Return to 1958 and build a century-old giant

Chapter 841 The Astounding Profits of the Gaming Industry

"Haha, that's because I applied for patents for all similar shapes, just to prevent others from circumventing it," Yang Wendong said with a smile.

Not only the D-pad, but also the cross with a circle in the middle, or four squares, or a completely circular structure, etc., he registered more than 30 of them at once, just to prevent them from being imitated;
Now, it will be very difficult for others to bypass it again. Of course, it's not impossible, but it certainly won't be that easy.

Looking at the series of pictures, He Guoyuan and Wang Zhiqun immediately understood the purpose of the D-pad. He Guoyuan exclaimed in surprise, "Such a small patent can make games much more convenient. It can also be used on our home game consoles."

Yang Wendong nodded and said, "Yes, so the next generation of home game consoles can use the D-pad, which will be much more convenient."

Previous game console controllers used levers, which was the normal design. Yang Wendong didn't rush to release a D-pad mode because there was no need. Good things can be released gradually; there's no reason to release a complete version all at once.

"That's great." Wang Zhiqun added, "Mr. Yang, I was just about to report to you on the recent progress of our game business over the past quarter."

“Okay, a few of us will go to the conference room upstairs,” Yang Wendong said.

Immediately, the three of them, along with two assistants, went to the conference room upstairs. Wang Zhiqun had already prepared the materials and said:
"Mr. Yang, last quarter, we sold a total of 41,000 arcade machines, which included our seven games: Battle City and Pac-Man."
Total sales amounted to $1.06 million, with net profit of approximately $4800 million.

"The profit is almost half gone," Yang Wendong said with a smile.
This is not surprising. Historically, a hit arcade game can earn nearly $1 million a year. Since we have several of them, the profits are naturally higher. This is because we are doing it in batches to avoid internal competition.
Although there are currently 7 games on sale, most of them are from a few years ago, and the most important ones are still "Tank Battle" and "Pac-Man".
Wang Zhiqun replied, "Yes, 'Tank Battle' is a hit in the global market, and the demand is getting higher and higher. My side is even stronger, so the profit margin is naturally higher."

This gave me another idea: should we postpone selling game cards for this game on our Famicom?

“Okay, let’s wait until the arcade market cools down before releasing it on home consoles, otherwise we’ll be competing with each other.” Yang Wendong nodded and said, “The popularity of ‘Tank Battle’ has lasted for almost a year, which has exceeded the normal arcade cycle. This is quite unexpected.”

Arcade games generally have a limited lifespan, typically starting to lose popularity after about six months. However, "Tank Battle" seems to be an exception, truly deserving of its status as a classic game from the childhood of those born in the 80s and 90s.

"It's a good surprise," Wang Zhiqun explained. "Mainly because it's different from other games, Tank Battle has too many levels. We can keep updating it and then selling new ones."

“That’s true. So, in that case, our cards can be operated in the same way from now on,” Yang Wendong said.
In the pre-internet era, software couldn't be updated; it was exactly what it was when you bought it.
Some games have the same interface, so they only sell one version and that's it. But games like "Tank Battle" can have different levels designed and then be sold repeatedly, which is a good thing for businesses.

He Guoyuan asked, "Shouldn't Pac-Man be the same?"

Wang Zhiqun said, "Yes, but Pac-Man is not as popular as Tank Battle, and Pac-Man is a casual game with different levels, so the differences are not significant."

In *Tank Battle*, the gameplay is completely different depending on the map.

"Yes, and generally speaking, action-packed level-based games are still the most popular among consumers," Yang Wendong added.

The popularity of Pac-Man is because after playing so many action games, it's nice to play one occasionally. But fundamentally, action games are the biggest market.

Casual games are suitable for occasional play or for girls to play occasionally. The main game genre is still male.

Including future titles like "Mario," "Contra," and subsequent PC and online games, the most popular games are always action-packed ones. While some casual games have become popular, like "Angry Birds," they can't compare to them overall.

