Those Years When I Was Forced to Top the Forbes List

Chapter 400 DCT
"This company will be one of our core incubation projects in the future. All of our resources will be directed toward it. It will not only be listed on the Hong Kong Stock Exchange, but will also become a leader in semiconductor manufacturing equipment."

"I've invited everyone here today not only for JD.com matters, but also to raise funds for this project."

After Chen Xuebing said this, the fund managers of various funds were somewhat puzzled.

Unfortunately, "lithography machine manufacturing companies" are such a niche field that even most operators in the TMT sector don't really understand them.

“That’s right.” Xin Mengzhen’s clear voice attracted attention. “My family has been involved in the electronics business since the 1970s. We have done OEM manufacturing for many international companies and have OEM factories in Guangzhou and Hong Kong.”

"In the past year, we have begun to transform our PC OEM business, started purchasing semiconductor products such as Intel CPUs and Seagate hard drives, and paid more attention to the development of the global semiconductor industry."

Her voice carried the air of an old-timer, and with Chen Xuebing by her side providing support, she exuded a calm and collected demeanor. The investors' mindset was different from when they were facing a grassroots entrepreneur like Liu Qiangdong; they listened to her with a professional attitude.

“We have found that the procurement of semiconductor equipment is entirely dependent on imports, and due to technology embargo lists, many countries are unable to purchase Western and advanced-generation lithography machines. This is an industry with a strong sense of local identity, yet it is irreplaceable.”

"If we develop advanced lithography machines, or even just the next generation, we will be able to obtain a lot of local support, namely government investment and local orders. SMEE (Shanghai Microelectronics Equipment Co.) is such a company."

"In 2002, they received 2.3 million yuan from the national special fund, an additional 6 million yuan from the Shanghai Science and Technology Commission, and investment from Zhangjiang Group and Shanghai Electric. It can be said that the country has always attached great importance to and continuously invested in them."

These few words explain the original intention.

Domestic monopoly and large-scale national capital injection.

"However, SMEE has been limited by equipment embargoes and insufficient international talent recruitment. It also relies on imports for core components and is subject to targeted blockades, so its development has not been successful. Until this year, they delivered an SSA600/20 device, which only achieved a resolution of 0.8μm, lagging behind the international level by 15 years."

"Therefore, I think we should rely on Hong Kong's advantages as a free port in the early stages, and obtain international resources through the injection of domestic and international capital to develop. Once the technology has reached a certain level, we can then introduce government capital to avoid being squeezed out and blocked by international forces before we have achieved technological results."

Xin Mengzhen was explaining her plans, while Chen Xuebing was scrolling through a chat window on his Kirin phone, a smile unconsciously creeping onto his lips.

November 3th at 14:17
Bingo: "How boring. I finally managed to secure a manufacturing contract with ASUS for one of their products today, but I feel no sense of accomplishment at all."

Hand-drawn pancake: "Got it, you're hungry. I'll treat you to lunch this afternoon. What would you like to eat?"

Frying Bingo: "[Anger] [Anger]"

Hand-drawn pancake: "??? What's wrong?"

Bingo: "It's all your fault. Lenovo's big order got through so easily. How am I supposed to work now? I've lost all my passion."

HandDrawPie: "Then I'll have President Liu increase the difficulty of the review process, and you can renegotiate."

Bingo (fried): "[Smiling] [Smiling]"

HandDrawing: "How about I give you something challenging? It just so happens that I can't personally handle this task."

Bingo: "Okay, what is it?"

HandDrawPancake: "The lithography machine, we'll talk about it when I get home tonight."

November 3th at 26:12
Bingo: "This is too difficult, I want to change my major."

Hand-drawn cake: "???"

Fried Bingo: "Me"

Fried Bingo: "Want to share."

Fried Bingo: "Semiconductor"

Bingo: "Professional!!"

HandDrawPancake: "Are you crazy? You studied liberal arts. Besides, what can a semiconductor major teach? Those teachers don't even understand it themselves. They don't have access to advanced information. Just start doing it and learn by doing."

Bingo: "There should be more information from HKU, right? I'll be going to HKU as an exchange student in my third year, and I can audit some classes in related majors."

Hand-drawn cake: "Is it useless?"

Hand Draw: "However, your Hong Kong identity is indeed useful. Zhang Rujing chose to start his semiconductor project in Hong Kong from the beginning. The geopolitical avoidance, capital freedom and international resource integration are all superior to those in China. As a result, his wafer fab was planned to use too much land and was kicked out by real estate developers. You make lithography machines, so you don't need such a large area of ​​land. I happen to be cooperating with Wu Guangzheng. Their Wharf Holdings has some industrial land and warehouses, which can solve this problem."

