Tech startup: I really do make mobile phones!

Chapter 215 Orange 3's BOM
Morning light streamed through the floor-to-ceiling windows, illuminating the snow-covered ceiling of the fish tank in the general manager's office of Orange Technology, showcasing the charm of "a thousand mountains reflecting a lone snow."

This aquascape is quite elaborate, costing over 10 yuan each quarter as it changes with the seasons, requiring an outsourced aquarium team to replace it.

After exchanging a brief "good morning" with his secretary Zhou Yumeng at the workstation by the door, Chen Mo habitually sat down in his large office chair and opened his computer browser.

Browsing the news every morning is an essential part of his routine for quickly catching up on global trends and industry dynamics.

Two international news items immediately caught Chen Mo's attention.

The first article concerns Great Russia's formal accession to the WTO.

The report states that its market will be further opened, and Germany has made initial contact with Great Russia to discuss the construction of the Northwest Transoceanic Gas Pipeline.

"The market in Great Ross is officially open," Chen Mo murmured to himself, his fingers tapping unconsciously on the table.

He quickly considered whether Orange Mobile should take this opportunity to send an advance team to explore the market in Great Russia.
More importantly, could we take this opportunity to "recruit" some top technical talents from that country known for producing mathematical geniuses?
The idea made him somewhat tempted.

The second news item focuses on Middle Turkey: Middle Turkey claims to have seized an advanced North American drone and refuses to return it, causing a sudden escalation of tensions in the region.

“The Central Plains are in turmoil again,” Chen Mo said, stroking his chin with a hint of insight in his eyes.

Economic cooperation between North America and Great Russia has stirred up new tensions between China and Turkey, and North America is once again feeling threatened!
Chen Mo keenly sensed that these two incidents might become a subtle turning point, forcing North America to seek some easing in other strategic directions.

The tense atmosphere between North America and China may cool down as a result.

This could be a potential boon for companies that need a global presence.

Should Orange Mobile seize this opportunity to expand overseas?

Then, he turned his attention to domestic news.

Surprisingly, Luo Yonghao, who is adept at creating buzz, didn't steal the headlines in today's tech section.

An even bigger piece of news ignited public opinion: the Chinese internet suffered the largest data breach in history!
The report details that due to security vulnerabilities in Tianya Forum, several well-known domestic websites, including CDSN, Duowan, Jingdong, and Taobao, were subjected to a chain of hacker attacks, resulting in the leakage of a total of 2.78 million account passwords, which can be described as an internet earthquake.

Tianya Forum, as the first node to be breached, leaked the data of 4000 million users (60% of its total users), including potentially fatal plaintext passwords and registered email addresses.

Worse still, Tianya not only failed to disclose the information proactively in the early stages, but also attempted to deny the allegations and cover them up.

This fatal delay and cover-up led to other platforms (especially e-commerce platforms) being attacked by hackers using the same account passwords for "credential stuffing" attacks, resulting in direct economic losses of up to 17.1 billion yuan!

The Ministry of Information Technology took swift action, ordering Tianya to rectify its practices indefinitely and urgently issuing new regulations requiring all internet companies to guide users to set passwords with different rules and to comprehensively upgrade their network security protection levels.

Chen Mo looked at the report and felt a deep sense of melancholy.

He knew very well that Tianya Forum, once the world's largest online community for Chinese people, was probably doomed this time.

It's not just the collapse of user trust; the exorbitant claims from damaged companies like Jingdong and Taobao alone are enough to bankrupt it.

Many people in later generations watched too much Douyin and thought that Tianya was imprisoned because he "revealed heavenly secrets". In fact, the root cause was that he underestimated the security risks and made a mistake in his response, which became the "source" of this disaster.

This leak has caused direct economic losses of 17.1 billion yuan and indirect losses of more than 60 billion yuan. Even if you sold Tianya, it wouldn't be able to afford the losses.

Therefore, it chose a dignified approach—bankruptcy liquidation—leaving future generations with many true or false legends about the divine post.

Chen Mo also confirmed that Chengbao, because its main battlefield was on mobile devices, was fortunate enough to avoid this leak storm that was mainly on PCs, and thus suffered no losses.

Subsequently, a news item concerning the future landscape of communications caught his attention:

China's Zhonghuayudong announced the official launch of large-scale TD-LTE trials in six cities across China, marking a substantial step forward in the deployment of 4G networks.

The news also announced the first batch of mobile phone brands participating in the test, which will be able to access 4G networks in these cities next year. Orange was prominently listed, alongside giants such as Sanjing, Pingguo, Soni, Fantasy, Chrysanthemum, Zhongxing, Coolpad, Green Machine, and Wheat.

