Who would still start a business seriously after being reborn?

Chapter 660 The Essence of Business (Second Update)
At this moment, inside the headquarters of Advanced Micro Devices (AMD) in Sunnyvale, California, USA.

Mark Jennings, head of data analytics, stared intently at the newly generated quarterly channel sales report on the screen, feeling like he was facing the most bizarre situation of his career.

The section highlighted in bold red in the report concerns the flagship product, the Athlon 64 3200+.

Released in 2003, this CPU remains a favorite in the entry-level and mainstream DIY markets thanks to its stable performance and excellent power efficiency. It is also one of AMD's trump cards against Intel's Pentium 4 series.

Currently, they and Intel are working on overcoming the challenges of dual-core CPUs, and all of this massive R&D funding is based on the Athlon 64 3200+.

Logically, after they and Intel jointly announced the supply cut to Chinese computer giants such as Lianxiang, Honor, and Hasee, AMD should have felt the chain reaction. After all, losing two major customers, Honor and Hasee, would inevitably halve their sales.

However, Microsoft offered very generous terms, which temporarily compensated for the loss of these two major clients.

But they were prepared for sales to be halved, and even lowered prices to develop the market in Southeast Asia and Europe. What puzzled him was that even though they were lowering prices to develop the market, weren't the sales figures a little too good?
In the Asia-Pacific region, especially in several Southeast Asian countries that are not traditionally core PC consumer markets, the purchase volume of Athlon 64 3200+ has surged in the past half month in a way that defies market trends.

Thailand saw a 420% increase month-on-month, Malaysia a 380% increase, Singapore a 250% increase...

Mark's fingers flew across the keyboard, bringing up more detailed distributor data: "Siam Tech, Penang Electronic Logistics, Sin Chew Precision... these companies' names weren't so prominent in the previous sales reports."

He opened the internal risk assessment system to check the backgrounds of these suddenly appearing major clients.

The system provides limited information, mostly from medium-sized trading or logistics companies that have recently registered. Their business scope is vaguely described, mainly focusing on the import and export of electronic components and regional logistics services.

“How could the economies of Cambodia, Laos, Vietnam… possibly absorb hundreds of thousands of mainstream CPUs in such a short time?” Mark frowned deeply.

He's the kind of technologist who believes data doesn't lie, so the data in front of him must have a serious problem.

Mark went through the sales report again and again, studying the graphs.

He pondered for a long time and discovered that the final destination of these chips was definitely not the small Southeast Asian country stated on their customs declaration.

"Are they laundering the origin of the product?" A thought quickly flashed through his mind.

This is a common gray area practice in globalized trade.

Goods are shipped from country A, then repackaged or transshipped through country B, with the certificate of origin and commercial documents changed, transforming them into products of country B before being shipped to their final destination, country C, in order to circumvent trade restrictions imposed by country A on country C.

And the restricted destination C is almost a given; one can guess without much thought that it refers to a Chinese computer company that is currently under joint sanctions by the Wintel alliance.

Having figured these things out, Mark immediately combined and summarized the Athlon 64 3200+ delivery data from Siam Tech in Thailand, Penang Electronic Logistics in Malaysia, and Sin Chew Precision in Singapore over the past three months.

He gasped when the final number appeared on the screen.

321547 stars!
This only refers to the three more obvious channels through which the information was leaked. If other potentially more covert channels are included, the number would likely be even more staggering.

This is almost equivalent to the total sales volume of the same product from Chaowei in other major markets around the world during the same period.

The overwhelming sense of absurdity and crisis made Mark's throat feel dry.

The absurdity lies in the fact that the sanctions they and Intel so confidently launched seem to have become a huge joke, with their own products being continuously sent into the arms of the enemy in another way.

The crisis is that if this matter is exposed by the media, Supermicro will face a huge credibility crisis and the wrath of its allies.

He dared not delay and immediately compiled an emergency report, attaching all the suspicious data and charts. He marked the email subject with the highest priority in red and sent it to President Hector, Vice President Tom in charge of sales, and Chief Legal Officer Susan.

