Rebirth 08: Rise from copycat phones

Chapter 533: A historic three trillion dollar market capitalization!
Zhuyun Group continues to increase its investment in the advanced semiconductor field, and the scale of the investment is extremely large. This is because many of Zhuyun Group's core businesses are becoming increasingly dependent on the advanced semiconductor field.

Various smart terminal businesses, PC businesses, server and cloud computing businesses, artificial intelligence businesses, computing chip businesses, robotics businesses, virtual device businesses, etc.!
Almost all of Zhuyun Group's main businesses are built on advanced semiconductor technology!

In addition to the group's own business, there are many sister companies, domestic manufacturers, and overseas partners.

Many domestic and foreign companies rely heavily on the semiconductor business unit of Zhiyun Group for high-performance chips, such as APO graphics cards, PX computing chips, LC series computing chips, mobile phone SOCs, memory and flash memory chips, etc.

The chips designed and manufactured by Zhiyun Group's subsidiaries, namely Zhiyun Semiconductor, Zhiyun Storage, and Jiangcheng Storage, which are semiconductor design companies, as well as Zhiyun Microelectronics, which specializes in semiconductor manufacturing, are never just supplied to Zhiyun Group itself.

We also supply a wide range of sister companies and domestic and foreign partner manufacturers!

Let's take the mobile phone SOC chip, which is more familiar to the average person, as an example!
Zhuyun Group expects to ship more than 800 million smartphone SOC chips this year... Zhuyun Group itself has only used about 300 million S-series chips.

The remaining 500 million W-series SOC chips will be supplied to other domestic and foreign manufacturers!

Vcool Electronics, Dami, Huawei, OPPO and Vivo, Transsion, Lianxiang, Sixing, LG, and a whole bunch of other second- and third-tier mobile phone manufacturers...

In the third-party mobile SoC chip market, it's basically a head-to-head competition between Zhiyun's W-series chips and Qualcomm's Snapdragon series chips.

In addition to the S-series chips used by Zhiyun Group itself, Zhiyun Group's market share in the SOC chip field is even greater.

Globally, at least 60 out of every 100 smartphones use S-series or W-series chips from Zhiyun Group, putting Apple, Qualcomm, Huawei, and Samsung below them.

In the field of mobile phone SOC chips, Zhuyun Group is very powerful!
Mobile SoC chips are just one type of logic chip, and only one business type of the semiconductor business unit under the Zhuyun Group. Zhuyun Group has a whole host of other semiconductor businesses.

Any product involving electronic computers requires high-performance CPU/GPU/SOC chips, memory chips (DRAM), and flash memory chips (3D NAND).

These three categories of chips are the core chips that support modern electronic products!
Zhuyun Group has a leading technological advantage in these three areas and is at a world-class level.

To maintain a technological lead, top-tier semiconductor processes are essential!
For example, the current S-series SOC chips and the GPU core of computing cards require a seven-nanometer process, and the future five-nanometer or even three-nanometer processes... These processes require advanced production lines with EUV lithography machines as the core.

Advanced memory chips require 10C, or at least 10B level processes, to determine their actual physical size. These top-tier memory manufacturing processes also require EUV lithography machines for production.

Currently, 3D flash memory chips with more than 150 layers also require production lines centered around high-performance EUV lithography machines to control costs... Although this level of flash memory chips can also be produced using DUV immersion lithography machines, the yield is not good and the cost is relatively high.

The three core chip types mentioned above—logic chips, memory chips, and flash memory chips—all have a huge demand for advanced production lines centered around EUV lithography machines…

This is a key reason why Zhuyun Group continues to increase its investment in the semiconductor field!

Of course, the direct reason that prompted Zhuyun Group to increase its investment in the advanced semiconductor field is the huge market demand for computing chips...

Previously, the demand for advanced semiconductors was limited to more traditional chips like mobile phone SoCs, and the demand for semiconductor production capacity was actually limited, and there was no need for 3D packaging.

However, now that computing power cards have emerged and are needed in such large quantities, there is a shortage of advanced semiconductors.