Wang Zhiqun said, "Yes, the games we develop internally are all action-packed adventure games. One of them has performed quite well and has already earned more than $300 million."

“Okay, being able to develop your own games would be ideal.” Yang Wendong nodded, then asked, “We’ve covered arcade games, what about home consoles? I heard the market feedback in the US is quite good.”

Previously, when he was dealing with gold and Chrysler investments in the United States, he would occasionally seek some entertainment, which led him to acquire his own Famicom (Nintendo Entertainment System). He also knew that it was not easy to buy one in the United States.

Wang Zhiqun replied: "Yes, our Famicom is selling very well in the United States and Japan. Last quarter, we exported a total of 37 Famicoms and sold a total of 150 million cards."

Total sales reached $1.44 million, with a net profit of approximately $8000 million, surpassing arcade games for the first time. The Famicom has now become Honor Electronics' most profitable business.

“37 units is not a lot. There are tens of millions of households in the United States, and most of them can afford it,” Yang Wendong said. “This market has only just begun to take off, and its future potential will be several times greater than this number. I’m not surprised at all.”

Historically, Atari became a top technology giant in the United States thanks to its home video game consoles, with annual revenue of $10 billion and net profit of $4 million. Unfortunately, it ruined itself by neglecting game quality.

We currently have a variety of hit games on our side; theoretically, the potential is even higher.

Wang Zhiqun said: "Yes, in terms of potential, arcade games have reached their limit, but home video game consoles are just beginning. This industry will be amazing in the future."
Once we have a sufficient quantity of hardware, I plan to attract third-party games, and as you previously requested, leverage global talent to achieve a monopoly in the game console market.

“Okay, I love hearing the word ‘monopoly’ the most.” Yang Wendong nodded and asked, “How’s the quality feedback? Are there any quality issues?”

With his advantage as a prophet and time traveler, it would be difficult for so many hit games not to become popular. The only uncertain factor is product quality. Once a batch of quality problems occur, even the best game will be useless.

He Guoyuan replied, "Don't worry, Mr. Yang, we are also monitoring the after-sales feedback from the United States and Japan. The probability of our products having problems is only three in ten thousand, and there are no batch problems."

The current strategy in the US and Japan is to assist with repairs if the cause is identified; otherwise, if the problem is unclear, they will replace the product with a new one first and then send it to a repair center. This approach aims to ensure customer satisfaction.

“Good, that’s a good point. This cost is nothing to us.” Yang Wendong nodded and said, “Keep it up. There absolutely cannot be any major problems with the quality.” He Guoyuan said, “Yes, Mr. Yang, I will do my best to control the quality in all aspects.”

"Can the production line keep up?" Yang Wendong asked again.

Wang Zhiqun said, "We have already outsourced some of the work to suppliers in Hong Kong and Taiwan. Mr. He is also arranging for the quality department to manage the suppliers."

“Okay, our current products are good in all aspects, but the exponentially increasing order demand makes me worry about quality issues.” Yang Wendong said, “I have given my requirements to all suppliers: if there are no major problems within a year, then we can get more orders next year, so that they will also pay attention to quality.”

"Yes, Mr. Yang," Wang Zhiqun replied.

Yang Wendong nodded and said, "Alright, let's do it this way. Guoyuan, keep an eye on things. Also, we need to pay attention to the LCD panel issue. If we can't produce it here, we should go to Japan or other countries to look for it. We need to be prepared to purchase equipment, technology, or finished products. We also need to prepare to start the handheld console project."

With the gradual development of electronic technology, many industries will spring up like mushrooms after rain, including databases, signals, optical fibers, communications, and software. This decade can be considered a pivotal one for the rapid rise and transformation of the global technology industry.

Even a time traveler can't do everything. Some other industries involve national strategies, and given the limited talent pool in Hong Kong, he won't participate in them; he can only invest in certain areas.

My involvement is actually only a small part, involving only a portion of the gaming and computer industries.

A week later, He Guoyuan came to Yang Wendong's office again.

"Mr. Yang, the factory has started trial production, but the yield rate for 3.0-inch wafers is only 20%," He Guoyuan reported.

