Those Years When I Was Forced to Top the Forbes List

Chapter 314 Moving Towards the Next Step

November 6th, Shenzhen
At 9:30 a.m., several Mercedes-Benz cars drove from Longgang and arrived at the SEG Plaza.

The S600L driver got out and opened the car door, but Mr. Chen inside waved his hand, pushed the door open directly, and got out of the car with a smile on his face, holding his phone to his ear.

"Don't accuse me of favoritism this time. My backend data shows that more than 80,000 tech enthusiasts have already registered for Alipay. They are all veteran internet users. The pre-sale will start in half an hour, and I estimate there will be another wave of registrations. If you can't handle the huge wealth, then that's your problem."

Mr. Ma on the other end of the phone sounded helpless: "The number of users switching from Alipay to Taobao isn't that high! Those electronics enthusiasts are all potential users of JD.com. You still want me to open a payment channel for JD.com? Isn't that like inviting a wolf into the house?"

"Your merchant's product quality is not good, is that my fault? JD.com opened the Alipay channel, that was because I forced him to do it! I'm helping you! Do you know that Dongzi wants to use JD Pay? If you don't share the channel, he will go it alone, and you will have another enemy in the payment field. I'm not forcing you, you can think about it yourself."

"Why can't we let Taobao participate in the online sales of Qilin? I'll give you the biggest discounts on sales commissions, and I can even open a special zone for you! Guaranteed maximum traffic!"

Jack Ma has a keen sense of smell and realized that this was a groundbreaking and disruptive innovation in e-commerce that could make a name for itself. Taobao had to participate in it to live up to its status as the e-commerce leader.

How could he be absent from the milestones of China's e-commerce development?

Mr. Chen curled his lip and said, "Come on, you know what Taobao's positioning is. You don't even have your own logistics. During delivery, things keep falling out of place. Don't tarnish my reputation. Besides, I'm a shareholder of Alipay, not Taobao. Taobao's profits and reputation have nothing to do with me. Why should I support Taobao?"

Mr. Ma held his breath.

"I can find a reliable logistics partner! You want SF Express, right? I'll go find Wang Wei!"

"We'll see. That's all for now."

Chen Xuebing chuckled and hung up the phone. A group of people had already gotten out of the car and were standing beside him waiting for him.

Qi Guangming, Gao Shu, and several other senior executives from mobile phone factories.

Recently, things have been looking up at Qidian. They opened the Kunlun Business Unit, which added more than a dozen departments. The network software company is also expanding rapidly. Not only have the headquarters and technical departments expanded to 2,000 people, but the mobile phone factory alone has 1,500 people, including a total of eight factory leaders.

Since Gu'an Group acquired Spreadtrum, Lu Weibing has felt a sense of crisis. He is not only trying to catch up with Spreadtrum in terms of personnel size and urging various departments to accelerate the establishment of patents, but also actively contacting the Shenzhen government in hopes of obtaining a cheap piece of land to put the Singularity Technology Park plan on the agenda.

Previously, he was frugal and saved money to build up cash flow. Now that he has discovered that whatever project the chairman undertakes is profitable and profits are increasing exponentially, he is eager to expand, fearing that the chairman will focus his energy on Spreadtrum.

Chen Xuebing appreciates this competitive spirit, but as more and more managers are promoted, there will be many problems later on, and they will need to be called in regularly for meetings and political lessons.

The factory is currently conducting large-scale training. This morning, without notifying anyone, he went directly to the workshop to inspect the equipment planning of the electroplating production line and the workers' training. He didn't say a word throughout the entire process. After the inspection, he summoned all the factory's senior executives to the Qidian headquarters and notified Lu Weibing to hold a management meeting on the way.

Lu Weibing inquired about the meeting process, confirmed the topic and agenda, and Chen Xuebing thought for a moment and told him to arrange it according to the weekly meeting schedule.

Upon entering the conference room on the 57th floor, one finds all the managers and above from Qidian's departments already waiting inside. There are over 30 people, plus those from the factory, making a total of 40, making even the long table feel a bit crowded.

After sitting down, Lu Weibing began to report on his recent work.

More and more people were attending the meeting, and the meeting had already established a standard procedure. Although Chen Xuebing was well aware of what Qidian had been doing recently, he did not interrupt and waited for Qidian to finish speaking before he began to speak.

"There are two things to discuss today. Let me start with the factory."

“Recently, the factory has made significant investments, and the electroplating equipment is quite expensive, far exceeding the previous plan. According to the list provided by Foxconn, our investment in equipment alone will amount to 1.6 million yuan, and there will be subsequent expenses for personnel and technology procurement.”

"I checked on the preparations this morning."

"I would describe it in seven words: brand new, yet utterly worn out."