The Yun VW virtual appliance business alone, conservatively estimated, will require at least two to three million APO series graphics cards by next year... and as time goes on, this market demand is gradually expanding, and it is possible that it will reach four to five million units or even more in the next few years.

The arrival of the virtual era has brought with it a huge demand for APO series graphics cards.

And this does not include the huge demand for APO graphics cards from the traditional artificial intelligence market. This market is also very large, with a current supply of about two to three million units per year. But this is just the supply. The reason why the supply is only two to three million units is not because the market demand is so small, but because the production capacity of Zhiyun Group is so limited.

If production capacity is increased, the market demand will be at least four to five million pieces per year!
It's not just high-tech companies playing with artificial intelligence now; a large number of small and medium-sized enterprises, and even traditional manufacturing industries, are also using AI. If the supply of GTAI's open-source AI is opened up, the market demand will be even greater.

These two areas alone have far exceeded the current APO graphics card production capacity of Zhiyun Group... resulting in a severe shortage of cards on the market!
It is extremely difficult for ordinary companies to procure graphics cards from the market.

Even the APO4500 graphics card, which was already considered an outdated product, is now unavailable...

Because Zhuyun Group used APO4500 in virtual machine equipment in the second half of this year, it has reduced the supply of APO4500 graphics cards to meet the production needs of virtual machines, resulting in a severe shortage of APO4500 graphics cards on the market now.

This refers to APO graphics cards, and there are also a whole bunch of equally advanced chips that require 3D or 2.5D packaging, such as EYQ chips, PX chips, ZY chips, etc.

The high demand for advanced chips has directly led to Zhuyun Group's large-scale investment in the advanced semiconductor field.

As we entered early August, Zhuyun Microelectronics, a subsidiary of Zhuyun Group, announced its production capacity plan to the outside world!

Zhiyun Microelectronics plans to increase its logic chip production capacity of equivalent 7nm and equivalent 5nm processes to 300,000 wafers per month within the next two years, of which 120,000 wafers are planned for equivalent 5nm processes.

They also announced that the 5-nanometer process has completed technical verification and is planned to be put into mass production next year!
At the same time, it will continue to expand the production capacity of the 14-nanometer process node (12-14), and expects to further increase the production capacity of the 14-nanometer process node to 400,000 wafers per month.

The advanced process capacity of the two aforementioned process nodes is expected to increase to 700,000 wafers per month!
At the same time, Zhiyun Microelectronics will also plan to invest heavily in advanced packaging to further expand its production capacity in order to meet the packaging needs of a large number of advanced chips, especially the most advanced 3D packaging technology.

At the press conference, Zhiyun Microelectronics also announced its equivalent 3-nanometer process plan, claiming that it has completed the technical theoretical verification of the equivalent 3-nanometer process in the laboratory and has begun preliminary capacity planning, with production expected to begin in two years.

At the press conference, they announced that they would complete the preparations for mass production of the two-nanometer process within 25 years.

Following the release of this series of information, it sparked heated discussions among outsiders regarding Zhuyun Group's semiconductor plans... Investors were the first to react to these statements: Zhuyun Group's stock price plummeted in response...

Every time Zhiyun Group announces a major investment in the semiconductor field, its stock price drops as a sign of concern. This is mainly because the semiconductor industry is extremely capital-intensive, and the more advanced the process, the more money it requires.

Behind Zhuyun Group's ambitious semiconductor process advancement and capacity expansion plans lies a massive capital investment... Many investors believe that, at this rate, even an annual capital expenditure of $50 billion might not be enough in the semiconductor manufacturing sector.

Even if Zhuyun Group's enterprise business is very profitable, it can't withstand such turmoil in the semiconductor manufacturing industry!

Of course, the stock price drop was limited. Some investors disliked Zhuyun Group's heavy asset business in semiconductors, while others liked Zhuyun Group's business approach of striving for technological excellence. As a result, the stock price was quickly pulled back up.

These optimistic investors believe that Zhuyun Group's continued technological advantage in the semiconductor field can bring substantial returns to the group's other businesses, such as computing power cards, virtual equipment, and robotics.