In the email body, he wrote succinctly: "Data shows that a large number of Athlon 64 3200+ processors are circumventing current sanctions agreements through gray channels in Southeast Asia and ultimately entering the Chinese market. The initial estimate is over 300,000 units, and the trend is still expanding. This matter needs to be dealt with immediately..."

After sending the email, Mark leaned back in his chair and let out a long sigh.

He knew that a storm sweeping through the company's top management was about to be unleashed because of this report.

Sure enough, the next morning, the headquarters of Superpower held an emergency meeting.

CEO Hector sat at the head of the table, his face grim.

Tom, the Vice President of Sales, and Susan, the Chief Legal Officer, sat on either side of him, along with several other core executives, including the Global Channel Director and the President of the Asia Pacific Region.

In front of the executives, Mark presented his findings in detail using slides.

When the graph showing a bizarre surge in procurement volume through Southeast Asian channels appeared on the screen, a suppressed gasp rippled through the conference room.

The people present were all top global elites, and Mark didn't need to explain much; they saw the problem immediately.

“Gentlemen, this is the situation,” Mark concluded his report. “We have ample evidence to suspect that the end users of these chips are Shenzhou and Honor computers, which are part of the Momo Group, and that they are using our channels to bypass the Wintel alliance’s blockade.”

"Fuck!" Tom, the vice president of sales, couldn't help but curse, and said angrily, "These yellow-skinned monkeys are actually playing this trick. We must immediately cut off the supply to these distributors and notify all channels to blacklist anyone involved in this shipment."

“Tom, calm down.” Chief Legal Officer Susan adjusted her gold-rimmed glasses and said calmly, “First of all, legally speaking, our joint statement with Intel and Microsoft does not have legal force; it’s more like a business agreement and gesture. We have no right, nor any legal basis, to prohibit our distributors from selling products to anyone, because they have already paid.”

“The distributors sell chips to Siam Tech or Penang Electronics, and the procedures are legal. As for who these companies resell to, it is difficult for us to intervene directly. Even if we can obtain a solid chain of evidence, we can only issue warnings and prohibitions. If we put them on the blacklist, all our distributors around the world will become trembling with fear.”

"Susan, this isn't a legal issue, it's a matter of credibility!" Tom slammed his fist on the table and roared, "We're allies with Microsoft now, working together to fight a common threat. And now we've stabbed our ally in the back! If Microsoft knew that our AMD chips are being used to assemble computers for Momo Group, what would he think? What would Intel think? We'd be the laughingstock of Silicon Valley!"

“Reputation?” Levin, the Global Channel Director, couldn’t help but speak, his tone laced with sarcasm. “Tom, tell me, can reputation put food on the table? These 300,000 chips mean nearly 30 million US dollars in sales. This means our production lines can continue to operate at full capacity. The Athlon 64 3200+ is a mature product, and its profit margin is already declining. Now that we can sell this many, do you know how much our fixed costs will be reduced?” Levin looked at Hector and said, “President, we have to be realistic. This isn’t something we actively sold to the Chinese. Our distributors found a way to make money through loopholes in the rules. Why should we cut off our own source of income? Actually, think about the way this sanction was imposed. Intel only supplied Lianxiang, and as far as I know, IBM has been negotiating with Intel. Intel has held internal meetings and plans to lift the sanctions against Lianxiang Computer.”

As soon as Levin said this, many executives began to whisper among themselves.

Should the sanctions against Lianxiang Computer be lifted?

Holy crap, are you kidding me?
Lianxiang Computer rarely uses their CPUs; their main customer is Intel.

Honor Computer and Hasee Computer are their major clients.

If Intel really announces the lifting of sanctions against Lianxiang Computer, then what the hell was the point of these sanctions?

Is this a sanction against Honor Computer and Hasee Computer, or against Supermicro?
“Levin, that’s short-sighted!” Tom immediately retorted. “If we offend the Wintel alliance, what will happen to our future cooperation? They will exclude us from the development of next-generation technology standards, and we will lose our future.”