As soon as he finished speaking, the expressions of several senior executives at the factory changed, and Lu Weibing's eyes also darkened. He wondered what trouble the factory had gotten into.

Chen Xuebing continued, his tone sharp: "You don't understand at all. If I can get Foxconn to build a production line for us, why not just hand over the phone manufacturing to them directly? Why go through all that trouble and build the most expensive electroplating production line!"

"It's a specialized technology! It comes with a technology premium!"

"This morning, I learned a few things that are worth pondering."

"First, a technical team leader told me that the data feedback from the spectrometer was incorrect. The gold color was reddish to the naked eye, but the machine showed that it was qualified. The engineer's choice was to forcibly lock the parameters without any manual inspection by comparing with the standard color chart."

"Please have the factory leaders investigate this matter."

"Secondly, when some employees were learning the technology, they were picking up electroplated parts by hand, and more than a dozen people were watching, but no one stopped them."

"Japan just had a case of poisoning last month. Have you prioritized safety in production?"

"Third, I heard that the cyanide additives are supplied by the Japanese company Atotech. A few months ago, the price suddenly increased by 30%, which caused the cost of Foxconn's electroplating mobile phone production line to surge. Has any leader in the factory paid attention to this issue? If so, please answer me now."

After a while of silence.

“Uh,” said Zhang, a deputy factory manager who had worked as the head of the technical department at Foxconn. “The formula for cyanide electroplating solution is blocked by patents from Japanese and German companies. Domestic alternatives have heavy metal impurities that exceed the standard by 3-5 times, forcing us to accept premium purchases. Electroplating standards are also controlled by international brands such as Motorola. Salt spray tests must meet Motorola’s MS-001 standard of no rust after 48 hours.”

"That means they didn't think of a solution."

Chen Xuebing waved his hand, making a definitive judgment, and then looked at the factory leaders with a scrutinizing gaze.

“You may not have thought of this, but I have. I learned about this information the day before yesterday, and then I called a few friends and found out some information in about a day: There is a company called Xinyang Semiconductor Materials in Shanghai that started research and development of electronic electroplating technology in 99, and its heavy metal impurity control technology is already quite mature.”

“An expert told me that while maintaining Atotech’s basic supply, we could introduce domestically produced pre-mixed solutions, add two filtration processes to ensure compatibility, and increase the localization rate to 30%.”

"I'm not sure if it's true, but the situation is definitely not as pessimistic as you imagine. The problem of foreign manufacturers' monopoly is probably not as severe as you think."

The factory leaders began to feel uneasy.

Qi Guangming stood up, his face flushed, and bowed his head, assuring everyone, "Chairman, we'll address this issue immediately! We've always prioritized cost control, and this matter..."

Chen Xuebing interrupted again: "Are you sure I'm talking about this?"

Qi Guangming was taken aback.

"That's a security issue."

"Security is of course important. This issue needs to be addressed through systemic reforms. We need to establish a dedicated security department, and you will serve as its director!"

Chen Xuebing tapped the table with his finger and continued:
"But what I want to talk about today is what kind of factory and company we should build!"

The last four words made everyone sit up straight, afraid that the chairman would call on someone else. Everyone was a little afraid of the chairman after spending time with him—mainly because he loved learning, was inquisitive, and had advanced ideas; he wasn't easy to fool.

And what Mr. Chen wants to talk about today is certainly not just a factory.

"The core of establishing an automated electroplating workshop is to reduce costs and increase efficiency, enhance technological value, and significantly improve yield! The key lies in three words—high precision!"

"First, we must dispel the myth!"

"Completely demystify the standards and production logic of major international manufacturers!"

"Although Foxconn helped us build production lines, their technology is mostly focused on standardized mass production, and is still mainly based on labor costs."

"What we should learn from them is their 'Just-In-Time' lean manufacturing approach! Implement a tiered training system! Automate production! Not everything! I've vaguely heard some voices saying we should learn everything from Foxconn, but I urge you to maintain your independent thinking."

“Setting up an electroplating production line is difficult for domestic companies. I believe they will encounter many problems, but the difficulty is moderate. I chose to approach it from this angle because I don’t want you to lose confidence, but I also don’t want you to become completely complacent.”

"This is also my methodology for managing singularities for a long time."

After saying that, he looked at Lu Weibing.

"The same methodology applies to supply chain issues. In this respect, we have relatively more resources at our disposal, so the challenges we face are also greater."

Lu Weibing suddenly realized: "Chairman, you mean to make domestic alternatives?"

Chen Xuebing then showed a hint of satisfaction, leaned back in his chair, and clasped his hands together.

“Direct substitution is impossible, but we have now overcome a hurdle: we have products and a brand. We should promote both international and domestic suppliers simultaneously.”

