A century-old wealthy family that rose from Shanghai

Rongchang Heavy Industry Group experienced a setback in the yacht manufacturing industry over the past year, mainly due to persistently high inflation in Europe and the United States, which negatively impacted the overall performance of the yacht industry. However, other industries performed relatively well, including smelting, machinery manufacturing, electromechanical and hardware manufacturing, all of which saw some growth.

Chen Guangliang's final stop was Midea Group. In the past year, Midea Group's "Walkman" and "Space Invaders Arcade" have become new growth points.

Among them, the Walkman sold 100 million units, with a total export value of US$7000 million; Space Invaders sold 5000 units in three months, with sales reaching US$1500 million. It can be said that it has developed rapidly and has become a representative of Hong Kong's high-tech enterprises.

In the electronic watch production workshop, Yang Xiancheng, president of Midea Group, introduced: "Boss, the Industrial Technology Research Institute of Taiwan is already able to mass-produce electronic watch ICs. We have already placed an order with them for 20 units. If there are no problems, then Hong Kong's electronics industry will no longer be restricted by Japan. In the future, Hong Kong will be able to catch up with Japan in global electronic watch exports."

In 1971, Midea Electronics produced the first electronic watch in Hong Kong, and subsequently, many other Hong Kong manufacturers entered the field. However, Hong Kong could not produce the ICs for electronic watches, so although its exports gradually expanded to become the world's second largest, its profits were relatively low.

The IC is a key component of electronic watches, and it is generally imported from Japan, or it can be supplied by semiconductor manufacturing bases in the United States located overseas.

In fact, the United States does not want Japan to have a monopoly overseas, hence its support for Taiwan's semiconductor industry. This year, the Industrial Technology Research Institute (ITRI) in Taiwan completed its first 3-inch integrated circuit demonstration factory. Employees received training at RCA, then the largest radio and television manufacturer in the United States. The first products were ICs for electronic watches, marking the first integrated circuit manufactured in Taiwan.

"Yes, the production yield rate in Taiwan should improve rapidly, and it might even surpass that of American manufacturers this year. This is a good thing for Hong Kong's electronic watch industry!"

Everyone agreed!

Taiwan's labor force is much cheaper than Hong Kong's, which would give it a price advantage once it develops integrated circuits. Hong Kong's electronics industry, on the other hand, does not include integrated circuits; at most, it covers the packaging stage. The preceding processes of integrating silicon wafers, such as photolithography, etching, and ion implantation, are relatively weak.

Despite this, Hong Kong's electronics industry continued to thrive and was projected to become Hong Kong's leading industry by the early 80s, surpassing the traditional textile industry.

There's also the integrated circuit industry, which Hong Kong is actually developing. It's expected that by the 1980s, Hong Kong's integrated circuit industry will also be able to develop accordingly.

And these will actually have a ripple effect on the entire South China region. Theoretically speaking, without Hong Kong's electronics industry, there would be no Huaqiangbei in China.

Finally, Chen Guangliang arrived at Midea's game entertainment company, which was also full of high-tech features.

"Boss, Space Invaders is a huge hit! The US and Europe keep placing new orders, and the Japanese arcade version of Space Invaders, distributed by EA, is also selling like hotcakes in Japan. This time, Space Invaders will definitely surpass arcade games like Ping Pong and Gunfight to become the number one seller worldwide," Lin Baitao said happily.

Space Invaders has a market price of up to $3000, which is 2.5 times that of Ping Pong. This is mainly because the hardware in the game is very valuable, and of course, the software is even more valuable.

For a single Space Invaders arcade machine, Midea Games Entertainment earns $1000 from the software alone. For example, Electronic Arts (EA) pays Midea Games Entertainment $800 per machine they distribute.

As a milestone in video games, Space Invaders surpassing 10 units sold is a foregone conclusion, just a matter of time. Midea Games Entertainment could very well earn $1 million from this single arcade machine.

This is equivalent to the total annual profit of Cheung Kong Holdings in 1980, while Midea Games Entertainment has more than one game, and Midea Games Entertainment is only a part of Midea Group and Cheung Kong Industrial Group.

"Okay. By the way, how about our game consoles?"

Midea Games Entertainment is also developing console games, but of course it can't afford to spend more than $8000 million on R&D like Atari did; in reality, it's only around $200 million.

First, Atari's Xbox 2600 was the world's most advanced console for gaming; second, American R&D personnel were 10 times more expensive than those in Hong Kong.

In fact, even Japan's Electronic Arts (EA) spends less than one-tenth of the cost of developing console games in the United States.

Lin Botao then led Chen Guangliang and Chen Wenkai into a research and development room, where the engineers immediately took out the 'Midea' brand console game.