"The future? If our quarterly earnings look bad because of losing this $30 million, and our stock price plummets, our future will be in question." Levin said without backing down, "The market votes with its feet. China needs our chips, and our channels are willing to sell them. What's wrong with that?"

"You're taking advantage of a loophole!" Tom shouted angrily.

"The essence of business is finding and exploiting loopholes!" Levin retorted.

Soon, several high-ranking officials also began to take sides, each with their own reasons.

The meeting room immediately erupted into chaos.

Sales and channel departments tend to turn a blind eye, after all, real revenue and impressive performance reports are what they care about most.

Those responsible for strategic relations and legal affairs are deeply worried, fearing retaliation from allies and damage to the company's reputation.

Hector remained silent, rubbing his temples as he listened to his subordinates' argument, his own mind in turmoil.

As CEO, he was all too aware of Chaowei's predicament.

For years, it has been suppressed by Intel. It finally made a remarkable comeback with the K8 architecture, but its overall strength is still far behind Intel.

This alliance with Intel is largely due to the favorable terms offered by Microsoft.

While the terms offered by Microsoft were attractive, they were only for the future. The unexpected order for 300,000 units was far too tempting for AMD.

This will not only boost performance, but also greatly increase their confidence in breaking through the dual-core processor barrier.

However, the pressure on Intel and Microsoft is also very real.

Microsoft, in particular, holds absolute sway in the operating system field. If you really offend Microsoft, the consequences would be unimaginable.

"Enough," Hector finally spoke, his voice not loud, but it silenced everyone.

He looked around and slowly said, "Susan, from a legal standpoint, we currently have no reason or right to directly intervene, right?"

Susan nodded and said, "Yes, President, unless there is a clear judicial order or government sanctions, unilaterally cutting off supplies to these legitimate distributors could itself lead to legal disputes."

“Very good.” Hector nodded in satisfaction and looked at Tom, saying, “Tom, I understand your concerns about the alliance, but business is business. Levin is right, this is not our initiative, but the result of natural market selection.”

He paused, then made a seemingly conciliatory but actually biased decision: "We at Chaowei will not make any public response to this matter. We will neither admit nor deny, nor comment. In addition, we will issue an internal document to remind all channel partners to pay attention to complying with trade regulations and carefully assess the risks to end users, but do not name names or specifically target any company or region. The tone should be mild and the wording should be vague."

This decision immediately made Tom's face turn ugly, while Levin secretly breathed a sigh of relief.

"President, your decision is wrong!" Tom stood up, somewhat annoyed, and tried to make a final attempt to persuade them.

Hector looked at him and said in a deep voice, "Tom, tell me, what would happen if we issued a statement now saying that we would severely punish the distributors who helped us clear our inventory? I can tell you with 100% certainty that if we did that, all these distributors we worked so hard to win over would switch to Intel. Are you willing to take responsibility for the chain reaction that would result?"

Tom opened his mouth, but ultimately remained silent.

He finally understood that, faced with enormous interests and a complex situation, the so-called credibility of the alliance was incredibly fragile.

After the meeting, Hector remained alone in the conference room, falling into a deep silence.

He knew in his heart that today's decision was essentially a tacit consent.

They tacitly allow that gray supply chain spanning Southeast Asia to continue to exist, and tacitly allow more than 300,000, and possibly more, Athlon 64 3200+ chips to flow into China and into the factories of Momo Group.

This is an extremely realistic consideration.

Unlike Intel, AMD is not a large and powerful company, so every penny is crucial to them.

This unexpectedly large order will greatly improve the company's cash flow and profitability, and provide financial support for the research and development of the next generation of products. If the company loses tens of millions of dollars every month for a vague alliance responsibility, it will not be able to get past the board of directors.

Moreover, China is currently the fastest-growing PC market in the world. In order to enter the Chinese market, Hector even learned Chinese. This was suggested to him by a rather unreliable friend who always spoke "china" all the time.

(End of this chapter)