I can become stronger by paying salaries. I have one billion employees!

Chapter 500: Planning Ahead – A New 300 Billion Yuan Project! It's Better to Rely on Yourself Than on Others!

What is Mr. Chen's opinion on the current state of development of China's integrated circuit industry?

In a small meeting room, Dai Zhenyu smiled and looked at Chen Yansen, asking a question.

“There is a lot of room for improvement.”

Chen Yansen said tactfully.

But in his heart he couldn't help but think: If they had any backbone, would Tiangong Technology and HiSilicon have needed to go to TSMC in Taiwan?
Dai Zhenyu laughed and pointed at Chen Yansen, saying, "That sounds harsh, but it's true. From EDA software to packaging and testing processes, we really don't have many core technologies that we can be proud of."

In a way, Tiangong Technology has set a good example!
By the way, I'm curious, how did you convince a foreign engineer like Mike Keller to work for Tiangong Technology?

"It mainly relies on personal charisma, plus a tiny bit of negligible stock options and cash incentives," Chen Yansen replied earnestly.

Dai Zhenyu smiled and shook his head, thinking to himself: This kid's skin is thicker than the walls of Chang'an.

He nudged Wang Guangtong beside him and joked, "It seems that each generation of young entrepreneurs in our country is more outstanding than the last."

Wang Guangtong, a representative of the Business Association, occasionally appeared on the 7 PM news. He smiled faintly, looked at Chen Yansen, and asked, "Mr. Chen, do you want to sell the Tiangong A100?"

"Huawei is waiting for the Kirin 910, but Meizu, OPPO and Coolpad think it's too expensive. Only Meitu is interested."

Chen Yansen shrugged and told the truth.

Because production volume was low, economies of scale could not be achieved, and in addition, the 28-nanometer process technology was still considered advanced in 2013, resulting in high foundry costs.

Despite the Tiangong A100's strong computing power, low power consumption, and decent signal performance, it is more than 30% more expensive than the Snapdragon 800, which is why even Xiaomi, 360, and NetEase are unwilling to adopt it.

Unless Chen Yansen doesn't make a single penny and sells at cost price.

If Huaxin International were to manufacture the chip, the total cost per chip would likely reach $60.

Currently, Tiangong Technology is offering a bulk purchase price of $45 for orders of one million or more, and $55 for small and medium-sized manufacturers, which is quite competitive.

However, compared to the Snapdragon 800's price of $35 to $50, it is still a bit expensive.

Of course, the more important issue is that the X2 has only been on the market for five days, and competitors are unsure about the actual performance of the Tiangong A100.

Given the procurement cost of the Tiangong A100, it is natural that it should be used in flagship models.

Who would dare to joke about their own flagship phone?

Wang Guangtong and Dai Zhenyu exchanged a glance, then Wang asked, "Has Mr. Chen not considered Huaxin International?"

"If Liu Xunfeng can keep the price of a single Tiangong A100 chip below $35, I am certainly willing to give the order to Huaxin International."

Chen Yansen said frankly.

He paused and continued, "But the reality is that Huaxin International's 28-nanometer process yield is just over 30%. Either I pay three times the price, or Liu Xunfeng will make up the difference."

Wang Guangtong frowned slightly. From the perspective of the entire industry chain, it was the right choice for Tiangong Technology and HiSilicon to hand over the chips to Huaxin International. But who would make up for the losses?

"In fact, Mr. Chen might as well give Huaxin International a chance and help them improve their process as soon as possible. At that time, both you and HiSilicon will benefit."

Dai Zhenyu patiently persuaded him.

To completely dispel Chen Yansen's concerns, he even stated bluntly: "The price difference will be covered by the foundation, with an order of 50 units allocated to Huaxin."

Chen Yansen remained silent; he hadn't expected the higher-ups to be so decisive.

Since Dai Zhenyu has approached him, he will most likely approach He Boting as well.

