Tech startup: I really do make mobile phones!

Chapter 131 Special Edition K3V2c
Maritime Silk Road Building, General Manager's Office.

The marketing manager was reporting to He Tingbo, his voice carrying a barely perceptible hint of excitement.

"Mr. He, we shipped 320 million K3V1 improved versions in August, generating a total revenue of 8.7 million!"

Established in 2004, Maritime Silk Road finally saw the light of day with revenue of 8.7 million yuan after years of losses!

This is not only the first commercial breakthrough of domestically produced chips, but also a resounding slap in the face to the doubters with the improved K3V1 chip.

From a "bottomless pit of burning money" to the revenue breakthrough of K3V1, this scene foreshadowed the rise of Qilin chips later, and can be regarded as the prelude to the counterattack of China's chip industry.

The marketing director was very excited; he understood even more what this meant for the Maritime Silk Road.

"Of those, 87.5%, a full 280 million units, were taken by Orange Technology. Thanks to their willingness to purchase at the market price of 25 yuan per unit, our overall profit margin has remained firmly at 35%!"

He Tingbo nodded slightly, his eyes deep.

A 35% profit margin sounds like a myth in this industry, but in reality, this is already a profit margin achieved through the Maritime Silk Road – truly high-tech industries are inherently "highly profitable".

In 2010, a profit margin of 10% in the real estate industry was considered excessive, but core technologies like semiconductors, which are often subject to technological bottlenecks, often yielded profits of 50%-60%, yet received little attention from the outside world.

Why don't you have it in China?

We have to use it even if we don't want to!
Why should I lower the price for you? Do you think I'm just bored?
The marketing director remarked, "Looking back at last year, domestic companies like Ruixin Microelectronics and our Haisi almost simultaneously launched Android + 3G solutions."

The first-generation product was unstable and outdated; who would dare to use it?

Ruixin Microelectronics went bankrupt, and our K3V1 even burned through the motherboard of our own Huawei phone. If it weren't for…

He paused, his tone filled with relief.

"If it weren't for Mr. Chen from Orange Technology, who refused to believe in fate, pulling us out of a desperate situation and managing to maintain a profit margin with the improved K3V1, we would still be shoving ourselves to ask Mr. Ren for money to invest in iterative research and development. Just thinking about it makes me feel ashamed!"

He Tingbo's fingers tapped lightly on the smooth tabletop.

Yes, the Orange 1 order acted like a shot in the arm, allowing Hai Si to maintain its composure while also leveraging the Orange 1 order as a commercial example to attract some counterfeit phone manufacturers and trigger a chain reaction.

The improved version of the K3V1 chip, which was encroaching on their traditional counterfeit mobile phone market, immediately alerted the astute Lianfa Technology.
If the Maritime Silk Road continues to iterate and catches up with another generation, how will they continue to sell their chips that rely on making money while being "one or two generations behind"?
As a result, Lianfa Technology lowered its prices to target Haisi, a rising star in the chip industry, forcing the entire industry into a price war. The average profit margin was halved from 50.6% in the first half of the year to the current 35%!

The decrease in chip costs has indirectly boosted the domestic smartphone market.

Previously, foreigners took almost 60% of the profits from chips, leaving domestic manufacturers with no bargaining power.

The current landscape of the domestic mobile phone chip market has finally been opened up by the Maritime Silk Road, giving many domestic manufacturers focusing on low-end and mid-range counterfeit mobile phones more confidence when negotiating with chip suppliers.

Lianfa Ke? Forget about our friendship. Where were you when I was trying to build a relationship with you? Just give me a straight answer: are you going to lower the price or not?
If the price doesn't drop, I'm going to switch to the Maritime Silk Road!
This improved version of the K3V1 chip works for the Orange 1, so why can't my knock-off phone use it?
"This is all thanks to your discerning eye, Mr. He, who made the decisive choice to select Orange!" the marketing manager said sincerely.

He Tingbo gently shook his head, not attributing the success of the improved K3V1 chip to himself.

"No, it wasn't that we chose Orange, it was Orange who pulled us back from the brink of disaster!"

Return the peach.

With a solemn expression, she instructed, "We must re-inspect every batch of goods manufactured by TECO to ensure that quality control is flawless, especially for the goods for oranges; there can be absolutely no mistakes!"

