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In August 1983, two months after Lemon Technology went public, it had more than four billion US dollars in cash on its books.

At the executive meeting on Monday morning, CFO Kevin reported on the financial situation: "Boss, the company currently has $4.3 billion in cash on hand, plus a $2 billion credit line. If this money were in the bank, it would accrue millions in interest every day, but we need better investment opportunities."

Su Ning looked at the several proposals on the conference table.

Some suggested acquiring a software company, others suggested building a new factory in Asia, and still others suggested investing in real estate.

But he was holding another document, written by the technical director, David Fleming, who had stayed up all night to write it.

“I’d like to hear David’s advice,” Suning said.

David stood up and walked to the whiteboard. He drew a simple diagram on it: on the far left was "sand" (silicon), in the middle was "wafer", and on the right was "chip".

"Boss, everyone, I'd like to propose a bold plan—we'll build our own wafer fab."

The meeting room was silent for a few seconds.

“Wafer fabs?” Marketing Director Lisa frowned. “Those are companies like Intel and Texas Instruments. We make complete systems, why would we get involved in chip manufacturing?”

“Because chips are the core.” David’s voice was firm. “The CPUs used in Lemon computers are MOS Technology’s 6502 series. The baseband chips for mobile phones are designed by Motorola. The chips for communication modules are bought from Japanese companies. We spend over a billion dollars on chips every year, and we have to be at the mercy of our suppliers—they can raise prices or run out of stock whenever they want.”

CFO Kevin nodded: "David is right. Last year, due to insufficient MOS production capacity, our Lemon 13 was delayed by a month, resulting in a loss of at least 50 million US dollars in revenue."

“Moreover,” David continued, “if we had our own wafer fabs, we could customize chips to our own needs. For example, chips specifically optimized for graphics processing, or low-power chips optimized for mobile devices. Current general-purpose chips always have some wasted performance.”

Suning asked, "How much does it cost to build a wafer fab?"

“I consulted industry experts.” David flipped through his notebook. “A wafer fab that can produce chips using mainstream process technologies requires an investment of at least one billion US dollars. For more advanced processes, it could cost 1.5 billion or even 2 billion US dollars.”

"One billion?" Someone gasped. "We only raised 4.3 billion in our IPO, and we've already spent a quarter of it?"

“But this is a strategic investment,” David said. “With our own chip manufacturing capabilities, we will no longer be at the mercy of others. Moreover, our wafer fabs can also be used for foundry services for other companies, just like some small factories in Taiwan are doing now, which they call the ‘pure foundry’ model.”

Suning's eyes lit up: "Pure contract manufacturing? Does that mean our wafer fabs won't design chips for the time being, but will only be responsible for manufacturing?"

“Yes.” David nodded. “Intel designs and manufactures chips, which is very costly. If our wafer fabs specialize in manufacturing, we can take orders from many companies, and it will also make IBM and Texas Instruments less resistant. Apple needs chips, IBM needs chips, and even our competitors may ask us to manufacture chips for them—as long as the price is right and the quality is good.”

"This idea is very bold," Su Ning thought for a moment, "but where will the technology come from? Where will the talent come from?"

“Technology can be licensed.” David had clearly done his homework. “IBM has mature process technology. They may not be willing to sell it, but we can try. Japanese companies are also developing foundry business, so we can cooperate. In addition, it is said that the US government is very dissatisfied with the development of Japanese semiconductors and is preparing to suppress them. This is an opportunity for Lemon Technology. Moreover, we can also poach talent. Intel, Texas Instruments, and Motorola have many excellent engineers. We can hire them with high salaries.”

"What about the risks?" General Counsel Robert asked. "A billion dollars is no small sum. What if we fail?"

“We’ll invest in stages,” David said. “First, we’ll invest 500 million to build a pilot line to verify the technology. If it’s successful, we’ll invest another 500 million to build a mass production line. Even in the worst-case scenario, if the pilot line fails and we lose 500 million, we’ll still gain the technology and talent, so it’s not a complete loss.”