A rough calculation shows that at least four or five hundred million yuan would be needed. Is it worth it?
But then he thought again, Dai Zhenyu had no choice, and neither did the higher-ups.

The reason why Huaxin International's 28nm process yield is so low is primarily due to insufficient technological accumulation and a lack of process experience.

Companies like Singstar, TSMC, and MediaTek have all taken a gradual upgrade path in their manufacturing processes, progressing steadily from 45nm to 32nm, and then to 28nm.

And what about Huaxin International?

Previously, the most mature process technologies were 40 nanometers and 65 nanometers. Now, we have suddenly entered the 28 nanometer field. The technological leap is huge, and the cost of trial and error is too high.

In addition, Huaxin International's 28nm process relies on Qualcomm's technology license, and its key technology patents are monopolized by companies such as TSMC and IBM. Huaxin needs to design around these patents, which increases the complexity of the process.

Without taking two or three years of detours, it will be difficult for Huaxin International to reduce costs and improve yield.

Therefore, even with the National Integrated Circuit Industry Investment Fund (Big Fund) subsidizing the price difference, Chen Yansen still did not want to hand over the orders to Huaxin International.

Who can guarantee that the Tiangong A100 chips produced by Huaxin International will not have any problems?

If a defect occurs, it could affect tens or even hundreds of thousands of Orange phone users.

Wouldn't the reputation that the Shiny Orange series has worked so hard to build be ruined in an instant?
Thinking of this, Chen Yansen smiled and looked at Dai Zhenyu and Wang Guangtong, saying, "I believe that with Huaxin International's strength, it will definitely be able to perfect the 28-nanometer process in two or three years. In two or three years, Orange Mobile's global annual shipments will most likely be two or three hundred million units."

Qualcomm and MediaTek won't just stand by and watch Tiangong Technology compete with them for market share.

Therefore, it's better to rely on yourself than to ask others for help; I'd rather build three to five 28-nanometer production lines myself.

Dai Zhenyu was taken aback when he heard this. From chip design to chip manufacturing, there may only be a difference of two words, but the working mode, technology patents and production equipment required behind the scenes are completely different.

"You want to get involved in chip manufacturing?" Wang Guangtong chuckled, finding it absurd.

“A year ago, when I founded Tiangong Technology, countless colleagues and subordinates advised me against it.”

Chen Yansen leaned back and said casually.

The CMOS structure, strained silicon, immersion lithography, and double exposure technology involved in the manufacturing process may be difficult for others, but for him, they are not insurmountable technical obstacles.

With his mental strength, he can only activate the Planck Clock talent for six seconds each day.

But those short six seconds were enough for him to complete six hours of high-frequency thinking.

Wang Guangtong's smile vanished instantly; he understood the subtext of Chen Yansen's words. Tiangong Technology, also without any foundation, had still leaped to become a top-tier chip design company.

"Mr. Chen, you're not joking, are you?" Dai Zhenyu asked seriously.

"The first phase of investment is 100 billion, the second phase will add another 200 billion, and the total investment over three years will be at least 300 billion, focusing on high-end manufacturing processes. I don't believe we can't make it work," Chen Yansen replied confidently.

“Money alone can’t solve the problem,” Dai Zhenyu replied.

If it were that easy, banks would have already built their own lithography machines.

Chen Yansen suppressed the urge to roll his eyes and muttered to himself: What business is it of yours whether I can handle the 28-nanometer process?
What I meant by saying this was to get you to hand over your money quickly!
Wang Guangtong understood and immediately promised, "The Integrated Circuit Industry Foundation can provide you with 30% of the funding."

"Wouldn't it be okay to replace it all with the 01 Special Fund?"

Chen Yansen asked, shamelessly.

The three main characteristics of 01 special funds are non-repayable, targeted, and separately accounted.

To put it simply, it's a government-funded grant, so there's no obligation to repay it or transfer equity.

