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Chapter 291 Investing in BYD

If Ernst's inaccurate prediction of iPod sales could be attributed to a calculation error, forgetting about the Windows user base, then...

When faced with the explosive sales of the iPod, Cook was completely bewildered, as if his worldview was being rebuilt. He never imagined that this palm-sized music box could unleash such power that it would shake the entire electronics industry.

He was very optimistic about the iPod. After the samples came out, he used his keen sense of supply chain management over the years to determine that it would be a phenomenal product.

Even he predicted that the annual sales in the first year would be only between 200 million and 300 million units.

In the 1998 electronics market, this number was already considered a blockbuster product.

Based on the iPod's price of $339, 300 million units would generate $10 billion in revenue.

There are only a handful of electronic products in the world that can generate over $10 billion in annual revenue per item.

But life gave him a real surprise, or more accurately, a shock.

Just one week after the official release of the iPod, when the marketing department presented Cook with the statistics, he rubbed his eyes three times before he could believe it: total sales and pre-orders had exceeded 210 million units.

This means that his previously predicted annual peak was achieved in just one week.

Wall Street analysts went even further, giving full-year sales forecasts of 2200 to 2400 million units.

A single product generating nearly $10 billion in revenue—not only was Cook stunned, but even the major Wall Street giants were dumbfounded by their own data analysis and predictions.

Based on this revenue, if AxonTech were a publicly listed company, its market capitalization would be at least 120 billion based solely on the iPod.

Starting at hundreds of millions of dollars.

While Cook was still questioning himself over the sales figures, thousands of miles away in Shenzhen, BYD founder Wang Chuanfu was also caught in the same bewildering cycle.

Not long ago, he had just received a loan agreement from the bank and was full of confidence, wanting to double the size of his lithium battery factory and strive to quadruple his production capacity.

The construction team has started work, and all kinds of machinery have entered the site, but you're telling me it won't work. We need to increase production capacity by at least ten times, otherwise we won't be able to keep up with the demand for iPod orders.

Even more restless than Wang Chuanfu was the Shenzhen Municipal Government.

In the conference room, Mayor Li sat in the main seat, holding a thick analysis report in his hand. The more he read, the more his brows furrowed, and for a moment he didn't know what to say.

Based on the projected annual sales of 2200 to 2400 million iPods, Shenzhen-based supply chain companies supporting iTech can generate over $8 million in revenue just from directly fulfilling orders.

It indirectly drives upstream and downstream industries such as raw material procurement, logistics and transportation, and packaging and printing, and the GDP indirectly boosted is likely to exceed 200 billion RMB.

Mayor Li slammed the report on the table and looked up at the people sitting in the conference room. "Do you know what 200 billion means? Last year, Shenzhen's total GDP was only a little over 1300 billion RMB."

The supply chain for an iPod alone can account for more than 10% of the city's GDP growth, which he cannot afford to ignore.

"Tell me about your situation."

No sooner had he finished speaking than the director of the Development and Reform Bureau spoke first: "Mayor Li, I've done the calculations. If all these orders stay in Shenzhen, it will create at least 5 jobs and attract a number of electronic component companies to settle in Shenzhen."

The director of the Commerce Bureau added, "Moreover, once Aitech's supply chain takes root in Shenzhen, other major international manufacturers may also come to inspect it, which is very important for us to build an electronics industry center."

After listening, Mayor Li slammed his fist on the table and said, "I don't care what methods you use, you must keep this order in Shenzhen and take it all."

"If these companies are short of funds, we need to help them coordinate with major banks to open a fast track for special supply chain loans. As long as the documents are in order, we must provide an approval result within 24 hours. Government departments will coordinate the entire process and handle it on a case-by-case basis."

"There's also the issue of factory buildings," Mayor Li said, looking at the director of the Housing and Construction Bureau. "Some supply chain companies say they don't have enough factory buildings and can't build new ones in time. So, we need to quickly investigate all the state-owned factories in the city to see if there are any idle production lines or factory buildings, and coordinate with them to temporarily rent them to these companies."

"If all else fails, we'll do secondary manufacturing. As long as we can guarantee product quality and meet environmental requirements, we'll give you the green light on all the paperwork."

Finally, he turned his gaze to the director of the Human Resources and Social Security Bureau and said, "The workers' problem must be solved. I'm putting it this way: as long as we can keep this order in Shenzhen, even if our city's leadership team comes to the production line to help with the assembly, it's no problem."

After speaking, Mayor Li looked around at the officials present and said, "Any questions? If you have any questions, raise them now. Don't wait until things get messy before making excuses. Don't blame me for being ruthless then."

The meeting room was completely silent; no one spoke.

Mayor Li nodded in satisfaction. "Good. Since there are no problems, I hope that we can once again demonstrate Shenzhen speed in ensuring the supply chain this time."

Mayor Li originally wanted to assign a few more tasks, but his secretary suddenly walked in quickly and whispered in his ear, "Mr. Cook from Ivy Technology has arrived. His plane has landed at Shenzhen Bao'an Airport."

Mayor Li immediately looked up and asked, "Where is their first stop?"

The secretary had already communicated with the contact person at AiTech and quickly replied, "The first stop is BYD."

Upon hearing the name BYD, Mayor Li's expression instantly turned serious.

He knew perfectly well that BYD was the key to ensuring the supply chain in this operation.