The meeting lasted three hours.

There are both voices of support and opposition.

Supporters believe this is a necessary step to master core technologies, while opponents feel the risks are too great and that it would be better to focus on making complete machines.

Finally, everyone looked at Suning.

“I agree to build a wafer fab,” Suning said, “but not immediately with a billion dollars. David, you will lead a preparatory team to do three things: first, investigate the current state of wafer fab technology globally; second, contact potential technology sources; and third, find talent. I will give you two months to come up with a detailed plan.”

"Great!" David exclaimed excitedly.

……

Over the next two weeks, David led a team of five to visit major chip companies across the United States.

They went to Intel's headquarters in Santa Clara.

They were received by a vice president from Intel, who was very polite but also wary.

"Mr. David, Lemon Technology wants to learn about wafer manufacturing technology? Aren't you a computer company?"

“We are considering moving upstream,” David said frankly. “The current unstable chip supply is affecting the launch of our products.”

“I understand,” the vice president said. “But wafer manufacturing is a capital-intensive and technology-intensive industry. Building a factory costs a billion dollars, and maintaining operations costs several hundred million dollars a year. Moreover, technology iterates very quickly, with a new generation every three years, and equipment depreciates rapidly.”

“What if we buy a technology license?” David asked.

"Intel's technology is not shared with outsiders," the vice president stated directly. "This is our core competitive advantage."

"What if we cooperate to build a factory? Lemon provides the capital, Intel provides the technology, and it's a joint venture."

"This... I need to report this to higher-ups. But the chances are slim."

After leaving Intel, the team went to Texas Instruments.

The situation is similar—they are willing to sell chips, but unwilling to share manufacturing technology.

The trip to Japan was slightly better.

In Tokyo, they visited NEC and Toshiba.

The NEC representative said, "We can provide technical consulting and even some equipment. But we are still developing the most advanced manufacturing processes ourselves."

Toshiba was more open: "If Lemon is willing to invest, we can cooperate to build a factory in Japan. But the products will be supplied to Toshiba first."

“That won’t do,” David shook his head. “What we need is the ability to produce independently.”

……

In early September, things took a turn for the better.

A Chinese engineer who had left IBM contacted David. His name was Chen Weiming. He had worked at IBM for fifteen years, where he was in charge of wafer fab processes.

"Mr. David, I heard that Lemon is considering building a wafer fab?" Chen Weiming asked on the phone.

"Yes, Mr. Chen is interested?"

"Yes. And I have important news—IBM may be willing to sell some of its wafer fab technology."

"Why? Isn't this their core?"

“Because IBM is in trouble now,” Chen Weiming explained. “Their mainframe business is declining, and their personal computer business can’t compete with Lemon. The company’s cash flow is tight, and they are considering selling non-core assets. Their wafer fab technology is very advanced, but the manufacturing cost is too high. It’s only used by themselves and doesn’t make money. If they package and sell the technology for licensing, they can recoup a large sum of money.”

David then immediately suppressed his surprise and reported to Suning.

"Meet with Chen Weiming and get more details," Su Ning instructed without hesitation.

"it is good!"

Three days later, Chen Weiming arrived in Santa Monica.

He brought a thick stack of documents to the conference room.

“Mr. Gan, Mr. David, this is a general overview of IBM’s wafer fab technology.” Chen Weiming opened the document. “They have two processes: one is 3 micrometers, which is already mature; the other is 1.5 micrometers, which is under development. If the 3-micrometer technology is licensed, it is estimated to cost two hundred million US dollars. The 1.5-micrometer technology is even more expensive, possibly five hundred million.”

"Two hundred million for an outdated technology?" David frowned.

“Not all of it is outdated,” Chen Weiming said. “While 3 micrometers is not as advanced as the latest 1.5 micrometers, it is sufficient for most chips. Moreover, the licensing agreement also includes technical support, personnel training, and an equipment list. With this technology, Lemon can build its own wafer fab within a year.”