Meanwhile, another related news item is that traditional telecom giants, Telecom and Unicom, have been subject to antitrust investigations and fines because they together hold more than two-thirds of the market share, constituting a dominant market position.

They are required to gradually reduce broadband tariffs and improve interconnectivity over the next five years.

"Yudong is trying to take advantage of the 4G wave to gain momentum." Chen Mo instantly understood the strategy behind it.

What he found even more interesting was a phenomenon that defied common sense.

Under the Fish Movement strategy, the initial price per MB of 4G data traffic is likely to be cheaper than that of 3G in its early stages!

This is clearly a shrewd market strategy employed by Yudong, taking advantage of the window of opportunity created by anti-monopoly efforts.

By offering lower prices and faster internet speeds, they aim to attract users to quickly migrate from 3G to 4G, thereby snatching a large number of users from companies like Dianxin and Liantong.

This is crucial for the Orange 3's 4G phone, meaning its main network partner and SIM card compatibility provider is the rising company, Yudong.

With the support of Yudong, a rising 4G giant, it's a great place to relax!
After quickly digesting this macro information, Chen Mo felt more confident, and combined with his memories from his previous life, he had a clearer understanding of future trends.

He pressed the "9" key on the internal phone to connect with Zhou Yumeng.

"Xiao Meng, notify all senior executives of Orange Technology, as well as key personnel involved in the Orange 3 project, that a production order meeting for the Orange 3 mobile phone will be held in Conference Room 2 in half an hour!"

Half an hour later, the atmosphere in Orange Technology's Conference Room 2 was serious.

The long conference table was full of people.

Orange Technology's headquarters includes:

Zhao Tiezhu, the marketing representative, brought with him his characteristic shrewdness and worldly wisdom.

Gong Yun, the representative from the logistics department, was calm and capable. She sat gracefully behind the conference table with her hands behind her back, appearing harmless.

Jiang Yu, the backbone of the technical department, is calm and reliable just by sitting there.

Lin Junfeng, the head of the legal department, exudes an elite aura, being rigorous and meticulous.

Wang Kai, the representative from the market research department, seemed to have a slightly weak presence, sitting next to Wang Qian, a customer service representative who had been specially invited.

The secretary, Zhou Yumeng, sat in the corner, preparing to take meeting minutes.

In addition, there were representatives from Orange Group's affiliated companies: Wang Teng, the technical director of Orange Treasure, with the clear eyes of a straight male programmer; and Zeng Baifang, the person in charge of Zhicheng, who was very familiar with the supply chain costs of Orange Group.

Chen Mo surveyed the room, and without any pleasantries, went straight to the point.

"Everyone, time is of the essence, so let's skip the formalities. We have only one goal today: to finalize the BOM (Bill of Materials) configuration for Orange 3 before the end of the year!"

His voice was loud and clear, carrying an undeniable decisiveness.

"Jiang Gong!" Chen Mo looked at Jiang Yu, the technical lead, and gestured to Zhou Yumeng to push over the mobile whiteboard that had been prepared next to them: "You are in charge of recording and summarizing everyone's reported costs on the whiteboard in real time!"

Jiang Yu nodded calmly, picked up a black marker, and stood in front of the whiteboard, like a staff officer about to record the battle situation.

"All departments have been preparing for a month, so let's begin the reporting!"

Chen Mo opened his notebook, picked up his pen, and with a sharp gaze, called out the first name: "Zhao Tiezhu! You go first and talk about the external supply chain situation, focusing on the three major components: chips, screens, and storage!"

Upon hearing his name called, Zhao Tiezhu immediately straightened his back.

As long as he's not tasked with complex market coordination and copywriting, simply running the supply chain and dealing with suppliers is exactly where his strengths lie.

He cleared his throat and opened the folder in front of him.

"Mr. Chen, colleagues, let me first report on the chip situation."

The first batch of Qilin 4G prototype chips that were taped out from the Maritime Silk Road region showed that the power consumption and temperature were indeed too high during testing.

Based on the high requirements for heat dissipation and stability of the Orange 3 gaming phone as we proposed, Haisi made engineering improvements, which they named the Qilin C3V2 chip.

"C series? Special edition?" Chen Mo's expression turned somewhat strange upon hearing this name, and he couldn't help but interject.

The fact that Maritime Silk Road has created a separate product line for oranges demonstrates its emphasis on the demand for oranges, and also signifies a willingness to customize products and share risks.