Investors are diverse, some pessimistic and some optimistic, but none of them can stop the stock price of Zhuyun Group from soaring toward three trillion US dollars.

In particular, the virtual equipment business has shown huge market potential, the robotics business is booming, and the computing power card business continues to generate high profits.

All of these factors have contributed to the continuous rise in the market value of Zhuyun Group... even as Zhuyun Group continues to invest heavily in the semiconductor field.

On Monday, August 5th, Zhiyun Group officially released its second-quarter and first-half financial reports. The first-half financial report showed that Zhiyun Group's revenue reached a record $335 billion in the first half of this year, representing a year-on-year increase of 19.2%.

Profits reached a staggering $79.2 billion, representing a remarkable year-on-year increase of 40.3%.

This is the financial report for the first half of the year. Relatively speaking, Zhuyun Group's revenue and profit have always been relatively low in the first half of the year, while they are much higher in the second half.

Following this pattern, it's a certainty that Zhiyun Group's total revenue will surpass the $700 billion mark this year. The key question is whether it will reach just over $700 billion, or $780 or $900 billion. The profit figures are even more staggering. Many analysts believe that Zhiyun Group's profits this year will likely exceed $180 billion… Not only will the total amount be high, but the growth rate will also be extremely high, with a projected year-on-year growth rate of over 40%.

Such a high profit growth rate is actually abnormal for a super-large multinational corporation with annual revenue of seven hundred billion US dollars... It's terrifying.

A closer look at the financial report reveals that the additional revenue and profit growth came from the growth of three new businesses: robotics, virtual reality, and computing chip, all based on artificial intelligence technology.

However, traditional smart terminal businesses, traditional chip businesses, software, and internet businesses have remained relatively stable with limited growth.

This demonstrates the significant role that artificial intelligence technology has played in driving the revenue and profit growth of Zhuyun Group!

Of course, Zhuyun Group's revenue and profits in the first half of the year were outrageous, but its various expenditures were equally outrageous!
Developing new businesses based on artificial intelligence technology is very expensive!

Capital expenditures in the semiconductor business alone reached a staggering $27 billion in just six months... quite extravagant... but we can't afford not to, because you can't play the artificial intelligence game without various computing chips.

The R&D investment is also extremely extravagant. In the first half of the year, Zhiyun Group's R&D expenditure reached an astonishing US$45.2 billion, ranking first among all companies in the world in terms of R&D investment, and by a huge margin.

Zhiyun's R&D investment is more than the combined R&D investment of the second, third and fourth ranked companies!

It's terrifying!
The revenue, profit, R&D expenditure, semiconductor capital expenditure, and other data of Zhiyun Group are all too frightening... They are often in the hundreds of billions or even tens of billions of dollars.

These staggering figures once again demonstrate the immense size and influence of the Zhuyun Group... You won't find another behemoth like it anywhere else in the world.

Even though Zhiyun Group operates on a heavy asset model in the semiconductor industry, even though its R&D investment is astronomical, and even though investors have never given Zhiyun Group a high price-to-earnings ratio, which has been around 17 or 18 times for a long time and rarely exceeds 20 times, and even if it does occasionally break through, it will quickly fall back down.

However, this still couldn't stop the stock price of Zhuyun Group from breaking through and continuing to rise!
Just after Zhuyun Group released its financial report on Monday morning, Zhuyun Group's stock price saw a continuous rise throughout the day.

In the half hour before the stock market closed that afternoon, Zhuyun Group's stock price experienced a rapid surge, and its market capitalization historically broke through the three trillion US dollar mark, maintaining this level until the close, when its market capitalization finally reached three trillion nine hundred and twenty-three billion US dollars.

This situation spread around the world within just half an hour of it occurring.

A large number of people working in the securities industry received this important message.

In the following hours, the news spread rapidly to the general public around the world, thanks to reports from numerous professional journalists, a massive amount of various random self-media outlets, and even reposts by ordinary people.

The domestic response was the fastest. As soon as Zhuyun Group's market value rose to three trillion US dollars, a large amount of news came from China, and many financial news media reported on it immediately.