No sooner had he finished speaking than He Tingbo's personal cell phone rang.

The screen displays: Orange - Marketing Manager - General Manager Zhao.

Her eyes flickered slightly, she raised her hand to signal the market manager to be quiet, answered the phone, and spoke in a cheerful tone.

"Mr. Zhao! What brings you here?"

On the other end of the phone, Zhao Tiezhu's voice carried a familiar lightness: "Haha, President He, I wouldn't dare accept such an instruction. There are two things I need to trouble you with!"

"The first thing is great news! Next month, we need at least 3 million K3V1 units. We have a big project planned for September, so your Maritime Silk Road production capacity needs to keep up!"

With an order for 300 million units, Maritime Silk Road's profits in September will be enough to cover its R&D costs!
This is at least... It really makes one's imagination run wild!
He Tingbo's spirits lifted: "3 million? No problem! Looks like Orange is going to make a big splash in September. We at the Maritime Silk Road will give you our full support!"

"Haha, Mr. He really understands our Orange!" Zhao Tiezhu changed the subject, lowering his voice, "The second thing, Mr. He, we need to discuss this privately, and you have to keep it a secret!"

"Don't worry, I know the rules!"

He Tingbo held his phone without putting it down, waved for the marketing manager to leave first, and then said seriously, "President Zhao! I'm all alone now, please speak!"

Zhao Tiezhu then got to the point.

“Our Orange 2 project has already started. It is still positioned in the mid-to-low-end market, but the chip needs to be upgraded to a level that is ‘one generation behind the market’.”

"President He, do you have any new products that you can present to the public?"
He specifically emphasized, "It has to be the kind that provides a one-stop solution?"

Orange Technology currently lacks talent in the field of integrated circuits and cannot even perform the most basic chip debugging, so it needs chip manufacturers to provide one-stop solutions.

He Tingbo's heart skipped a beat, overwhelmed with immense joy!

Orange 2!

Another opportunity has arrived for the Maritime Silk Road!

How did the improved version of the K3V1 from the Maritime Silk Road open up the market? It was by riding the wave of the Orange 1!

He Tingbo even secretly hoped that the Orange 2 would sell well, even surpassing the two new smartphones from Yu Dazui that were positioned for the lower-tier market!

Who said our Maritime Silk Road chips are no good? It's clearly your big mouth Yu's phones that are no good.

She suppressed her excitement, but her voice trembled slightly.

"Yes! Mr. Zhao! Of course!"

"Last year, K3V1 stumbled, so we made two preparations. In addition to the current improved version, the other is the newly designed K3V2 40nm process. The core goal is to solve power consumption and compatibility issues. The project was officially launched in March of this year!"

This means five months have passed. I wonder how the Maritime Silk Road is progressing?

There was a few seconds of silence on the other end of the phone before Zhao Tiezhu's voice came through again, carrying a hint of inquiry.

"Mr. He, would you mind sharing some information about the progress and key parameters of the K3V2?"

"Of course, if it involves the core secrets of the Maritime Silk Road, then disregard my question!"

Zhao Tiezhu's question was direct and also carried a hint of probing.

He Tingbo did not hesitate at all.

She recalled Zhao Tiezhu relaying Chen Mo's words: "Orange's ordering at market price is not a handout to domestically produced chips, but a gamble that the Maritime Silk Road can carve out a path in the chip industry and become Orange's real asset in the future—orders, and then technology will speak for itself!"

She will always remember the kindness and generosity shown by Orange in helping her in her time of need.

"Mr. Zhao, please keep the following words confidential before the official commercial release of K3V2!" He Tingbo instructed firmly.

"Don't worry, Mr. He! I know the rules!"

Having received the assurance, He Tingbo held nothing back.

"The 65nm process and compatibility issues of the K3V1 are a painful lesson for our Maritime Silk Road."

For K3V2, we have completely switched to the ARM reference architecture!

The quad-core Cortex-A9 processor uses TSMC's 40nm process and features a key memory bus design—64-bit wide, offering twice the bandwidth of its competitor, the Tegra 3!
In terms of computing performance, our goal is to crush Lianfa's contemporary products, at least twice as fast!