“Yes, Mr. Chen!” Zhao Tiezhu affirmed, and continued to explain in detail: “The process is 28nm, and the current cost per chip is 45 yuan!”

"Maritime Silk Road promised that if the purchase volume exceeds one million pieces, the unit price can be reduced to 31.5 yuan."

This chip integrates a 4G baseband and radio frequency module, and supports downlink speeds of up to 100Mbps.

Its advantages are strong computing performance and very fast response speed, but its disadvantages are...
The maximum temperature during full-power operation may reach 55°C, and its image processing performance is slightly inferior to that of its nanometer-level competitors, such as Tri-Crystal and High Bucket.

There may be a certain probability of frame drops when running complex games!

After reporting on the chip, Zhao Tiezhu then talked about the screen.

"We selected a 4.3-inch TFT display from Jingdongfang, with a resolution of 800×480. It uses a full lamination process to improve the touch response and feel. The cost of a single screen is 120 yuan."

Next is the storage section.

"The memory combination is 1GB of Hynix DDR2 RAM and 8GB of Dongzhi eMMC flash memory, with a total cost of 80 yuan. It supports TF card expansion up to 32GB."

Upon hearing this, Chen Mo frowned slightly and interrupted Zhao Tiezhu, raising a question.

"Wait, Tiezhu! Why did you choose Hynix and Dongzhi for the storage? Aren't our domestic solutions like Elpida and Micron better? Wouldn't they be more cost-effective?"

Zhao Tiezhu did not answer directly, but instead turned his gaze to Jiang Yu, who was taking notes on the whiteboard.

Jiang Yu understood, turned around, and explained in his usual calm and technical tone: "President Chen, this issue involves the core positioning of Orange 3."

"Our phone focuses on the gaming experience. Given that the chip's image processing is not its strongest point and the screen's resolution is not the highest, to ensure a smooth and responsive gaming experience for users, we must maximize the performance of the key indicator of data read and write speed."

After repeated testing and comparison by our technical department, the combined read and write speed of Hynix's RAM and Dongzhi's eMMC is approximately 2.5 times that of the current mainstream domestic solutions of the same level.

This difference becomes very noticeable during game loading, scene switching, and the launch of large applications.

To ensure that the phone truly lives up to its 'gaming phone' positioning, we believe it's necessary to invest more in guaranteeing basic smoothness.

After listening, Chen Mo gave a helpless yet understanding smile and waved his hand: "Alright, performance first, okay! Let's use this solution."

"The image display is already not top-notch. If we also get cursed by users because of slow loading and lag, then we'll really ruin our reputation!"

He compromised, but reiterated that cost was based on the bottom line of user experience, not just on cost-effectiveness.

After Zhao Tiezhu finished his report, he sat down.

Chen Mo turned his gaze to Zeng Baifang of Zhicheng Procurement: "Baifang, it's your turn! Tell me about the parts that our Orange Group can handle internally, and you'd better show me our cost advantage!"

Zeng Baifang was prepared and smiled as he spoke, his tone carrying a hint of pride: "President Chen, rest assured, the quality and price of our own oranges are absolutely guaranteed."

"First is the motion-sensing interaction module, which uses Orange Technology's self-developed MYT-2.0 gyroscope and MYW-1.0 micro motor to provide accurate motion capture and vibration feedback."

This system perfectly supports motion-sensing games such as "Orange Racing" and "Orange Run," and its total cost is kept under 25 yuan.

"Regarding the battery, it adopts Yuancheng New Energy's latest second-generation gaseous lithium technology, model YC2.0.3, with a capacity of 1200mAh, a cycle life of up to 2500 times, and supports fast charging protocols. The cost per unit is 90 yuan."

"The heat dissipation system is key. Orange Technology has developed the leaf vein biomimetic micro-cooling system YML-1.0 for us, and the more powerful YML-2.0 is under development."

The estimated cost is between 20 and 28 yuan, and it can effectively reduce the CPU core temperature by 15 to 25 degrees Celsius, ensuring sustained high performance.

"The fuselage, including the reinforced glass cover produced by Orange Technology itself, uses newly developed Phoenix glass material and a magnesium-aluminum alloy frame. The overall structure is sturdy and has passed a 1.5-meter drop test. The cost is controlled at 32 yuan."

Upon hearing that the "magnesium-aluminum alloy mid-frame" was also produced by Orange Technology, Chen Mo became interested and asked a follow-up question.

"Oh? The mid-frame is also manufactured by Orange Technology? Aren't they involved in micro-motor modification and optical materials? Are they able to handle it all?" Zeng Baifang smiled and affirmed, "Yes, Mr. Chen!"

