Rebirth 08: Rise from copycat phones

Chapter 400 Hailan-Tesla Strategic Cooperation

In business competition, it is very important to distinguish who is the enemy and who is the friend; who can be cooperated with and who should be suppressed.

This is especially true when it comes to cross-border markets and competition between old and new industries.

What Xu Shenxue is facing now is that Hailan Automobile’s biggest enemy is not the emerging electric car manufacturers like Tesla, nor the new domestic manufacturers, or the electric car manufacturers transformed from traditional domestic car manufacturers such as BYD...

Or to put it more extreme, electric vehicle peers are not the enemy...at least not yet.

The current electric vehicle industry is still a blue ocean industry. Its biggest competitors are not its electric vehicle peers, but traditional fuel manufacturers that occupy almost all market share... To be precise, they are traditional international fuel vehicle manufacturers such as General Motors, Ford, Toyota, Honda, Hyundai, Volkswagen, BMW, Mercedes-Benz, and Peugeot.

This can be seen from the current overall automobile market.

In 2016, even with the strong support of giant Hailan Automobile, the global sales of new energy vehicles totaled just over million, and the global penetration rate was only about %.

Even in China, where new energy is strongly supported and developing at the fastest pace, and is backed by giants like HaiLan Automobile, the penetration rate of new energy vehicles is only about 7%.

This is still a long way from market saturation.

In this case, whether it is Hailan Automobile, Tesla, or automobile manufacturers such as BYD that are vigorously transforming into electric vehicles, their most important task is not to fight with their electric vehicle peers, but to find ways to seize more market share from the original fuel vehicle manufacturers.

The current automobile market actually has certain similarities with the early mobile phone market.

Before Apple released smartphones, various feature phones dominated the global mobile phone market.

After the release of the Fruit 2G mobile phone, the sales volume reached more than million units, but compared with the mobile phone market worth more than billion, this was just a big wave.

Even two years later in 09, when Zhiyun Mobile released C1, C2 and S9, it once again set off a wave of smart phones.
However, at that time, Zhiyun Mobile and Fruit Mobile seemed to be selling their mobile phones like crazy, but their production and sales volume was still a small part compared to the global mobile phone market.

Therefore, Zhiyun Group and Fruit were not competing enemies back then. On the contrary... the two companies were actually in a very tacit cooperative relationship in the early years.

The two companies have been fighting various tacit battles around the world, and have even cooperated on some supply chains. They are also actively promoting various smartphone technology standards, mobile Internet standards, etc.

Through the tacit cooperation in the early years, Zhiyun Group and Fruit successfully divided up the global high-end mobile phone market and completely killed the traditional mobile phone manufacturers...Nouya, the former mobile phone giant, completely collapsed in just a few years.

Motorola, the former second-largest market player, was on the verge of death and was eventually acquired by Lianxiang. Subsequently, relying on the Chinese smartphone supply chain advantages brought by Lianxiang, Motorola was able to barely maintain its status as an American mobile phone brand... But in fact, of the Motorola mobile phones sold in the United States today, only the brand name is still considered American.

Almost all the parts are from China. Core parts such as mobile phone SOC and storage chips are all products of Zhiyun Group. Other parts are also mature shelf products in the domestic smartphone supply chain.

The final product assembly is also carried out in Huaxia.

There is also the former Sony Ericsson, which is basically finished now.

There are still many traditional mobile phone manufacturers at home and abroad that have either died or become third- or fourth-rate, and only a few have survived.

Among them, the four-star brand has the most successful transformation, followed by LG, which has also been quite successful.

In the wave of smartphones impacting feature phones, there is actually a lot of cooperation between smartphone manufacturers.

At that time, traditional mobile phone manufacturers such as Nokia and Motorola once accused Zhiyun Group and Fruit of monopoly and unfair competition.

And it is true. The reason why Zhiyun Group and Fruit were so keen on the so-called head-on competition back then was mostly not to compete with each other, but more to clear the field and swallow up the mid-to-high-end market of traditional mobile phones.

In the era of incremental market back then, both Zhiyun and Fruit were actually having a lot of fun, and their relationship was not too bad... but this period of friendship was very short, lasting only about two years.

However, after traditional mobile phone manufacturers such as Nokia were eliminated one after another, the production and sales volume of smartphones exploded rapidly in just a few years, reaching hundreds of millions, and the penetration rate quickly reached several dozen percentage points.

After that, Zhiyun Group began to compete head-on with manufacturers such as Fruit and Sixin.

After the production capacity of smartphones exceeded one billion, the entire smartphone market, especially the high-end smartphone market, has basically entered the inventory era.

From this time on, Zhiyun and Fruit broke out into a fierce conflict, which eventually led to each doing their own thing... Zhiyun drove Fruit out of the Chinese market, and Fruit also drove Zhiyun out of the American market!
The two sides each occupy their own domestic market, and then fight for third-party markets in ASEAN, Europe, Japan, South Korea, Mexico, Canada, New Zealand and other regions.

In fact, there is also such a trend in the current electric vehicle market.