He doesn't want to suffer any loss at all.

However, it was precisely this confidence that convinced Wang Guangtong and Dai Zhenyu that he did indeed intend to enter the chip manufacturing industry.

"Equity investment is an important certificate for the foundation when using funds. If we allocate special funds to you, Chairman Wang and I will make a mistake."

If you are not willing to accept an equity investment model, the maximum funding I can offer is 10%, the exact amount depending on your actual investment in specific technology research and development, equipment upgrades, etc.

Dai Zhenyu thought for a moment and then said.

Chen Yansen made empty promises to him, and he also made empty promises to Chen Yansen.

Both he and Wang Guangtong are seasoned veterans who never act without a clear objective, and they would never readily offer specific policies based solely on a single statement from Chen Yansen.

The National Integrated Circuit Industry Investment Fund (Big Fund) has a state-owned background, and Chen Yansen is not actually opposed to it; it's just that the shareholding ratio is worth discussing.

Just like the Eastern Capital, they invested in Yanjing and Luzhou.

As a result, the chairman was practically a professional manager, holding a pitifully small percentage of shares.

Although Chen Yansen is not the type to keep everything to himself, he doesn't want to give up too many shares.

After all, the other party is state-owned, unlike foreign companies like DST which are easier to bully.

His many underhanded tactics easily provoke dissatisfaction from those above.

Therefore, this ratio must be agreed upon from the beginning.

The three then discussed issues such as the selection of industrial land, the initial capital required for factory construction, equipment, and research and development, as well as the operating capital for the first year.

To Chen Yansen's surprise, he originally thought that Dai Zhenyu and Wang Guangtong only understood the operating rules of the Central Secretariat and were not familiar with some professional aspects.

But Dai Zhenyu immediately calculated the approximate investment cost for each production line for him.

Ten NXT 1950i lithography machines were purchased, each costing approximately US$60 million, for a total cost of US$600 million.

Fifty etching machines were installed, each costing approximately US$3 million, for a total cost of US$150 million.

The project includes 50 thin film deposition machines, each costing approximately US$200 million, for a total cost of US$1 million.

The facility has 30 testing and measurement devices, each costing approximately US$400 million, for a total cost of US$1.2 million.

The core equipment was all purchased directly from the supplier, with a total cost of approximately US$10 billion.

If you replace it with second-hand equipment, the cost can be reduced by 50% to 60%.

"Don't worry about the equipment. If you're willing to do it, we can help you connect with suppliers and secure the goods. But you'll have to figure out the technical aspects yourself."

Dai Zhenyu specifically reminded him.

How can they provide something that doesn't exist?

The minimum amount of targeted grants of 10 billion yuan and equity investment of 10 billion yuan, plus some patent authorizations from the Huazhong University of Science and Technology Association.

After a few seconds of contemplation, Chen Yansen nodded heavily.

Of the initial investment of 100 billion, he would contribute a maximum of 30 billion.

The remaining 50 billion can be negotiated with Luzhou, Shenzhen, or Shanghai.

Whoever bets he'll win, he'll set up his company in that city.

More than an hour had passed by the time the three finished their initial conversation.

Chen Yansen returned to the conference hall and chatted with the bosses of packaging and testing and equipment manufacturing companies.

Chen Yansen saw this and chuckled.

I wonder if He Boting will agree to give part of the Kirin 910 manufacturing orders to Huaxin International?

About twenty minutes later, He Boting returned. Her brows were slightly furrowed as she leaned close to Chen Yansen and whispered, "Mr. Chen, have you also agreed to cooperate with Huaxin International on manufacturing?"

"No," Chen Yansen replied truthfully.

"?" He Boting stood there, stunned, full of doubt.

Why is this different from what she expected?
Chen Yansen didn't explain much, leaving the bewildered He Boting behind, and walked towards Wang Chaoxin who was standing to the side.

(End of this chapter)