Rebirth 08: Rise from copycat phones

Chapter 523: Ruthless and Harsh Zhiyun Supply Chain

The advantage of computing power resources gives Zhiyun Group an advantage in various fields such as artificial intelligence.

This advantage also affects the crucial field of materials research and development.

This is also the area that Xu Shenxue attaches the most importance to...The competition in many high-tech industries is actually the competition for new materials and new technologies.

A typical example is the screen. Different materials can be used to make different screens. These screens have different qualities and costs, and each has its own characteristics... It is said to be a competition among screens, but in fact it is a competition among screen materials.

Therefore, Xu Shenxue has been investing heavily in various research and development in the field of materials science for many years!

In order to carry out material research and development, he also strongly supported the integration of the Artificial Intelligence Research Institute and the field of materials research to develop artificial intelligence materials science.

Although artificial intelligence materials science has only been used for a few years, it has given Xu Shenxue a lot of surprises.

A series of new materials have been developed through this new material research and development model.

MK34 material is just one of them. There are many more new materials developed using this model that are widely used in various fields.

This is the advantage brought by computing resources and artificial intelligence!
While other companies or research institutions are still struggling with traditional material research and development models or the computer materials science that was popular in previous years, Zhiyun Group has already developed a large material model and promoted the development of artificial intelligence materials science.

This leads to a gap in material research and development!
This gap will be reflected in other areas.

The establishment and development of artificial intelligence materials science has a huge and profound impact, and directly affects the rise and fall of many industries.

Including the core field of semiconductor manufacturing...Semiconductor manufacturing requires various top-level manufacturing equipment and consumables represented by photolithography machines, and the manufacturing of these equipment and consumables requires a large amount of domestic trade and top-level materials that cannot be imported.

Let’s take the lens material used in a typical lithography machine as an example. This material will not be exported to you abroad. If you want to make ultra-high precision lenses, you can only develop usable materials yourself and then use this material for polishing.

The Materials Research Institute of Fairy Mountain Holdings is doing just that. It has developed the lens material used for EUV lithography machines. Later, Southern Optics, a subsidiary of Fairy Mountain Holdings, was able to use this material to polish ultra-high precision lenses.

Finally, this lens was cleverly designed to become part of the exposure system of the lithography machine.

Then, Gulf Technology, a subsidiary of Fairy Mountain Holdings, was able to use these subsystems to make EUV lithography machines.

With the HEUV-300B lithography machine, Zhiyun Microelectronics, a subsidiary of Zhiyun Group, will be able to build a semiconductor manufacturing plant with the equivalent of seven-nanometer process or even the equivalent of five-nanometer process in the future.

Only with this advanced semiconductor manufacturing plant can we produce top-level mobile phone SOCs such as the S903 chip or S1003 chip designed by Zhiyun Semiconductor, or the GPU cores of top-level computing power cards such as AI6000/APO5000.

Only then can we produce 10C, the third-generation memory chip with ten-nanometer process level, and 3D storage chips with more than one hundred layers.

Then... there was a series of smart terminals of Zhiyun Group, including the Zhiyun S series mobile phones equipped with top-level mobile phone SOC, memory chips, and storage chips!
Of course, this also includes the products of many domestic smart terminal manufacturers. After all, Zhiyun Semiconductor's W series mobile phone SOC chips, various memory chips, and storage chips are all supplied to the outside world, and they almost occupy the vast majority of the domestic market share.

Zhiyun Semiconductor's SOC business, including the S series and W series, has two main categories, with annual shipments exceeding one billion units, accounting for more than 65% of the global market share...Not only are they used in mobile phones, in fact, many baseband-free SOC chips are also used in various terminals such as smart home appliances and smart homes.

Nowadays, TVs, refrigerators, air conditioners and other home appliances are also moving towards intelligence. Most of them are also equipped with SOC chips, but they are all mature products with backward technology. The 28-nanometer process is widely used, and some use 14/12-nanometer process chips.

The W700 series of SOC chip products in Zhiyun Group's semiconductor industry still use a -nanometer process, but the current shipment volume is still large, and they are mainly used in various mid- and low-end smart home appliances.

If you buy a TV from one of the major domestic brands and take it apart, you will find that the SOC chips, memory chips, and storage chips inside are all chip products from Zhiyun Group.

They are just products with mature technology, and the prices are actually quite cheap now.