Bingo: "The manufacturing of lithography machines requires very high ground vibration control. Hong Kong's subway system is so advanced, it won't work, right?"

November 3th at 26:12
Bingo_fried_zi: "??"

November 3th at 26:13
Hand-drawn cake: "It's Hong Kong!"

HandDraw: "I just asked Wu Guangzheng about the land issue, and he said it can be resolved! Tai Po Industrial Estate! It's a 30-minute drive from the airport! It has its own heavy cargo terminal, making transportation very convenient. Moreover, it's an early reclaimed land plot with granite bedrock. It's designed for high-load factory buildings, so there's no risk of subsidence. It's also adjacent to the Chinese University of Hong Kong, where they have a microelectronics laboratory, so the academic conditions are quite good."

Bingo: "Is the land big enough?"

Hand-drawn cake: "It doesn't need to be very big, forty or fifty acres is enough. There's also a substation nearby, so this piece of land is perfect. I'll meet with Wu Guangzheng in a few days, and I'll make friends with him and ask him for help."

Bingo: "How about I go home and discuss it with my grandfather? We've renovated the factory at Kwai Chung Wharf. It's a hundred acres there, and it's very convenient to cross the border to Shenzhen."

HandDraw: "No need. Your foundry should be retained and expanded further. Early acquisitions of semiconductor manufacturing equipment should be conducted under the guise of 'strategic investments to enhance precision manufacturing capabilities.' Don't expose the purpose of semiconductor equipment manufacturing; otherwise, it could easily be seen as 'a deliberate acquisition of European high-tech by a Chinese company.' In international scrutiny, your business naturally intersects with the global semiconductor supply chain, and your background is clean, never involved in sensitive political or business areas, making you a 'low-risk entity.' You understand what I mean?"

Bingo: "Why do I feel like you're insulting me?"

Hand-drawn cake: "Women, don't overinterpret."

Bingo: "Prepare to die, let's have a one-on-one fight after get off work."

12:22
HandDrawPie: "The investors will be here tonight. After Dongzi's matter is resolved, we'll find an opportunity to bring this up. You'll take the lead, and I'll supplement your points."

Fried Bingo: "[ok]"

Just as Chen Xuebing was reading this, Xin Mengzhen had finished presenting a business plan (BP).

Everyone was pondering when Zhao Lihuan suddenly asked a very direct and simple question that no one else had asked: "You've been talking about the prospects of semiconductor equipment for so long, but you still haven't explained clearly what kind of equipment this lithography machine you're making is. I've heard the name a few times before, but if you hadn't told me today, I would have thought it was some kind of DVD burner or something."

Xin Mengzhen explained with a smile:
"The function of a photolithography machine is to expose circuit patterns onto a silicon wafer, just like an old-fashioned film camera. Then, chemical etching is used to create a three-dimensional circuit. However, its precision is one-thousandth the thickness of a human hair, as small as engraving the entire 'Dream of the Red Chamber' on a grain of rice."

"Currently, mainstream lithography machines are divided into dry lithography and immersion lithography. The light source for both is argon fluoride (ArF) laser. The difference lies in the medium between the lens and the silicon wafer: one is air, and the other is water. When using air as the medium, the 193nm wavelength deep ultraviolet light can only reach a 65nm chip where the pattern is no longer visible. However, in 02, Dr. Lin Benjian from Taiwan proposed an immersion solution that uses ultrapure water as the medium, which shortens the wavelength of deep ultraviolet light in water, making it equivalent to 134nm. The refractive index of water on light saved the 193nm lithography machine."

Her explanation made the investors realize the difficulty.

At this point, Xiong Xiaoge sighed, "Back in 03, I attended a closed-door meeting on China's semiconductor equipment supply chain. I talked with ASML China executives about the technological bottlenecks and localization paths of lithography machines. We also went to investigate SMIC together. The ASML people told me that 90% of the components in a machine cannot be made in China. That was the first time I realized that lithography machines are even more difficult to manufacture than atomic bombs."

At this point, he raised some questions: "Last year, we also facilitated some cross-patent licensing between AMEC and Lam Research, the US etching equipment giant. At that time, I also talked to people from AMEC about lithography machines. They said that lithography machines are many times more difficult than the etching machines they make. It sounds like you actually want to make a complete lithography machine? Is it a dry or immersion type?"

At this moment, Zhu Xiaohu, an investor in SMIC, shook his head repeatedly:

"Immersion? Impossible! I've heard Nikon's immersion technology isn't even mature yet. It's better to buy ASML's dry technology. And ASML's immersion technology is impossible to buy; even SMIC can only..."