"Where are the talents?" Su Ning asked the most crucial question.

“If Lemon decides to do it, I can bring my team over,” Chen Weiming said confidently. “I know at least thirty top engineers at IBM, all of whom are highly skilled. They are currently undervalued and paid relatively low salaries at IBM. If Lemon offers better compensation, many of them would be willing to switch jobs.”

“Thirty is not enough,” Suning said. “A wafer fab needs at least two hundred engineers.”

“We can train them,” Chen Weiming said. “I can look for more in Taiwan, Hong Kong, and Singapore. There are many international students studying semiconductors in the US who can’t find good jobs after graduation. If Lemon is willing to give them opportunities, it can recruit a lot of people.”

The meeting lasted a full day.

At the end, Suning said, "Mr. Chen, if you are willing to join Lemon and take charge of the wafer fab project, your salary will be three times what you earned at IBM, plus stock options."

Chen Weiming answered almost without hesitation: "I'll join."

In mid-September, Suning personally led a team to New York to negotiate with IBM.

IBM's representative was Senior Vice President Thomas, an old-school manager in his sixties.

"Mr. Gan, I heard you're interested in our wafer fab technology?" Thomas asked bluntly.

“Yes. We want to purchase the complete technology license for the 3-micron process,” Suning said.

"Including what?"

"All process documents, equipment list, patent licenses, and one year of technical support."

Thomas laughed: "This is IBM's core technology. How much are you prepared to offer?"

"One hundred and fifty million US dollars."

“Too low.” Thomas shook his head. “We’ve invested over a billion in developing this technology. Three hundred million is the lowest price.”

“Mr. Thomas, you’ve been using 3-micron technology for five years, and the next-generation 1.5-micron technology is about to go into production. The marginal value of this technology for you is decreasing. One hundred and eighty million, plus IBM’s priority in purchasing chips from Lemon for the next five years.”

Thomas thought for a few minutes: "Two hundred and fifty million."

“Two hundred million,” Suning said. “Cash payment. And we’ll allow IBM engineers to join Lemon during the project without pursuing non-compete agreements—I know you’re laying off staff, so this will reduce your severance pay.”

These words hit Thomas right where it hurt.

IBM is indeed laying off employees. If these engineers could voluntarily leave and go to Lemon, IBM could save a lot of money.

"Two hundred and twenty million," Thomas conceded.

"Deal." Suning held out his hand.

The contract was very detailed: $220 million to buy IBM's complete 3-micron process technology package, including the right to upgrade to the same improved version for free within five years.

IBM provided six months of technical support from twenty engineers.

Lemon promised that if it needs to purchase chips within five years, it will give priority to IBM under the same conditions.

After signing, Thomas remarked, "Mr. Gan, do you know, twenty years ago, IBM was the absolute king of the computer industry. Now..."

"Times are changing," Suning said. "Cooperation is the only way to achieve win-win results."

……

After obtaining the technology license, Chen Weiming immediately began assembling a team.

He placed a job advertisement in the Electronic Engineering Times: "Lemon Technology is building an advanced wafer fab and sincerely invites semiconductor talents."

Meanwhile, he flew to Taiwan, Hong Kong, and Singapore.

In Hsinchu, Taiwan, he met Morris Chang, who had just returned from studying in the United States...

Yes! He was the founder of TSMC.

At this time, Morris Chang was still working at Texas Instruments, but he was already dissatisfied with the glass ceiling in the United States.

"Mr. Chen, is Lemon Technology really going to build a wafer fab?" Morris Chang asked with great interest.

“It’s true. The technology was bought from IBM, the funds are plentiful, and the determination is strong,” Chen Weiming said. “If Mr. Zhang is willing to join, he can be the Vice President of Technology, with a salary 50% higher than Texas Instruments, plus a large number of stock options.”

“But wafer fabs require huge investments and carry high risks,” Morris Chang said cautiously.