"Mr. Chen, this console comes with six games (the game cartridges are not removable), including 'Ping Pong'. Its advantage is its low price; each unit can be sold for HK$260."

This year, Atari will release the Atari 2600, priced at US$199, or approximately HK$1100, according to Chen Wenhai. While the price is high, it's considered relatively inexpensive for the Atari 2600's hardware configuration, especially considering it's a detachable gaming console.

Electronic Arts will release two game consoles (non-removable and non-washable) – the Color TV-Game 6 and the Color TV-Game 15. The most expensive Color TV-Game 15 will cost around 15000 yen (equivalent to 50 US dollars = 280 Hong Kong dollars).

Hong Kong-based Midea Games Entertainment also releases console games, priced at only HK$260 per unit.

All three companies publish console games, but they don't directly compete with each other. Atari 2600's main markets are North America and Europe; capturing these markets alone could unlock a market worth tens of billions of dollars.

Electronic Arts (EA) focuses on the Japanese market, since the Color TV-Game 6 and Color TV-Game 15 can only compete with Japanese manufacturers.

Midea Games Entertainment in Hong Kong focuses on the Hong Kong and Southeast Asian markets.

"Let's convene a meeting with key management and engineers."

"Ok"

Soon, more than twenty managers and engineers gathered together.

Midea Games Entertainment is a very successful company, gaining great popularity with its arcade patents, "Ping Pong", and "Space Invaders".

Chen Wenkai chaired the meeting and said, "Atari in the United States has developed a detachable gaming console—the Atari 2600, using [specific hardware]. Electronic Arts in Japan has also developed two models, the Color TV-Game 6 and the Color TV-Game 15, using [specific hardware]. So, in terms of hardware, we are not as advanced as Atari in the United States, nor do we have the cost control of Electronic Arts in Japan. How can we guarantee the future of Midea's gaming and entertainment business?"

This is a heavy topic!

Although Midea Games Entertainment invented the 'arcade', it is now lagging behind the hardware of console games.

Lin Baitao naturally understood and immediately said, "While ensuring investment in arcade and console games, we must also ensure the development of game software. After all, we've developed classic game software like *Ping Pong* and *Space Invaders*, so we can break through in this area." Chen Wenkai nodded and then said, "That's right! So, there are two important game projects coming up. I've gathered everyone here today to establish two project teams. One team will develop *Hong Kong Blocks*, and the other will develop *Pac-Man*."

Subsequently, Chen Wenkai and Lin Botao began selecting the project managers and engineers for the two games.

"Hong Kong Blocks" is the predecessor of "Tetris". This game is suitable for arcades, handhelds, TV game consoles, and PC games.

Pac-Man is a game where players control a yellow, round Pac-Man navigating a maze. The goal is to eat all the dots and avoid being caught by four ghost symbols. In the game, Pac-Man can temporarily reverse his character by eating power pills to chase ghosts. The game is simple to learn, but mastering it requires strategy and quick reflexes.

Finally, Chen Guangliang said, "These two projects are our key projects going forward. Of course, our hardware department will continue to invest, but Midea's future strategy for gaming and entertainment will be software-centric with hardware as a secondary focus."

"Yes, Mr. Chen."

3 month.

The morning light of Silicon Valley had just spilled over the glass curtain wall of Atari's headquarters. Chen Wenhai stood in the corridor of the administrative area, where most of the employees were white, but there were also a small number of Asians and Blacks.

Of course, the majority of Black people are women, and they are in administrative positions, and their numbers are very small.

When recruiting employees, Chen Wenhai mainly recruited white people, while he selected outstanding R&D engineers from Asians. As for Black women, they were just there to make up the numbers.

His main concern was that he didn't want his skin color to stand out too much in the company. So at that time, Atari was mainly composed of white management and employees, but Chen Wenhai, being of Chinese descent, didn't seem so conspicuous.

Of course, as Atari grew, the entire company held him in high esteem because he was not only a 'technical master' but also an excellent manager.

In 1974, Atari introduced the Japanese game "Gunfight." Between 1975 and 1976, "Gunfight" arcade machines sold over 3 units in the United States, becoming the best-selling arcade machine in the country. This success, coupled with the financial backing of Chen Wenhai, gave Atari the resources to develop its second-generation console games.

"Dennis! We've received over 3 orders on the first day! Our dealers' phones are ringing off the hook!"

His subordinates happily reported this to him.

"it is good"

Chen Wenhai nodded, but didn't stop walking—he wanted to see the production line with his own eyes, to see the Atari 2600 consoles that were about to be shipped to various parts of North America, and to see how this "treasure," which cost more than 8000 million US dollars to develop and carried his three years of hard work, would usher in a new era of gaming.