He raised a question, but before he could finish, he said it was best not to make the matter of SMIC secretly buying second-hand transfer dryers so obvious.

These days, it's not that hard to buy a machine at a high price.

However, the fact that even this acquisition path is unavailable demonstrates ASML's technological advantage and the difficulty of using immersion lithography machines.

Xin Mengzhen also had to admit:
"It's impossible; doing a direct immersion is tantamount to suicide."

"ASML and Nikon have laid a tight net of patents for immersion technology. The patents for water immersion refraction, immersion control system, and anti-pollution lens coating are all new patents. I have calculated that if we want to make an immersion device, we will have to pay $300 million in patent fees to the two companies for each device, which accounts for 40% of the total cost."

"There's also the supply chain. Zeiss 1.35NA lenses, ASML nano-level immersion lenses, and Ebara's ultrapure water circulation system are all monopolized."

"We can only start with dry lithography, acquiring second-hand lithography machines from Japan for reverse engineering. Many of the patents involved have expired and are in a semi-public state. In addition, there is already a domestic foundation for 0.93NA lenses, so we can collaborate with domestic companies for research and development. The assembly and debugging of dry lithography machines can cultivate a basic optical and mechanical team, preparing for the research and development of immersion lithography."

This is all the information she has painstakingly collected over the past few days. Just to gather this information, she had to use a lot of her family connections to inquire with some large companies.

The semiconductor equipment industry is really very closed off. The more you learn about it, the more you realize how difficult it is. She has spent a lot of time understanding the principles of lithography machines these days, which is why she wants to switch to semiconductors.

Her only source of confidence was Chen Xuebing telling her that it was possible to acquire it.

If we cultivate a strong talent base this year and attract capital, we will have US dollars and opportunities next year. Hong Kong is an English-speaking city, and many international talents are willing to come here, giving us a natural advantage for starting out.

Chen Xuebing, who was observing from the side, saw everyone complaining and smiled bitterly to himself.

The group of people kept talking about DUV.

No one has mentioned EUV yet.

He could only tap the table and say:
"The reason we chose to enter this industry is because the semiconductor market is getting bigger and bigger."

"Recently, Cymer in the United States has also developed a laser plasma light source with a wavelength of only 13.5 nanometers. However, the conditions for the formation of the light source are very harsh, and the medium must be a vacuum, as it will be absorbed when it comes into contact with air."

"For such equipment, the core subsystems of the entire chain, including light source manufacturing, vacuum environment, lenses, photoresist, and photomasks, must be rebuilt. There is still a long way to go in chip manufacturing, and the future is actually quite bleak."

"In other words, there are many opportunities. As long as you seize the key opportunities in any subsystem, the value of the company will undergo tremendous changes."

Today's occasion is equivalent to a roadshow for a new company, and the essence of a roadshow is to make empty promises.

He didn't want these investors to go back and investigate, only to find that DUV lithography machines were already difficult, and that EUV lithography was even more difficult, thus completely losing their confidence.

He wanted investors to realize that the challenges of EUV were both a formidable obstacle and an opportunity.

"I can guarantee that as long as Mr. Xin's company masters the dry lithography machine, I can put it on the stock market. If we can develop a prototype of the immersion lithography machine, I can inflate its value to 30 billion. If we can capture any subsystem opportunity of the new lithography machine, I am confident that I can push this company into a national-level large-scale support project and inflate its market value to 80 billion to 100 billion Hong Kong dollars."

"ASMAIL's current market capitalization is 332 billion euros or 441 billion US dollars, a valuation that has more than doubled since January of this year."

"The core event was the announcement that the world's first mass-produced immersion lithography machine, the XT1900i, was delivered to Intel, which promoted the mass production of Intel's 45nm chips and triggered market expectations of technological monopoly. If Mr. Xin's company can make real progress and win orders from Chinese companies, this valuation is not high."

Chen Xuebing's pie-in-the-sky promises are just wishful thinking. Everyone knows they're impossible to achieve; the point is simply to understand where the peak of the valuation expectation lies.

After he finished speaking, he returned to reality: "If the research and development is not strong, I will unilaterally continue to increase investment. Although it will lead to an increase in equity, at least the company will survive and continue to conduct research and development, so that everyone's investment will not fall to the ground. I will also continue to work on the concept. As long as the industry cycle comes, there will be an opportunity to go public."

Dreams are important, but so is reality.

If three years isn't enough, then let's do another three years.

The difficulty of lithography machines requires the right timing and concerted efforts from all sides. This should first be reflected in the shareholders, just like SMIC, which has capital support in different fields.

Therefore, for this company to operate, it needs to attract at least 20 investors.

If many domestic institutions take the initiative, the next step can be to introduce international capital.