"However, didn't Orange Science build a new CNC precision machining center?"
In addition to that precious five-axis CNC machine tool, we also introduced a batch of high-performance three-axis CNC machine tools, which are perfectly capable of processing precision structural parts like the mid-frame of mobile phones.

"What about the cost? How does it compare to the professional OEM factories in Dongguan?" Chen Mo was concerned about core competitiveness.

Zeng Baifang's smile widened, tinged with a hint of smugness.

"Mr. Chen, you might not believe it, but the cost of our self-produced mid-frames at Orange Technology is about 15% lower than the prices quoted by our competitors in Dongguan!"

Seeing Chen Mo's surprised expression, he began to explain in detail.

"The advantages mainly come from three points:"
First, five-axis machine tools can achieve one-time forming of more complex structures, reducing the number of subsequent secondary processing steps and losses;
Secondly, the glass cover, body structure, mid-frame, and even some structural components of the motion sensing module and cooling system of our Orange 3 are all manufactured by Orange Technology.
Internal circulation significantly reduces logistics, packaging, and management costs associated with being distributed among different suppliers;

Third, and most importantly, economies of scale.

"As long as our Orange 3 orders exceed 50 units, OrangeTech can further reduce the price of the mid-frame by 3 to 5 percentage points through optimized production scheduling and material procurement!"

As Chen Mo listened, he silently complained to himself:

Goodness, this Orange Micro Motor really keeps a low profile!
Relying on that five-axis CNC center, they actually gradually expanded from core components to structural parts processing.

If this trend continues, won't we soon be able to manufacture most of the mobile phone components, except for chips, screens, and memory?
The depth of vertical integration at Orange Group is a bit frightening!

While Chen Mo's thoughts were wandering, Jiang Yu had already quickly listed all the costs on the whiteboard based on the reports from Zhao Tiezhu and Zeng Baifang, and then summarized and calculated them.

Soon, a clear Bill of Materials (BOM) for the Orange 3 phone was presented to everyone.

[Orange 3 Mobile Phone BOM Details]

Core performance modules:

4G communication system (HaiSi QiLin C3V2 chip): 45 yuan

Motion-sensing interaction (Chengke gyroscope + micro motor): 25 yuan

Display and Imaging:
Screen (Jingdongfang 4.3-inch TFT): 120 yuan

Camera (front 30 + rear 500): 60 yuan

Energy and heat dissipation:
Battery (Yuancheng YC2.0.3 gaseous lithium): 90 yuan

Cooling system (Chengke YML-1.0/2.0): 20~28 yuan

Structural components and perimeter:

Body (Orange Phoenix Glass + Magnesium Aluminum Alloy Frame): 32 yuan

Side buttons (Neon APLS): 12 yuan

Storage and Expansion:
Memory (Hyper RAM + Dongzhi eMMC): 80 yuan

Acoustics and Vibration:
Speaker (ACC super linear unit): 25 yuan

Other electronic components:
Sensor (Bosch accelerometer + electronic compass): 20 yuan

PCB motherboard (Shennan Circuits 6-layer HDI): 85 yuan

Assembly and Packaging:
Complete machine assembly (BTD Electronics, including testing): 50 yuan

Accessories (fast charging adapter + data cable): 35 yuan

Interface (mini USB + headphone jack): 8 yuan

Total material cost in BOM: 701 yuan (including tax)

Jiang Yu wrote the number heavily in red pen at the bottom of the whiteboard: 701 yuan.

The meeting room fell silent instantly, and everyone could hear each other's breathing.

This number is much higher than expected, and can even be said to be seriously excessive!
Chen Mo quickly calculated in his mind: the BOM cost of 701 yuan, plus about 30% channel distribution fees, brings the cost to 911.3 yuan.

If Orange Technology wants to maintain the same 13% gross profit margin as the previous two generations, then the retail price of Orange 3 should be set at 1029 yuan!
1029 yuan!
This number weighs on everyone's heart like a boulder.

The first generation of Orange was priced at 499 yuan, and the second generation at 699 yuan. Its "affordable" and "cost-effective" image has been deeply rooted in people's hearts.

If this third-generation phone suddenly jumps to over a thousand yuan, will it still be the same Orange brand rooted in the "lower-tier market"?
Will the brand's positioning collapse instantly?

All eyes of the attendees were focused on Chen Mo, awaiting his final decision.

The air seemed to freeze at that moment.