Two weeks after the Atari 2600 was launched, good news flooded into Chen Wenhai's office.

First, The New York Times published a lengthy report on its technology front page with the eye-catching title: "Atari 2600: A Milestone in Reshaping the History of Video Games." The article detailed the console's innovations—"Removable cartridges freed games from the limitation of being 'disposable,' and the 160×192 resolution and 128-color display elevated the visual experience of home gaming to a new level. Its success was by no means accidental, but rather a precise understanding of players' needs."
The Washington Post followed up with a report, describing the market frenzy as a "national frenzy": "From Fifth Avenue in New York to Hollywood Boulevard in Los Angeles, long lines formed in front of every retail store selling the Atari 2600. Some people waited overnight with folding chairs, and some argued with others to grab the last console. This console was no longer just a toy, but became the hottest 'social symbol' in North America in 1977."

Chen Wenhai casually flipped through the newspaper on the table when his assistant came in carrying a stack of sales figures: "Dennis, sales in North America have exceeded 300,000 units in just two weeks since its launch! The Boston dealer said their warehouse is sold out, even the demo units have been bought by players; a department store in Seattle..."

"Go and urge the factory to replenish the stock as soon as possible."

The first-generation MiloWar game console only sold 130 million units over several years, but the Atari 2600 has sold over 30 units in just two weeks, demonstrating its immense popularity.

Soon, Chen Wenhai convened a meeting of Atari's top executives. The meeting room was filled with foreign executives—Sales Director Mike, R&D Director Tom, Legal Director Lucy, and others, each with a "Third-Party Software Cooperation Plan" in front of them.

“We have over 50 game software companies approaching us now, wanting to develop games for the Atari 2600,” Mike said first, his tone full of optimism. “This is a good thing; the more software companies we partner with, the more attractive the console will be.”

Chen Wenhai shook his head and pushed a report in front of everyone: "This is our market research—if left unchecked, at least 20 poorly made games will appear within six months. Some may be filled with violent scenes, and some may even contain vulgar content. Once these games enter the market, they will not only affect the player experience, but also ruin the reputation of the Atari 2600."

The meeting room fell silent instantly. Tom frowned and asked, "Dennis, what should we do? We can't just refuse all third-party collaborations, can we?"

"Of course we won't refuse, but rules must be established."

Chen Wenhai's tone was firm: "I plan to launch a 'censorship and production monopoly model,' which will be implemented in three steps: First, all third-party games must be reviewed by Atari, and those involving violence or pornography will be rejected outright. At the same time, each software company will be limited to releasing a maximum of five games per year to ensure quality. Second, an 'encryption system' will be built into the Atari 2600 console, preventing unauthorized game cartridges from running and technically eliminating piracy and low-quality games. Third, third-party game cartridges must be produced through Atari's designated production lines, and we will charge a processing fee of $12 per cartridge, which will both control production quality and increase company revenue."

General Counsel Lucy immediately raised the question: "Wouldn't this 'monopoly model' violate U.S. antitrust laws?"

“No.” Chen Wenhai was prepared and took out a document prepared in advance by the legal department. “Our review standards are based on ‘home entertainment’ and we treat all third-party manufacturers equally; the encryption system is to protect intellectual property rights; the designated production line is to ensure cartridge compatibility—all of these comply with the law, and we have consulted the best lawyers on Wall Street.”

Tom flipped through the details of the rules and couldn't help but nod: "This is a good plan! It can ensure the quality of the game while avoiding vicious competition. There was a console in Japan that was no longer sold after six months because the quality of third-party games was too poor."

Mike added, "From a sales perspective, high-quality games can increase console repurchase rates. After players buy a console, they will continue to buy game cartridges for good games, which is a win-win situation for both us and third parties."

Seeing the approving looks in everyone's eyes, Chen Wenhai continued, "In addition, we will also establish a dedicated 'third-party cooperation department' to be responsible for review, production coordination, and after-sales follow-up. Lucy, the legal department should translate the rules into contract terms as soon as possible; Tom, the R&D department should complete the debugging of the encryption system as soon as possible; Mike, you are responsible for notifying all potential software vendors that a briefing will be held next week."

After the meeting, Lucy walked up to Chen Wenhai and couldn't help but praise him: "Dennis, you've thought things through so thoroughly. Many companies ignore risks when the market is booming, but you've been able to plan ahead."

Chen Wenhai smiled and said, "I am the helmsman of this ship, so naturally I will lead everyone to go further."

He firmly believed his father's words: if third-party games were not regulated, they would inevitably lead to serious consequences in the future. (End of Chapter)