Then in the mobile phone industry chain, a large number of mid- and low-end mobile phones are still using 14/12 nanometer process chips. Among the W series chips of Zhiyun Group, the W900 series chips still have the largest shipments. This series of chips uses the 14/12 nanometer process.

Strictly speaking, various logic chips at the 28-nanometer and 14-nanometer process nodes are still the most mainstream advanced technology products. The semiconductor manufacturing business at these two process nodes still brings more than 50% of revenue to Zhiyun Microelectronics.

With the advanced seven-nanometer technology, its manufacturing business revenue is actually only over 20%!
This is also a characteristic of the semiconductor manufacturing business, that is, mature, stable, and cost-effective process nodes often have a large number of orders, while the most advanced process nodes are only used in high-end smartphones and computing power cards due to their high costs... The revenue ratio in the short term is not high.

Advanced semiconductor equipment and consumables such as lithography machines bring not only logic chips, but also memory chips and storage chips.

These two types of chips are also important products of Zhiyun Semiconductor's business.

Although ordinary people outside do not pay much attention to it, in fact, these memory and flash memory chip products account for more than 60% of Zhiyun Microelectronics' production capacity.

Zhiyun Microelectronics is the world's largest semiconductor manufacturer, with a large part of its business coming from memory and storage chips.

Through industrial chain analysis, we can clearly see that Zhiyun Group's series of businesses, including the businesses of many related domestic smart terminal manufacturers and home appliance manufacturers, are all based on the semiconductor industry.

The semiconductor industry is built on Fairy Mountain Holdings, a very special semiconductor equipment and consumables company... Why is it special? Not only because of its huge role, but also because of its astonishing losses!
Since the establishment of Fairy Mountain Holdings, Xu Shenxue has invested more than US$100 billion through its various companies and funds...

The above are direct or indirect cash investments, and do not include the profit transfer made by Xu Shenxue through regular business of Zhiyun Group, Weiku Electronics, Hailan Automobile and other companies... For example, the contract unit price of many spare parts businesses for smart terminals is often relatively high, which somewhat violates the conventional business logic.

The reason for giving these high-priced orders to the subsidiaries of Fairy Mountain Holdings is clearly to give money to Fairy Mountain Holdings.

And the numbers in this part are also very large!
Zhiyun Microelectronics’ high-priced lithography machine order to Gulf Technology was also based on similar reasons... This is a kind of order support.

All of the above were obtained by Xu Shenxue using his personal funds and his affiliated companies to support orders and transfer benefits.

And then we have to take into account the various support subsidies amounting to tens of billions of dollars!
Last year alone, Fairy Mountain Holdings received more than eighty US dollars in direct or indirect subsidies from various channels and in different ways... It obtained more than twenty pieces of land alone, spread across first- and second-tier cities in the country.

Many times, the higher-ups don’t give you money directly, but choose to give you land and policies, and you have to find the money yourself!

Sometimes they don't even give the land directly... but instead use a simpler and more convenient method: one of your subsidiaries under Xiannvshan Holdings has a factory land in the urban area of ​​a certain city. The land of this factory is industrial land, and now the higher-ups are manipulating it to turn it into residential land, commercial land, etc.

Then, you, Fairy Mountain Holdings, can relocate the factory yourself and develop the changed land, and the money will come!
There are many ways for the higher-ups to support you, and it doesn't necessarily require direct cash subsidies or tax refunds... These operations are too conspicuous and easily attract attention from both inside and outside the company.

But it's much easier to use the indirect method!
Of course, the real estate subsidiaries under Xiannvshan Holdings generally do not develop the land themselves, but choose to sell the land to other real estate development companies to quickly cash out.

Therefore, the outside world cannot feel how strong Fairy Mountain Holdings is in the real estate sector, but everyone in the real estate industry knows that there is such a very special real estate company.

This Fairy Mountain Holdings, through some shell companies, can obtain a large number of high-quality plots of land that real estate companies are jealous of every year...

Many people will initially doubt these shell companies, thinking they might be the white gloves of some big boss, but upon closer inspection,... there is Fairy Mountain Holdings behind them, so there is nothing to worry about!

Even if ordinary people don’t know, how could the upper class not know the specialness of this company?

This broken company is given billions of dollars in support funds by various means every year...and it is normal to operate through land.

Fairy Mountain Holdings has invested nearly 200 billion US dollars and finally established a nationwide advanced semiconductor equipment and consumables industry chain...Now the company's revenue status has barely reached a balance between income and expenditure.