"That's why we hired professionals to do what they do best," Chen Weiming said. "Mr. Gan said that if the project is successful, it may be spun off and listed independently in the future. At that time, the stock options of the early employees may be worth dozens of times more."

These words moved Morris Chang.

He had already risen to the position of vice president at Texas Instruments, but all the higher-ups were Americans, making it very difficult for Chinese people to advance.

"I need to think about it and discuss it with my family."

"Of course. But we hope to get a reply as soon as possible. The project can't wait."

A week later, Morris Chang called: "I'm joining."

At the same time, Chen Weiming poached thirty top engineers from IBM, fifteen from Intel, and ten from Motorola.

With the addition of forty international students recruited from Asia, the team quickly expanded to one hundred people.

In early October, Lemon Technology officially established Ningxin Semiconductor as a subsidiary, with Chen Weiming as general manager and Zhang Zhongmou as deputy general manager of technology.

The initial funding was $500 million.

……

The first board meeting of Ningxin Semiconductor was marked by intense debate.

“The wafer fab must be built in the United States,” General Counsel Robert insisted. “We, Lemon Technology, are a publicly listed company in the United States, our main market is in the United States, and our government relations are also in the United States. If we build the factory in Asia, Washington will have objections.”

“But costs are lower in Asia,” said CFO Kevin. “Labor costs in Taiwan are only a quarter of those in the United States, and land and utilities are cheaper. Moreover, Asia has a complete electronics supply chain, making it convenient to provide supporting services.”

“Taiwan’s political situation is unstable,” Robert countered. “China and the United States have just established diplomatic relations, and Taiwan’s position is sensitive. Putting a billion dollars of investment in Taiwan would be too politically risky.”

“What about Japan?” David suggested. “Japan has a stable political situation, advanced technology, and isn’t too far from the American market.”

“The costs in Japan are not low either, and Japanese companies may see us as competitors and will not be genuinely cooperative.”

Everyone has their own reasoning.

Finally, let's look at Suning.

“We’ll build in both locations,” Suning decided. “We’ll build a research and development center and a small-scale production line in the US, since we can’t keep relying on buying technology, and it will mainly serve the North American market and help us manage government relations. We’ll build a large-scale production plant in Asia to supply the global market.”

“What about the budget?” Kevin asked.

"We'll invest 300 million in the US factory and 700 million in the Asian factory. The total budget is 1 billion, to be invested over three years," Suning said. "The US factory will be located in Oregon, where there's an Intel factory, a talent pool, and tax incentives. The Asian factory... will be located in Shanghai."

"What? Shanghai?" Everyone was a little surprised, or even shocked.

“Yes! Shanghai.” However, Suning nodded casually, without explaining much to everyone.

"But there are risks..."

"Everyone can rest assured! The risk of building in Shanghai is almost zero, and the labor and land costs are incredibly low."

“Shanghai is indeed a good place,” Chen Weiming agreed. “Now that China has just begun its reform and opening up, it will definitely welcome our investment, and the costs will be reduced by a large part again.”

"Furthermore, we cannot back down on the issue of the wafer fab's shares! It must be wholly owned by Ningxin Semiconductor, and we can temporarily refrain from entering the mainland market."

"it is good."

The location was decided in one fell swoop: the suburbs of Portland, Oregon, USA, and the Pudong area of ​​Shanghai.

In mid-October, the two teams set off simultaneously.

The US team, led by David, went to Oregon to negotiate land and preferential policies.

The Shanghai team, led by Chen Weiming and Zhang Zhongmou, met directly with the Shanghai management.

The city of Portland was very welcoming.

"Mr. David, Oregon welcomes Lemon Semiconductor!" The governor personally received him. "We offer the following incentives: First, free land use for twenty years; second, full exemption from corporate income tax for the first five years, and a 50% reduction for the following five years; third, a $50 million low-interest loan from the state government; and fourth, assistance in recruiting workers and provision of training subsidies."

...(End of chapter)