Hailan Automobile and Tesla seem to be the most direct competitors... and in fact they are.

But they have a more powerful common enemy: traditional fuel manufacturers!
Globally, the annual sales of passenger cars are around 80 million, but new energy vehicles are only 2 million, which means that around 98 percent of passenger cars are traditional fuel vehicles.

On one side, there are two million new energy vehicle sales, and on the other side, there are around 80 million global passenger vehicle sales…any smart person can see where the enemy is.

Xu Shenxue can see these situations, and so can Musk.

Therefore, Musk was very tempted by Xu Shenxue's invitation to cooperate. If he could deepen the cooperation with Xu Shenxue, Tesla would be able to obtain a more stable supply of power batteries, and excellent semi-solid batteries.

At the same time, it can also ensure the supply of airborne computing chips... The PX2 chip released last year is quite good. It uses a 20-nanometer process and a more advanced architecture design. A single chip can provide TOPS of computing power.

Although this computing power is not as exaggerated as the 3TOPS of the abnormal EYQ80 chip, it is also first-class... At least among the airborne computing power chips available on the market, the PX2 chip is already among the top ones.

Tesla is currently using the PX2 platform.

Moreover, Zhiyun Semiconductor is still continuing to promote the development of the PX computing power platform... Tesla is not the only customer of the PX platform. A large number of traditional car companies or new forces that have the strength and ambition to develop their own assisted driving functions have chosen the PX computing power platform to develop their assisted driving systems.

If you do not have the ability to develop, or are unwilling to spend huge amounts of money to develop your own assisted driving system... Zhiyun Group can also directly provide customers with a full set of technical solutions: the EYEQ series.

The chips, sensors, and algorithms are sold directly as a package, and customers only need to do some minor adaptations. In addition to the early pure vision solutions, the upgraded EYEQ4 series also provides lidar solutions... The top-of-the-line solution can even provide a very good assisted driving solution.

However, it is also quite expensive for car manufacturers to directly purchase the top-of-the-line EYEQ4 solution.

If Zhiyun sells chips, it will only cost you a few thousand or tens of thousands of yuan at most...but if you go to Zhiyun to buy a complete set of EYEQ4 solutions.

Chip + lidar + camera + various other sensors, plus an algorithm, all packaged together and sold to you for 70,000 or 80,000 yuan... It's very shady.

Therefore, very few car models will choose the top-of-the-line EYEQ4 series launched this year... Most of them will just make a low-end model to let customers know that they have an assisted driving system.

Manufacturers like Tesla naturally choose to develop their own PX platform, and are also developing their own computing chips.

However, when Xu Shenxue talked with Musk, he also said that by the end of the year, Zhiyun Semiconductor will also launch the PX3 chip based on the 60-nanometer process, and the computing power of a single chip is expected to reach TOPS.

When Musk heard what Xu Shenxue said, he looked at his own self-developed computing chip and sighed.

His chip engineer designed a self-developed chip for him. The whole system uses dual chips, but the total computing power is only 144TOPS... But next year, Zhiyun Semiconductor will launch a PX60 chip with a single chip of 3TOPS. If multiple chips are connected in parallel, it can easily reach 180TOPS or even 240TOPS. This is because Zhiyun Semiconductor's computing power chip has another important feature: the chip communication speed is very high, and there is also a dedicated development ecosystem to support the parallel connection of multiple chips.

Most others have two chips, but Zhiyun Semiconductor's airborne computing chips often have four, six or even more than ten.

Although this is more expensive, it can bring greater total computing power.

This is also the reason why Zhiyun Semiconductor sells not a single PX chip, but a PX computing power platform.

Of course, even in terms of the computing power of a single chip, other manufacturers cannot compare with Zhiyun Semiconductor!

While other semiconductor manufacturers were playing with billions of transistors, Zhiyun Semiconductor started playing with more than 200 transistors... Although the number of transistors was greater, the chip area was also larger, which ultimately led to higher manufacturing costs.

However, compared with the increase in computing power, these cost increases are acceptable.

In addition, how to stack more transistors on a chip is also a big issue in the field of chip design and it is very difficult to do.

Then when it comes to the manufacturing field, this will create a certain gap!
TSMC now has 10-nanometer and 16-nanometer processes. Let's not talk about the top-level 10-nanometer process for now. Anyway, it is not used for automotive-grade chips. It is used for top-level industrial products such as mobile phone SOCs and server GPUs.

Even if compared, TSMC's 10-nanometer process is not as good as Zhiyun Microelectronics' 10-nanometer process in terms of the number of transistors.

Speaking of the 16-nanometer process, their 16-nanometer process itself is much lower than Zhiyun Microelectronics' 14-nanometer process.

Their subsequent improved process based on the 16-nanometer process was still not as good as Zhiyun Microelectronics' 12-nanometer process.

Differences in manufacturing processes will ultimately lead to differences in chip performance.

In recent years, the powerful performance of Zhiyun Group's S series mobile phones is largely based on the powerful S series chips. The power of the S series chips is based on the company's top chip design capabilities on the one hand, and on the chip manufacturing capabilities that are ahead of its peers on the other.