As for recovering the investment cost, God knows when!
Now Fairy Mountain Holdings is still investing a huge amount of money every year in various types of research and development. It spends whatever it has and can't give any return to shareholders... Of course, the shareholders of this company don't need it to make money.

What shareholders want is for it to be able to produce top-notch semiconductor equipment and consumables.

Xiannvshan Holdings may not make money, or even continue to lose money, but as long as it can produce semiconductor equipment and consumables, it can allow the domestic semiconductor manufacturing industry to maintain its development and expand its market share, becoming a world leader, thereby driving the development of various industries such as smart terminals, robots, virtual industries, Internet industries, electric vehicle industries, and smart home industries!
Then it’s a huge success!
As long as the above-mentioned industries can continue to succeed, giving billions of dollars in subsidies every year means nothing. The higher-ups will be happy to give them to you!

The reason why Xiannvshan Holdings is able to produce a large number of semiconductor equipment and consumables, especially a complete set of equipment and consumables for advanced process production lines with top-level EUV lithography machines as the core.

This is inseparable from the success of artificial intelligence materials science!

This is also the reason why Xu Shenxue came to Zhiyun Guangcheng Science and Technology Park today and focused on inspecting the Zhiyun Guangcheng Materials Research Institute.

This research institute is the first in China to carry out research on artificial intelligence materials, and has developed the epoch-making room-temperature superconducting material MK34.

Very representative!
During the inspection, Xu Shenxue also gave an impromptu live speech to the R&D engineers in the institute, focusing on the importance of materials and the necessity of artificial intelligence materials science.

Finally, Xu Shenxue set the tone for this impromptu speech: "This is an era where new materials determine the future. I hope everyone will continue to work hard and live up to the expectations of the times!"

After visiting the Materials Research Institute, Xu Shenxueang hosted a banquet for a group of senior managers and core scientists from Zhiyun Guangcheng Branch in the restaurant in the Science and Technology Park that evening.

The next day, Xu Shenxue went to inspect Southern Optics, an important subsidiary of Xiannvshan Holdings in Guangcheng!

Southern Optics, a research and development and manufacturing company of various optical products under Fairy Mountain Holdings, mainly deals in various optical products, such as CMOS cameras. In addition, it also produces optical microscopes and electron microscopes for scientific research.

The above-mentioned businesses are their main money-making businesses, but in the entire system of companies under Xu Shenxue, the task of Southern Optics is not to make cameras, but to make various types of lenses needed for lithography machines.

As for camera products, although they are also doing very well, that is just to provide research and development funds for the development of lithography machine lenses...

Using the main business of cameras to support the research and development of lithography machine lenses... This is the business model of Southern Optics, and it is also the business model of many companies under Fairy Mountain Holdings.

Because the market size of semiconductor equipment and consumables is too small, the profit is not as high as imagined... In the presence of corresponding foreign competitors, Xiannvshan Holdings must maintain the competitiveness of its own products, and the price cannot be too high... But the R&D cost will not be reduced just because you sell it cheaply.

In fact, because Fairy Mountain Holdings did not start research and development from scratch, but it was a model of developing from one point to one hundred, and to complete so many technological breakthroughs in a short period of time, the research and development costs are extremely high.

Therefore, the semiconductor equipment and consumables industry of Xiannvshan Holdings has been suffering huge losses since its establishment!
The operation of the entire group of Xiannvshan Holdings can barely be maintained and achieve an overall balance between income and expenditure. On the one hand, it is because the superiors provide tens of billions of subsidies every year, and on the other hand, it is because these subsidiaries have their main businesses to provide subsidies.

Otherwise, Fairy Mountain Holdings would not be able to continue... Its foreign counterparts can directly purchase mature spare parts or raw materials from manufacturers throughout Europe, Japan and South Korea for assembly and production, and they can rely on the semiconductor industry chain of the past few decades and develop sequentially.

But Fairy Mountain Holdings does not have such conditions... When purchasing from abroad, people will not sell to you, and when purchasing from domestic sources, there are no ready-made suppliers, so we can only do everything ourselves.

This also leads to extremely high R&D costs!

The cost of catching up with or even surpassing foreign competitors in just ten years is enormous.

This is also the reason why each subsidiary of Xianvshan Holdings has a bunch of additional main businesses...these main businesses all serve as sources of R&D funds for the semiconductor business.