"For domestic suppliers, we need to list out the parts that could potentially be replaced, and visit each one to find out their parameters. If they are usable, then add them to our Spreadtrum Trun-key phone supply chain, let them grow, and gradually integrate them into Singularity's supply chain."

"Find out the companies with potential and give me the list."

"Among international suppliers, camera modules and sensors have the highest bargaining power. Their marginal cost of producing module chips is extremely low. What they sell is technology and patents. There are also many alternative manufacturers. We need to start the negotiation process for supply from here."

“I took a look and found that Apple’s image sensor supplier is Micron, and the camera module assembly is done by Foxconn and Cowell Electronics. We need to negotiate with our suppliers using the Apple agreement prices from these three manufacturers.”

"There is also a near-field infrared sensor that we don't have, which can automatically turn off the screen when a face is near it. It is made by Sony. We will use this in our next generation of mobile phones, so we need to invest in its research and development now to create our own technical parameters and production standards. We need to contact Sony's sensor company to strive for technical cooperation."

"This matter involves many companies, so I'm leaving it to you."

"Secondly, it's the chips."

"Marvell designed the solution for us, and the on-chip system and CPU design fees were theirs. The fee was $500 million plus a $9 per chip commission. In addition, they developed a multi-touch chip for us, which cost $13.5 per chip, totaling $22.5. The minimum was 20 sets, and the technology output belonged to them."

"Talk to them and see if they can buy out the design and plans for 50 yuan per set in one go. If we need to lower the price when we sell later, we won't be under that much pressure."

At this moment, Lin Bin spoke up: "I talked to them on the phone yesterday, and they want 80."

Everyone present gasped in shock.

They're seriously raising prices on the spot.

$22.5 multiplied by $80 equals $1800 million, which is 1.41 million RMB!

Singularity also provided a $500 million basic design fee!
Isn't that 1.8 million?
Marvell probably never dreamed that something a team of a few dozen people could produce in a few months could earn so much money.
At the time, Marvell offered a minimum sales target of 20 units, which they considered an exorbitant price.

Now that Singularity has gained a reputation, its price has skyrocketed!
"Heh." Chen Xuebing chuckled dryly. "They've certainly calculated the potential market perfectly. They even sent people to our press conference? They were probably the ones laughing the hardest back then, weren't they?"

“Chairman, it’s not worth it.” Lu Weibing frowned and said, “Our phones can only be sold in the domestic market right now. In the surrounding markets, Japan uses the CDMA standard, which is dominated by Qualcomm. South Korea has already completed full WCDMA coverage. Europe’s 2G network was originally quite developed, with speeds sufficient for web-based applications, so our phones with GSM could also be sold there. But now we’ve signed an agreement with Apple to expand the market. It’s tough. We bought 80 units at once, and it’s hard to say whether we can even sell 80 of them.”

Zhang Hongbin also sighed: "Their solution is not advanced and is still far behind Apple's multi-touch. If we were in the United States, we could easily find the right talent and make a design of the same level within six months. 1.8 million is practically free money."

Chen Xuebing shook his head and said firmly, "Let's just accept it. Who told us to start our touchscreen research late? This is the price of growth. But we have to add one condition: In addition to using this solution for free for the first 80 units, we can also license it to other manufacturers. Although they retain the technology, they can only charge us one-third of the design fee for the manufacturers they license."

“You mean…” Lu Weibing asked hesitantly.

"We definitely need to go to Europe, but we don't necessarily have to go ourselves. We'll wait until you've perfected your supply chain."

Seeing that there were many people present, Chen Xuebing only said half of what he wanted to say.

The agreement with Apple is one that benefits both parties, and no one is foolish enough to think that a contract can restrict anything.

However, to keep this agreement during this period, Jobs would have to give Apple some benefits.

He waved his hand and continued, "The rest is about the screen. Screens are the domain of Japanese and Korean manufacturers, so I'll figure out a solution. You don't need to worry about the battery for now."

Upon hearing this, Lu Weibing's expression relaxed.

Even if you really put him in charge, he doesn't have the ability.

I still vividly remember the blatant price gouging by Japanese and Korean manufacturers when we were procuring high-end screens, and the agonizing negotiations.

Everyone was also calculating what tasks their department would be assigned, fearing they might be assigned to those difficult suppliers.

At that moment, deafening cheers erupted outside.

Following the sound, I saw it coming from the direction of the internet company's office.

The official website is managed by the web design company.

Everyone suddenly realized: the Qilin pre-sale has begun!

A young employee burst through the conference room door, his voice trembling with excitement:

"President Lu! Chairman Dong! Five thousand units in ten minutes!!!"

(End of this chapter)