The same is true for automotive-grade chips. For other companies, the EYQ3 chip, which is based on a -nanometer process and has more than billion transistors, is a huge challenge to design. Even if it is designed, it is a huge hassle to produce it.

The PX chip for the third-party market also has similar advantages... To some extent, the PX chip is actually a performance-reduced version of the EYQ chip.

It is actually very difficult for other chip design companies to develop similar chips.

At least Tesla doesn't have much confidence.

Consider the cost issues of power batteries, onboard chips, a host of miscellaneous automotive-grade sensors, and a large number of other electric vehicle supply chains.

Another purpose is to open up the Chinese and ASEAN markets.

In the end, Musk quietly flew to Shenzhen on a special plane a few days later and visited Xu Shenxue at the headquarters of Zhiyun Group.

The two sides exchanged views on the future development of smart electric vehicles, especially the international market, and finally reached a number of consensuses.

For example, in Europe, you can invest in building factories, but don’t mess around with core technologies. Leaking core technologies is equivalent to cultivating new powerful competitors.

In the future field of smart electric vehicles, Tesla represents the US market and HaiLian Auto represents the Chinese market. This is enough and there is no need for strong third-party competitors.

At the same time, in order to have better and more healthy competition... well, join forces to eliminate other traditional fuel vehicle manufacturers, compete for more market share, and better build the infrastructure for electric vehicles.

The two parties will cooperate in many aspects such as the market and charging piles.

In the market, HaiLan Automobile will assist Tesla in settling in China, building factories in China, and assist Tesla's invested factories in China to complete 100% localization in the shortest possible time to meet the negotiation requirements for investment and factory construction... Tesla's previous entry into the negotiations had the requirement of sole ownership, but it was rejected... Now that we have HaiLan Automobile, no one will spoil Tesla.

Therefore, this time Tesla’s investment must find a local joint venture automobile manufacturer, and this manufacturer is HaiLian Automobile. Of course, it is still given preferential treatment in terms of the controlling stake.

In the joint venture between the two parties, HaiLan Auto holds 30% of the shares and Tesla holds 70% of the shares.

Tesla holds so many shares mainly because it needs to promise to export at least half of its production capacity, and at the same time, it needs to achieve 100% domestic production within a certain period of time.

In order to help Tesla achieve 100% localization rate within one year, Xu Shenxue will provide various electric vehicle parts and components including new power batteries, onboard chips, and automotive interiors.

In exchange, Tesla will assist HaiLan Auto in building a factory in Mexico, which will also be a joint venture between the two parties. Tesla will hold 30% of the shares and HaiLan Auto will hold 70% of the shares.

Building a factory is not the point. The point is to ensure that Hailan Automobile can smoothly enter the US market after changing its brand in Mexico.

This is actually an agreement for both parties to exchange markets... I help you enter the Chinese market, and you help me enter the American market.

Both parties keep in step in the European market, especially in terms of investment and factory construction. They strictly control the bottom line and absolutely do not allow such nonsense as the transfer of core technology and giving up controlling rights... It doesn't matter if you lose, but don't hurt me.

Then the two parties will cooperate in the field of charging piles. Tesla will support Hailan Auto's fast charging protocol in its own charging pile protocol, and vice versa, Hailan Auto's charging pile protocol will also support Tesla cars.

This is to ensure that the cars and charging piles of both parties can be used interchangeably. The scope of the agreement is global... It is mainly to unify the global charging pile protocol standards and further rapidly expand the basic supporting facilities for electric vehicles.

Hailan Automobile and Tesla not only produce electric cars, but also build charging stations around the world and strive to promote their own charging technology standards. When they reach an agreement, in a sense, the charging standards for power batteries around the world will form a basic unity.

As for the charging standards of other electric vehicle manufacturers, that’s not important... Domestic manufacturers are now all using the Ocean Blue standard, and Tesla is the only dominant player in North America.

Although traditional European and American automobile manufacturers have their own standards, their numbers are too small to form an effective scale, and no one listens to them.

Therefore, after Hailan and Tesla support each other's charging standards, a unified standard can be formed on a global scale.

This is very important for the development of the entire electric vehicle industry.

It even has huge benefits for other electric car manufacturers... For example, BYD, they don’t have any charging standards now, they directly use the Hailan charging standard. Now if they export their cars to Europe or the United States, as long as there are charging piles that meet the Hailan standard or Tesla standard in the local area, they can be used directly!

Very simple and convenient.

As for whether European or Japanese and Korean manufacturers will have any objections in the future, and whether local governments will require the inclusion of their own standards, we will talk about it later... Even if their charging standards are included, it will not affect the charging of Hailan or Tesla cars.

Anyway, what Tesla and Hailan Automobile want is not the control over charging standards, but to allow more charging stations to support charging of their own cars.

There are many other things in the cooperation agreement reached by the two parties, but after the core things are agreed upon, some other things are no longer important.

Soon, Hailan Automobile and Tesla held a joint press conference to officially announce this cooperation!

Then...it exploded outside!

(End of this chapter)