Of course, as time goes by, some of these main businesses are doing very well.

Southern Optics is such a company.

At this time, several senior managers of Fairy Mountain Holdings and the management of Southern Optics were accompanying Xu Shenxue to check out some of Southern Optics' main commercial products, that is, their camera products with the highest revenue and profits.

"We developed the first self-developed COMS sensor six years ago, and then made progress on this technology. With the rapid development of domestic semiconductors, the technical level of our COMS sensors has also been getting higher and higher!"

"At present, our fifth-generation COMS sensor products are manufactured using Zhiyun Microelectronics' second-generation advanced COMS production line, and the quality of their manufacturing is not much worse than Sony's similar products."

"We use the fifth-generation COMS sensors to produce the latest mobile phone cameras of all kinds. The overall technical level has reached the world-class level. At present, they have been installed in a large number of smart phones at home and abroad. Last year, the shipment volume of mobile phone camera products exceeded 400 million sets. We have become the largest mobile phone camera supplier of Weiku Electronics, and also one of the main mobile phone camera suppliers for domestic manufacturers such as Xiaomi, Huawei, and OV!"

"At the same time, our fifth-generation flagship products have also begun to be gradually applied to Zhiyun's new cloud brand, A series and SX series mobile phones."

"At present, we are developing a new generation of sixth-generation products. We will strive to launch the sixth-generation flagship product next year so that it can be applied on S series mobile phones!"

As the king brand in the smartphone industry, the S series of mobile phones under Zhiyun Group has always been known for pursuing the limits and using the best parts and components.

The best SOC, the best memory chip, the best flash memory chip, the best screen, the best vibration motor, the best acoustic component... and also the best camera!
For a long time before, in order to maintain this limit, Zhiyun S series mobile phones have used LCD screens for many years, but this screen is not from Huaxing Technology... Even though Huaxing Technology is a company controlled by Zhiyun Group, Zhiyun Group does not use its own screens.

The purpose is to create and maintain a reputation for pursuing extreme technology!

Later, Huaxing Technology caught up with the technology in the field of OLED screens, and even surpassed it in some areas. Only then did the S series of mobile phones begin to use Huaxing Technology's OLED screens.

The same is true for other spare parts... Zhiyun S series mobile phones always use the best!

As for the camera field, Sony is currently the best. Their COMS sensor technology was top-notch before, and it is still top-notch now. Therefore, Sony has been the main mobile phone camera supplier for Zhiyun Group's S series mobile phones in the past few years. Another secondary COMS sensor supplier is Four Star.

Although Southern Optics' products are good, they still haven't reached their limits, so they have never been included in the supply chain of the S series mobile phones.

Becoming the mobile phone camera supplier for the S series mobile phones has become the obsession and even the greatest pursuit of the COMS business department of Southern Optics.

In fact, it is not just their company. In fact, other spare parts suppliers in the field of smart terminals at home and abroad are also proud to pursue becoming a supplier of Zhiyun S series mobile phones!
Let’s not talk about whether it makes money or not, but as long as it gets in, the supply chain manufacturer can proudly say: In this field, my product is the most technologically advanced!

Over the past few years, Sony has been constantly promoting itself as Zhiyun's official mobile phone camera supplier and has won a large number of orders... Many manufacturers' high-end flagship products have also followed Zhiyun's example and selected Sony's COMS sensor products.

Of course, Sony has paid a considerable price over the years to maintain its position as the main supplier of cameras for Zhiyun S series mobile phones. Every year, it has to cooperate with Zhiyun Group to develop more advanced and better COMS sensors... The R&D pressure is enormous.

Zhiyun Group has very strict R&D requirements for any supplier.

It will not allow you to sit back and wait for death. It will force you to reinvest and research and develop again. Once your research and development steps cannot keep up, it will abandon you without hesitation!
Zhiyun Group’s supply chain is well-known for its large order volumes and high profits, but its R&D requirements are demanding and it is very cold and ruthless... Even if you are a supplier you have cooperated with for many years, once the other party’s R&D steps cannot keep up, you will be kicked out in minutes, without any mercy!
Because... Zhiyun Group's S series mobile phones must ensure that all of their components are the best in the world... at the very least, they must be among the best!

Under such stringent requirements, Sony's camera R&D department is actually under great pressure to keep up, especially since the four-star COMS business department is always trying to grab more orders.