There are many alternative manufacturers in China that produce chargers and casings. Even if one manufacturer's capacity is insufficient, they can transfer the orders to another, and the production capacity can definitely meet AIT's needs.

But BYD was different; at that time, there was no other factory in China that could produce lithium batteries specifically for iPods.

If BYD cannot secure this battery order, AIO Technology will absolutely not wait for it to gradually expand its production capacity.

The iPod is currently riding high, and if Cook can't wait, he will definitely shift a large number of orders to established battery manufacturers in Japan such as Sanyo and Panasonic.

Although BYD's prices are significantly lower than those of Japanese manufacturers, price has become a secondary factor given the phenomenal sales of the iPod.

Cook cannot simply stand by and watch the iPod miss out on sales momentum due to insufficient battery supply.

Thinking of this, Mayor Li immediately stood up and said, "Let's go to BYD too."

The secretary next to him hesitated for a moment. "Should we contact BYD first?"

Li Shi waved his hand. "No need. Time waits for no one. By the time we get there, Cook might already be talking to Wang Chuanfu."

With BYD's current production capacity, it is simply impossible to meet the needs of AI Technology. He has to go and personally support Wang Chuanfu.

This is no longer a question of orders; it's a question of whether Shenzhen can produce a world-class manufacturer.

With the iPod's immense popularity, BYD, as the iPod's battery supplier, will soon come into the view of major international manufacturers.

The success of the iPod has proven the stability of BYD batteries, and their prices are much lower than those of Japanese manufacturers. These major manufacturers have no reason not to choose BYD to reduce product costs.

BYD's meteoric rise is certain, but whether it can achieve such rapid success depends on whether it can secure the iPod order this time.

Meanwhile, in a conference room at BYD headquarters, Wang Chuanfu was caught in a dilemma.

When Cook arrived, he didn't even exchange pleasantries before throwing out two difficult questions, catching Wang Chuanfu completely off guard.

The first challenge is that Aike Technology wants to invest in BYD, and has clearly stated that it must acquire at least 20% of the shares.

In fact, Wang Chuanfu had already thought of this. From the day BYD became part of Aike Technology's supply chain, he knew that the bigger the tree, the more the wind would blow against it, and Aike Technology could not stand by and watch its cultivated supplier grow independently.

This is a common practice in the international supply chain; the only differences are how many shares to give up, how long to hold them, and how much money to make.

Let alone BYD, even Japanese battery manufacturers like Sanyo and Panasonic have to give up a portion of their equity to secure orders from Motorola and Nokia. Otherwise, why would they entrust you with the supply of core components?

However, Japanese manufacturers are large in scale and have high profits, giving them a certain degree of bargaining power. The equity they give up may be less than 0.5%.

But BYD is different. BYD's entry into the international supply chain is entirely due to the support of AI Technology. It can be said that without the iPod, there would have been no explosion in BYD's lithium battery business.

To put it bluntly, if AIoT suddenly announced the termination of its cooperation with BYD and switched to Japanese manufacturers, BYD's lithium battery business would be instantly brought back to square one.

But he didn't expect Cook to ask for 20% right off the bat. This was an outrageous demand that completely shattered Wang Chuanfu's psychological bottom line of 10%.

The second problem was even more troubling for Wang Chuanfu. Cook bluntly inquired about BYD's production capacity: "If BYD cannot solve its production capacity problem, I will not wait. I will go directly to Japan and talk to Sanyo about cooperation."

This made Wang Chuanfu even more at a loss for words. He knew BYD's current situation better than anyone else. Previously, AiTech had placed an order for 1000 million batteries. Even if BYD built a new factory and ran all its existing production lines at full capacity, working overtime, it could only barely complete the order.

Cook has now placed an additional order for 3000 million units, and the timeframe remains unchanged. This means that BYD's production capacity will need to quadruple to meet the demand.

But BYD's new factory has just started construction. Factory construction, equipment procurement, and production line debugging all take time.

"Wang, my time is very precious. I'm only staying in Shenzhen for two days. I hope BYD can give me an answer now: can your factory meet our order requirements?"

Cook was also feeling frustrated; to be precise, he was experiencing a bittersweet mix of pain and pleasure.

He was happy because iPod sales far exceeded expectations, which meant that iTech's revenue would explode, and his bonus would naturally be substantial.

He was frustrated because, as a master of supply chain management, he had unexpectedly suffered a major setback in the supply chain this time.

For someone with a background in supply chain management, this was the first time he had ever been driven to such a state of frustration by the supply chain.

While everyone else was on Christmas holiday, he had to give up his vacation and fly to Shenzhen overnight to help with the production capacity issues of iPods.

Looking at Cook's serious expression, Wang Chuanfu knew he genuinely wanted to secure the order. It wasn't just about the money; it was also a crucial stepping stone for BYD to enter the international market.

But he also knew that, given BYD's current situation, it was simply impossible for them to fulfill this order.

His face was somewhat ashen, and he opened his mouth with difficulty, preparing to tell Cook the truth, "Mr. Cook, regarding your company's new orders, we at BYD—"

"Yes, absolutely no problem."

A firm voice came from the conference room door, interrupting his speech.

Wang Chuanfu was stunned for a moment, then turned his head and saw Li Shi push open the door and walk in, giving him a reassuring look.

Li Shi strode up to Cook, smiling as he extended his hand. "Mr. Cook, welcome back to Shenzhen. Rest assured, BYD will definitely deliver all battery orders within the timeframe agreed upon by your company."