She paused for a moment and frankly acknowledged the shortcomings of the K3V2.

"However, the GPU part is a bit troublesome." "In order to bypass the patent barriers of Gaotong, we chose Vivante's solution, which may be about 5% weaker than the same generation of Lianfake in terms of image processing capabilities."

"But Mr. Zhao, rest assured! We will absolutely put in a tremendous amount of effort to ensure compatibility, and we will conduct in-depth optimization and adaptation specifically for Orange OS 2.0, providing a one-stop service!"

"Ha!" Zhao Tiezhu laughed on the other end of the phone: "President He, are you playing a seesaw game with your K3V1 and K3V2? One is weak in computation but strong in graph visualization, and the other is strong in computation but weak in graph visualization?"

He Tingbo smiled wryly, "President Zhao, you flatter me. GPUs are a case of 'a skilled cook can't cook without rice.' Self-development takes time, and Gaotong is holding onto the patent and refusing to budge!"

"Haha! That must mean the Gaotong (high-powered) group feels threatened by your Haisi (maritime) forces!"

He Tingbo, sitting opposite, smiled and said that President Zhao was too kind.

"I sincerely hope that one day, Hai Si can stand on the ring and face Gao Tong head-on, and have a real fight. Even if she loses, it will be better than being looked down upon by her opponents now—at least she will have stood on a real battlefield, and Hai Si will no longer be someone who is ignored!"

The predecessor of the Maritime Silk Road team was the integrated circuit design center of Huawei in 1991. In 2004, it started to work independently on various functional chips. In 2009, it produced its first mobile phone SoC chip. In fact, Maritime Silk Road has never had much presence in Huawei or in China.

"President He! I believe that one day, Hai Si will make a stunning debut!"

Zhao Tiezhu offered a timely compliment, then changed the subject, focusing on Chen Mo's core concern—the Great Fire Dragon.

"President He, let's get down to business. The K3V1 was a small fire dragon, and you had a lot of trouble taming it. The K3V2's computing performance is so aggressive, twice that of its predecessor, Lianfa. Won't it turn into a 'big fire dragon'?"

"Our CEO Chen's idea is that we hope the Orange 2 chip will be developed steadily. As for the chip's computing power, it should be on par with the mainstream products of LinkTech. There is no need to push it to the limit."

"The future of the Maritime Silk Road is long, and developing chips is not something that can be done overnight. Orange is willing to grow steadily with you."

He Tingbo's mind raced with a thousand thoughts.

Give up on pushing performance to the limit?

She was somewhat unwilling to accept this.

However, the massive orders for Orange 2 are an indispensable cornerstone for the development of the Maritime Silk Road.

"President Zhao...is this President Chen's personal instruction?" she asked to confirm.

“Absolutely true! These are Mr. Chen’s exact words!” Zhao Tiezhu replied decisively.

He Tingbo took a deep breath and made a decision.

"Good! Since Mr. Chen has such foresight, Hai Si will certainly cooperate! How about this, we will launch a special 'custom-made' K3V2c version specifically for the Orange 2, adjusting the CPU computing performance to be on par with the same generation of Lianfake chips, ensuring stability and prioritizing temperature control!"

Zhao Tiezhu felt a huge weight lifted from his heart, and his tone became lighter.

"Great! Mr. He, you're so generous. So, when can you provide us with a sample of this 'special edition' K3V2c for testing?"

He Tingbo understood Zhao Tiezhu's underlying meaning: as long as Haisi could produce a stable chip that met Orange's requirements, the big order for Orange 2 would be basically secured!

Orange has provided substantial support to its Maritime Silk Road allies, and He Tingbo naturally doesn't want to disappoint them.

She quickly calculated: "The original plan was for the K3V2 to be commercially released next June, but the Orange 2..."

"That won't do, President He!" Zhao Tiezhu interrupted her, his tone urgent and leaving no room for discussion: "We must get the engineering sample for whole-machine testing by March next year at the latest, and start mass production and inventory preparation in May. Time waits for no one!"

He Tingbo was startled!
Sample photos from March?
Mass production in May?
This suggests that the development pace of Orange 2 may be extremely tight!

She immediately realized that the two sides now held some key positions in each other's hands, and such allies with shared interests were more trustworthy.