At the same time, Southern Optics, a newly emerging COMS sensor manufacturer under Fairy Mountain Holdings, has entered the domestic mid- and low-end mobile phone camera market, and has even brought COMS sensor products into the heartland of Sony's COMS business department: Zhiyun's A series and SX/SXL series mobile phone products.

Now, Southern Optics plans to go a step further and is actively developing the sixth-generation COMS sensor products, intending to enter the supply chain of the S series mobile phones next year!

If Southern Optics really breaks into the market by relying on the performance advantages of its products, it will definitely be a disaster for Sony's COMS business department, and even for the COMS business department of Four Star.

This means that a third competitor has emerged in the absolute high-end COMS sensor field, which means that Sony and FourStar's technology is no longer absolutely leading.

If things go wrong, it may bring about a series of chain reactions!

This is also a huge flaw as a Zhiyun supply chain manufacturer...that is, there is too much reliance on Zhiyun.

If we lose the Zhiyun order, we will not only lose huge revenue and profits, but also face huge doubts: Are you still good enough? Are you still the most advanced?

Over the past few years, most of the manufacturers who have lost Zhiyun's supply chain orders have not had a good end... This is true for both foreign and domestic suppliers!
Gu Zhiming, who manages Zhiyun's supply chain, doesn't care whether the supplier is a foreign or domestic company. If the supplier performs poorly and is overtaken by its competitors, Gu Zhiming will kick the supplier out in a minute and choose its competitor's products.

Whether the original supplier will go bankrupt after being kicked out is none of Gu Zhiming’s business!
Over the past few years, there have been too many companies that have been acquired due to poor management and forced to make up for the loss of their status as Zhiyun suppliers...

Similarly, it is also because Zhiyun Supply Chain has such great magic... Once you enter, you will receive a huge amount of orders, which means huge revenue and profits, and it also means that the technology of your product has been recognized by the most demanding Zhiyun Supply Chain in the world.

This kind of technical recognition is more useful than bragging about winning some technology awards. Awards cannot bring you orders, but the recognition of Zhiyun Supply Chain can!
When many peer companies saw that Zhiyun Supply Chain recognized this supplier and thought it had something to offer, they came over to discuss cooperation!

This is also one of the core reasons why a large number of domestic and foreign companies are scrambling to enter the Zhiyun supply chain.

Now, Southern Optics is trying to enter the supply chain of Zhiyun Group's S series mobile phones to prove that it is the supplier with the best technology in the COMS field, or at least one of the top two or three.

With this reputation, it will be much easier to compete for orders from other corporate clients. Not to mention orders from domestic corporate clients, even fruit orders can be won.

Fruit also likes to follow Zhiyun and use the same suppliers. For many products of these two companies, there is a relatively high degree of overlap in their supply chain suppliers.

There is no way to avoid overlap. After all, there are only two or three top-level supply chain manufacturers in the world, and Fruit also claims to be a high-end flagship, and has always been directly benchmarked against Zhiyun, so they will also choose products from these top manufacturers.

With only two or three suppliers, and considering the 80/20 principle of the supply chain, they will choose a main supplier and a secondary supplier at the same time. In the end, the overlap between the two suppliers is very high!

For example, Zhiyun previously began to use Huaxing Technology’s OLED screens as the main and Sixing’s OLED screens as the supplementary ones for its S series mobile phones.

The fruit uses the OLED screen from Sixin mainly, supplemented by the OLED screen from Huaxing Technology!

The screen suppliers of these two companies are the same, but they have chosen the opposite main supplier... because in modern times, only these two screen manufacturers can provide top-level OLED screens.

If you don't choose these two companies, you have no choice... and in order to ensure the security of the supply chain and bargaining power, you can't just choose one company. You have to at least find a secondary supplier.

This will give us bargaining chips and ensure the security of the supply chain.

There is only one supplier for a spare part, which is a very big supply chain risk. Unless there is no choice, it should be avoided if possible.

Due to supply chain risk and technical issues, if Zhiyun's S series mobile phones switch to Southern Optics' COMS sensors in the future, Apple may also follow suit. ……

This is the huge influence of the Zhiyun S series mobile phone supply chain!
Similarly, this is also the core reason why Southern Optics is trying its best to develop new technologies in order to win the order for Zhiyun S series mobile phones!
Once we get the COMS sensor order for Zhiyun S series mobile phones, it will mean a bright future!
Thus, they can take the most delicious piece of meat in the COMS niche market!

(End of this chapter)