Within five minutes, several domestic online financial and securities media platforms reported the news.

Within a few hours, almost everyone who uses their phone to browse short videos, WeChat Moments, and Weibo received the related message.

The market value of Zhiyun Group has exceeded three trillion US dollars, making it the first company in China and the world to reach a market value of three trillion US dollars... This news is so sensational that even ordinary people would click in with surprise and curiosity to take a look.

Such significant news naturally attracted a large number of analyses and discussions from so-called financial experts.

Some optimistic financial experts believe that Zhuyun Group's current stock price is still undervalued. Despite Zhuyun Group's huge R&D investment and semiconductor financial expenditures, they are actually making money...

With a projected annual profit of $180 billion, even using a relatively common price-to-earnings ratio of 20, the market capitalization should reach $3.6 trillion.

With a current market capitalization of $3.09 trillion, the price-to-earnings ratio is only 17 based on this year's projected profits.

This is abnormal; it's been underestimated!

Of course, some financial experts are doing well, while others are not.

Some financial experts have stated that Zhuyun Group's current price-to-earnings ratio is already slightly overvalued.

After all, Zhuyun Group's business strategy is so different from that of conventional high-tech companies that it spends money too aggressively.

Everyone knows that Zhiyun Group operates on a "high investment, high risk, high return" business model, investing heavily in research and development and capital expenditures in order to reap huge profits!

This business model is quite different from traditional high-tech and manufacturing companies. Instead, it resembles the model of pharmaceutical companies that develop their own drugs... Pharmaceutical companies that develop their own drugs are typically characterized by high investment, high risk, and high returns.

Therefore, while pharmaceutical companies' new self-developed drugs may seem to have extremely high profits, with prices often reaching tens or hundreds of thousands, the market value of these pharmaceutical companies is generally not very good. This is because the R&D investment in self-developed drugs is too high and the risks are too great. If the investment in these failed projects is also taken into account, the overall profit margin of pharmaceutical companies that develop their own drugs is actually just average, and therefore their price-to-earnings ratio is also just average.

Specifically within Zhiyun Group, who can guarantee that Zhiyun Group will continue to make so much money to cover its huge R&D and capital expenditures?

In particular, if the business in the three major areas of robotics, virtual equipment and computing cards encounters some obstacles and the growth rate drops even slightly, Zhuyun Group may fall into difficulties due to its huge R&D investment and capital expenditure, thereby dragging down the overall profit performance.

After all, no one can predict the future.

This is also the core reason why investors have consistently given Zhuyun Group a relatively low price-to-earnings ratio!

With a low price-to-earnings ratio, high risk and high investment are not a problem; investment returns can be guaranteed!
However, if the price-to-earnings ratio is even slightly high, then buying shares of Zhiyun Group becomes extremely risky.

The two sides of investors engaged in a game of strategy, which ultimately led to the current situation of mutual compromise.

But regardless of whether financial experts are optimistic or pessimistic, the fact that Zhuyun Group's market value has reached three trillion US dollars is undeniable.

Taking advantage of this opportunity, Zhuyun Group officially began the final preparation stage for its domestic listing... and started intensive contact with major investment institutions.

According to the plan, Zhuyun Group will list in two locations simultaneously in early September, issuing an additional 10% of its shares in China. This plan has now entered the final stage of listing preparation.

The fact that Zhiyun Group's market value has exceeded three trillion US dollars has undoubtedly given these investment institutions greater confidence.

Meanwhile, a large number of ordinary stock investors in China are eagerly raising funds to buy shares of Zhuyun Group issued domestically.

Even ordinary people who didn't play the stock market before and had little confidence in the domestic stock market are now thinking about buying some shares of Zhuyun Group as a long-term investment.

They don't trust other listed companies in China, but they do trust Xu Jiayin, the world's richest man...

Just as the outside world was hotly discussing Zhuyun Group's market value exceeding three trillion US dollars, and domestic investors and even ordinary people were looking forward to Zhuyun Group's listing in China.

Meanwhile, the executives at Zhiyun Group are busy preparing to launch the next generation of flagship S-series smartphones.

(End of this chapter)