“Samples in March, delivery in May.” He Tingbo hesitated for a moment, then said decisively, “Okay! President Zhao! Hai Si will do everything in its power to meet the deadline and will absolutely not affect the launch plan of Orange 2!”

"That's great!" Zhao Tiezhu was satisfied, then asked, "What about the package specifications for this 'special edition' K3V2c? We need to reserve space for it in our hardware!"

"12×12mm package, the world's smallest quad-core processor!" He Tingbo said with pride, "Integrating a quad-core A9 (1.5GHz clock speed) + 16-unit GPU, its small size will definitely save you space!"

"That's settled then! Mr. He, it's decided. Please have someone send a copy of the detailed specifications to our company later. We will ensure your confidentiality!"

Zhao Tiezhu hung up the phone decisively.

Orange Technology, General Manager's Office
Zhao Tiezhu barged in without even knocking.

"Brother Chen!"

Chen Mo was standing in front of the floor-to-ceiling window, gazing into the distance and relaxing his eyes. Hearing this, he turned around.

"We've got the Maritime Silk Road sorted out!" Zhao Tiezhu exclaimed excitedly. "There really is a new product! It's the K3V2, a product from the same series as the K3V1."

"They listened to your advice and, as you suggested, reduced the computing performance from twice that of the same generation as the United Law School to the same level as them!"

"As for the GPU, it uses Vivante, which has 5% weaker image processing capabilities. It might cause frame drops when playing high frame rate games, but it's definitely fine for daily system use and general applications!"

Chen Mo nodded, completely unconcerned about the details of the image.

"Frame drops are a minor issue. We're using a mid-range screen, so the image processing requirements aren't high. Besides, our Orange 2 sells for 699, not 6999!"

"Want the ultimate experience? Then let them buy apples."

He walked behind his desk and sat down, his brows furrowed slightly, his fingers tapping unconsciously on the surface, as if he were pondering some difficult problem.

Seeing that Chen's expression was strange, Zhao Tiezhu asked, "Brother Chen, is there anything else?"

Chen Mo raised his head, a genuine look of confusion in his eyes.

"Zhao Tiezhu! If someone claimed they could make smartphones with a profit margin of only 3%, would you believe them?"

He pointed to a report on the table.

"Look at us now, our cash flow is expanding every day, and our expenditures are piling up at a rate of 500 million per day."

With this 500 million invested, it will take 30 days or even longer to see a 13% profit return.

This payment period forces us to maintain at least a 13% profit margin in order to keep the company running and growing.

That wheat company, not the mobile phone manufacturer that advertises a 3% profit margin, how exactly does it operate?
Even if we subsidize it with the money from pre-installation and advertising, it's just a drop in the bucket!

You don't want the payment terms anymore?
Are we giving up on expansion?
That doesn't make sense!

Zhao Tiezhu smiled and shook his head, saying, "Brother Chen! You'll have to ask Sister Gong about this accounting stuff! I don't know anything about this stuff."

Chen Mo was genuinely puzzled as to how wheat in later generations could achieve a 3% profit margin.

Light asset model + marketing?

Chen Mo's approach to promoting technological equality initially involved learning from Lei Jun, the inventor from his previous life, and simply and directly reducing profit margins to 3% to benefit more people.

But after he actually tried it, he found that Orange was a real business, and it felt like he had tried to draw a tiger but ended up with a dog instead.

It is foreseeable that Orange will become an industrial group that produces more mobile phone components in the future. It is impossible for it to follow the example of Wheat and focus only on marketing, let alone reduce its book profit to 3%.

This is why Lei Jun later claimed that wheat was a loss when he started making cars.

The book profit of a company engaged in real business may look like 13%, but the actual usable net profit may only be 2%-5%. If any more is taken out, the company's cash flow will collapse.

The final cost structure of Orange 2 needs to be controlled within 500 yuan, while the terminal selling price is 699 yuan. The profit margin must be maintained at least 13% to ensure the company's normal operation and rapid development.

It seems that Chengzi's path to technological equality is long and arduous. The practical route taken by Xiaomai in his previous life is of no reference value. In the end, Chen Mo has to explore and walk the path step by step on his own!

(End of this chapter)