"20%?" Yang Wendong asked again, "What about the 2.5-inch ones?"

He Guoyuan said, "The 2.5-inch ones account for about 45%."

"That's too low. What's the yield rate for this size in Japan?" Yang Wendong asked rhetorically.

He Guoyuan replied, "According to my information, their yield rate is at least 80%. I'm sorry, Mr. Yang, in this respect, we still have a long way to go to catch up with Japan."

“It’s not your fault. It’s normal for a city to be inferior to a country. Don’t forget, the United States is also inferior to Japan in many industries.” Yang Wendong didn’t seem to care.

Japan in this era possessed an astonishingly powerful industrial force.

In cutting-edge fields such as steel, shipbuilding, automobiles, and chemicals, China is showing a trend of surpassing the United States. The real estate boom in a few years will also be based on this powerful industry.

He Guoyuan continued, "We are already developing a plan to introduce new equipment and technology, and then conduct trial production. I estimate that the initial yield rate can reach 50%, and then it can be gradually improved."

"Um, how long will it take?" Yang Wendong asked.

He Guoyuan said, "It might take about six months."

“This speed won’t do, but things still need to be done.” Yang Wendong thought for a moment and said, “How about this, you make two preparations. On the one hand, after the handheld console is made, directly purchase 3-inch LCD chips from Japan. On the other hand, we should also try to produce and continuously optimize them ourselves.”
As you know, our games have been a huge success on the Famicom (NES), so they're bound to be a massive hit on handhelds as well. Demand will be incredibly high, and I estimate that even if Hong Kong can produce them, production capacity won't be able to keep up.

In the IT era, once a blockbuster product emerges, there is always a shortage of production capacity. Historically, the reason why Taiwan's electronics manufacturing industry was able to develop rapidly was because Japan produced too many new electronic products, and there was not enough time to produce them.

It's important to understand that Japan is an industrial powerhouse, yet even its factories can't keep up with global demand. In addition, electronics contract manufacturing is an inevitable trend of the times, and Japanese electronics companies need to focus their energy on research and development and the market. This is what has led to the strength of Taiwan's contract manufacturing industry. Of course, the same is true in the United States.
In Hong Kong today, although the country has always valued industry in the past, it is impossible to go against the trend. Whether it is parts or assembly, it will need to be outsourced in the future. Early arcade games could be produced in-house, but later Famicom and handheld consoles could not keep up with market demand.

"Should we go straight for 3.0, instead of considering 2.5? 2.5 would be significantly cheaper, and the quality would be easier to control," He Guoyuan asked.

Yang Wendong shook his head and said, "Going up to version 3.0, with a larger screen, will give consumers a better visual experience. It doesn't matter if the cost is a little higher, they will be willing to pay for it. The handheld consoles on the market now are too rubbish. I want to rely on the best handheld console to expand the entire industry."

Good software needs to be matched with good hardware. Several games under Honor are very suitable for handheld consoles, and the larger the screen, the better the gameplay can be.

“Okay, I’ll make a trip to Japan now. There are a few companies there that can produce 3.0-inch screens, and I need to talk to them,” He Guoyuan replied.

Yang Wendong said, "Okay, go ahead. Our order volume will be high in the future, at least several million a year. With such a large order and our company's reputation in the game industry, we can help you negotiate a good price."

Without the gaming industry, Honor Electronics would be insignificant in Asia. But with gaming, Honor has become one of the world's top technology companies, on par with Sony and Panasonic in terms of both scale and influence.

Furthermore, the strong protection of copyright allows them to remain in a stable position and potentially enter the home appliance market, which is where Japanese brands excel.

“Okay.” He Guoyuan smiled.
A large order book is the best weapon when dealing with suppliers. Unless you are dealing with a supplier with a monopoly, you can always maximize your profits.

Yang Wendong suddenly asked again, "By the way, what do you think of the electronics industry in mainland China these days?"

PS: Please give me a monthly ticket
(End of this chapter)