology to form a customized mobile phone battery for delivery.

The batteries in modern mobile phones all have built-in chips to manage charging and discharging and ensure safety.

Previously, Zhiyun Technology did not perform well in this area, so it relied on purchasing battery management module solutions from major foreign manufacturers. Later, Zhiyun Semiconductor developed its own battery management chip. After the technology was greatly improved, the performance was quite good, especially in safety management.

The charging and discharging efficiency is of ordinary first-class level, nothing too outstanding, but the safety is excellent. When designing the battery management module, the design team focused on safety management.

You should know that lithium batteries are very dangerous. If the battery management technology is not good, they will explode in minutes.

When it comes to battery charging and discharging efficiency, Zhiyun Technology pays more attention to battery safety issues.

Because Zhiyun phones are sold globally and are high-end phones, in terms of battery, you can charge slowly and have poor battery life, but you can't explode or catch fire...

Therefore, Zhiyun Technology is actually very conservative in the battery field and hardly makes any technological advances.

For example, Xu Shenxue had already mentioned fast charging technology to the technical team a long time ago, and several fast charging technology solutions had been proposed before, but all of them were rejected... It's not that the charging is not fast enough, but that it cannot ensure the ultimate safety. Therefore, the battery team in Zhiyun Technology is still working on fast charging technology, trying to find a safer and more effective fast charging technology...

The existing technology is not mature enough to be used. After all, if a battery in a Zhiyun phone that costs five, six, or even seven thousand yuan explodes and catches fire, the news will instantly make headlines around the world!

In the past two years, Zhiyun phones have been selling well all over the world, but there has not been any major news about the phones exploding or catching fire... Well, there were a few isolated incidents, but they were all handled in a timely manner by Zhiyun's public relations team, and did not cause much waves in public opinion.

There is no such thing as lithium batteries, which are absolutely safe!
----

In the battery field, Zhiyun Technology designs the battery management modules itself and then hands them over to the OEM factories for production.

The battery foundry in Zhiyun Technology's supply chain only provides basic battery packs and subsequent integration and assembly.

Therefore, it is impossible to sell the so-called original Zhiyun mobile phone batteries in the third-party spare parts market... because the battery management module in each Zhiyun mobile phone battery belongs to Zhiyun Technology itself, which is only used for its own use and not sold to the outside world, so it will never flow out of the market, let alone the spare parts market.

Therefore, many so-called original Zhiyun batteries on the Internet, except for second-hand ones that are disassembled, are all fake.

In-depth design integration of components is a new feature in the current consumer electronics industry chain. The companies that have done this well are Zhiyun and Fruit. In addition, other four are also actively promoting it.

Of course, these are only limited to some larger and more special spare parts. Conventional spare parts that do not require much technical content will not be directly used.

Among special spare parts, such as screens, this thing is really too cross-industry. Except for Four Star, neither Fruit nor Zhiyun makes it themselves.

On the one hand, Zhiyun has strategic cooperation with foreign companies such as LG and Sharp, and on the other hand, it supports domestic screen manufacturers through strategic investment.

If you do it yourself, there is no need for this... The domestic LCD panel industry is actually doing quite well nowadays. There won't be any bottleneck problems, and the cost is also easy to control.

Camera modules, including optical lenses, were not very good before. However, after Zhiyun Technology strongly supported two or three domestic manufacturers, the camera module field is now developing rapidly and has been fully applied in Weiku Electronics. When the C4 series of mobile phones are launched next year, they will also be fully equipped with domestic camera modules.

There are many similar ones, and basically they all adopt the model of strategic investment plus order support!

We will not blindly pursue controlling stakes or even autonomy. There is no need for that. It will be enough to achieve strong enough control over the supply chain.

By the way, Zhiyun Technology and Fruit actually share quite a lot of supply chain companies... There is no way around it, both companies are pursuing high-end products and have very high requirements for spare parts, and there are often only a few leading supply chain companies that can meet the requirements.

Therefore, whether it is Zhiyun or Fruit, they will all go there without any prior arrangement.

For example, in the field of screens, Apple also uses screens from LG and Sharp, but the products they use are different from the large screens used by Zhiyun.

----

After a meeting on strengthening control over the supply chain, Xu Shenxue entered a relatively stable period of work. He had a lot of free time to hang out with Lin Yaxian, and occasionally he would take a few secretaries from the general manager's office out to play.

But the top is just talking, the bottom is running around...

Xu Shenxue only held a strategic meeting, but Zhiyun Technology's strategic investment department and supply chain department became busy with this.

Start a new round of review of companies within the supply chain to identify potential supply chain security risks and propose solutions.

So when it was reflected outside, people saw Zhiyun Technology waving checks to buy, buy, buy...

People were once again shocked by Zhiyun Technology’s financial strength!
The current cash flow of Zhiyun Technology is terrifying!

Before going public, the company had more than 10 billion US dollars in cash flow on its books, and when it went public, it raised another 38 billion US dollars through the public sale of shares.

This resulted in a terrifying cash flow of more than 50 billion US dollars appearing in Zhiyun Technology’s account!
You should know that the market value of Zhiyun Technology is only more than 200 billion US dollars, but when it first went public, its cash flow exceeded 50 billion US dollars.

Of course, cash flow is just cash flow. Most of the money is actually raised from listing financing and cannot be counted as the company's normal revenue.

It does not mean that all of this money is corporate profit and can be used in its entirety... a lot of it is needed to pay for various parts and components, research and development expenses, marketing expenses and other miscellaneous expenses.

At the end of the year, the profit might be just over 10 billion US dollars.

But... this is still a cash flow that is beyond the reach of most companies in the world.

With its huge capital, Zhiyun Technology can carry out various acquisitions and strategic investments on a large scale.

It is normal to make strategic investments of tens of millions of dollars in some supply chain companies and some promising innovative companies. Xu Shenxue doesn't even need to hold a meeting to discuss it. The strategic investment department will finalize it and report to Xu Shenxue, who will simply take a look, sign and approve it.

Strategic investments or acquisitions involving hundreds of millions of dollars require Xu Shenxue's personal attention... but it is only a slight attention, not to the extent that Xu Shenxue needs to handle it personally.

Only some critical and special investments and acquisitions will be handled personally by Xu Shenxue.

In addition, Xu Shenxue will also personally pay attention to and handle strategic investments or investments involving tens or even hundreds of billions of US dollars.

Especially when it comes to the field of chip manufacturing.

In early January 11 years later, Xu Shenxue led his team to Jiangcheng to start the final strategic negotiations on the acquisition of Jiangcheng Semiconductor.

(End of this chapter)