For many investors here, the actual difficulty of the technology is not that important. Prototypes and concepts can be created out of thin air and hyped up. The key is who is hyping it up.

With Mr. Chen handling the promotion, how many people are tempted?

There's actually a clear picture here. As of the end of last year, there were 746 companies listed on the Hong Kong Main Board, with a total market capitalization of HK$133398 billion, averaging HK$178.8 billion per company, which is equivalent to US$22.9 billion.

This number is still climbing this year.

If a company can go public, its value will be considerable.

Xiong Xiaoge spoke again, getting to the heart of the matter: "President Chen, is your idea 'buying equipment = mastering the technology'? Or 'importing technology'? Or 'developing your own technology'? This directly relates to how much money everyone has to invest, how large this project is, and how much you'll have to invest each year if R&D is ineffective. You should explain this clearly."

"The research on dry lithography machines will start with $300 million in funding. Within three years, we will enter the pre-research phase of immersion lithography and initiate IPO financing. In another three years, we will enter the pre-research phase of the new EUV lithography machine."

This means that we need to focus on real research and development; no one will start by using $300 million to hype up a concept.

"Should we start with 300 million or a valuation of 300 million?" Xiong Xiaoge asked again.

"We've raised 300 million."

Chen Xuebing's words left everyone present scratching their heads.

JD.com has only raised less than $200 million in total funding to date.

陈学兵解释道：“阿斯麦尔截止去年的过往研发总投入是54.3亿美元，06年营收是50亿美元；尼康光刻机过往研发总投入是60亿美元，06年营收是46.7亿美元；上海微电子过往四年总投入9亿美元，营收是300万美元。”

“This data should make it clear to everyone where the barriers to entry are in this industry. We have the advantage of being a latecomer and the advantage of Hong Kong. We don’t need to pursue complete technological independence for Shanghai Microelectronics and we don’t need to start from scratch. However, building factories, acquiring technology companies, purchasing machines for reverse engineering, and purchasing technology licenses are all extremely expensive. I think an investment of 300 million US dollars is too little. I need to do another round of financing next year to raise the company’s capital to more than 15 billion US dollars before we can really make this happen.”

Everyone's eyes darkened upon hearing this.

Starting with $3 million, there's still an expectation of seven or eight times that amount by the time it goes public. If it's $15 billion, how much more can it rise after going public?

The key is.
"Mr. Chen, where are we going to get $15 billion? How much are you planning to invest?"

Asking for $15 billion? Are you kidding me?
They don't expect us to raise $15 billion, do they?

Even Xin Mengzhen was surprised by this, as Chen Xuebing had never told her that he would invest so much money.

"Oh, I'm not investing for now. Just like last time, I'll lead the later rounds, but this time I won't promise a high-price buyback. I invited everyone here just to help generate buzz. You can invest however much you want. If anyone feels they've lost money after three years, they can sell their shares to me at a 10% premium per year. We can sign an agreement on this. I still won't let anyone lose out; this is a business that guarantees principal."

Everyone breathed a sigh of relief.

Without this condition, it would be too difficult to give President Chen face, and even if everyone agreed, it would be hard to persuade the investment committee when they got back.

"You mean, we need to put together a shareholder list?"

"Yes, but let's all at least chip in 30 to 50 million US dollars for President Xin to get started, shall we?" Chen Xuebing said with a smile.

He knew these people wouldn't be able to raise much money, because this wasn't a guaranteed profit business; it might even be a complete loss. They couldn't see the future of the lithography machine company clearly, but short-term expenses would be huge. To prevent disunity among shareholders later, he had to provide them with a safety net.

The significance of this financing is not only to give Xin Mengzhen an early start and expand her network, but also to cope with international scrutiny. With so many institutional shareholders, her future large-scale investment in the British Virgin Islands will not arouse suspicion.

"Is that $15 billion intended to be raised internationally? How much are you prepared to contribute?" Zhu Xiaohu asked hesitantly.

Chen Xuebing smiled mysteriously: "We'll see. I've contacted a large international fund. We'll raise as much as we can from the 15 billion. As for the difference, someone will cover it."

There's no need to spell this out too clearly.

But it's not convenient to explain it too clearly.

Xiong Xiaoge narrowed her eyes, determined to get to the bottom of it: "President Chen, do you have that much money?"

Chen Xuebing smiled but remained silent.

"What's the company name?" Xu Xin asked, a question that only a woman would ask.

This question elicited a bright smile from Xin Mengzhen.

"Call it DCT."

"DCT? What's the name of that device?"

"No, it's an abbreviation for Dreams Come True, meaning dreams come true."

(End of this chapter)