Chen Mo frowned and stared at the numbers on the whiteboard for a full minute.

He tapped his fingers lightly on the table, making a soft, rhythmic sound that revealed his inner deliberation.

Finally, Chen Mo raised his head, his gaze sweeping firmly across the entire room, his voice steady and powerful.

"From the day it was born, Orange Phone has been positioned for the lower-tier market. Technological equality means providing affordable smartphones for the general public. This foundation must not be forgotten, nor can it be changed!"

He paused for a moment, then announced almost decisively.

"Therefore, the price of the Orange 3 absolutely cannot exceed 1000 yuan, which is the psychological threshold for users! The retail price will be set at 999 yuan!"

"999 yuan!"

The logistics supervisor, Gong Yun, reacted very quickly, immediately calculating the profit in her mind, and then frowned and spoke.

"Mr. Chen, if the price is 999 yuan, based on the BOM cost of 701 yuan and the channel fee of 30%, our Orange Technology's gross profit will only be about 8%!"

This is 5 percentage points lower than our expected gross margin of 13%, which means total profit will decrease by about 38.4%!

This will affect some of our R&D investment, production capacity, and market expansion plans next year!

Chen Mo had clearly considered this issue. He took a deep breath and explained, "I understand that profits will be affected!"

"However, reputation and brand positioning are more important than short-term profits."

Orange 3 must maintain its price below 1,000 yuan.

This time, we will sacrifice some profits to preserve our market foundation.

For the next generation of products, we'll make further adjustments, such as launching a higher-end 'Orange 4s' series to target the mid-range market!

Upon hearing this, Gong Yun lowered her eyes slightly and revealed a meaningful smile: "President Chen, your idea is very good, but you may have overlooked a related problem!"

"Oh? What's the problem?" Chen Mo looked at her.

Gong Yun calmly analyzed: "If the Orange series insists on its affordable positioning, then the theoretical upper limit of the BOM cost of the next generation Orange 4 cannot exceed 869 yuan."

The problem is that, in order to achieve the gaming phone experience, our Orange 3 has already invested "excessively" in terms of configuration.

By next year, even if hardware costs decrease due to economies of scale and technological advancements, the budget available for improving the performance of the Orange 4 will be severely compressed.

The result is likely to be
The overall performance of the Orange 4 is barely on par with the Orange 3, and there may even be trade-offs in some aspects!

Chen Mo was stunned for a moment, then suddenly realized, his tone a mix of amusement and exasperation.

"Sister Gong! You mean..."
Is it possible that our generation of Orange 3, with its "heavy-loaded" features, might actually create a group of "holdouts"?
Will users find the Orange 3 good enough and have no incentive to upgrade to the Orange 4?

"Exactly!" Gong Yun nodded with a smile: "This is highly likely, and Orange 3's user stickiness will be exceptionally high!"

Chen Mo shook his head, as if trying to shake off this "trouble," and finally waved his hand: "Forget it! Let them be holdouts!"

"This shows that our product is well-made and recognized by users."

The top priority right now is to maintain Orange phones' reputation for being affordable.

As for the profit gap...

He then shifted his focus, revealing his mindset regarding capital operations.

"Next year, Yuancheng New Energy will launch its Series A financing. Gaseous lithium technology is highly sought after, and we can recoup a large amount of funds by giving up a small number of shares."

If that's still not enough, we can launch Orange Treasure for fundraising. Hongshan Zhonghua has given us a valuation of $5 million, which is enough to cover our strategic investment in mobile phones.

After making this crucial decision that would determine the brand's fate, the meeting moved into a relatively relaxed phase of refining the details.

Customer service representative Wang Qian relayed some frequently raised issues from users, such as app compatibility and expected battery life.
Chen Mo instructed Jiang Yu from the technical department to follow up and optimize the process.

He specifically instructed Jiang Yu: "Our directly operated stores have already opened in the southwest and western multi-ethnic regions!"

The Orange OS 3.0 system must be properly adapted to the languages ​​of major minority groups; this is the right task and a market necessity!

If possible, have the design team create unique UI elements for these language versions!

Jiang Yu, representing the technical department, nodded in agreement.

Next, Chengbao Wang Teng reported on the current status of game development adapted for the Orange 3 mobile phone.

"Mr. Chen, the online mode of 'Orange Treasure Racing' and 'Orange Treasure Cool Run' is under development. The current plan is to support two-player battles on 3G networks and four-player battles on 4G networks."

Additionally, "Defend the Oranges" and "Orange Wars" are also adding a two-player mode.

After listening, Chen Mo thought for a moment and said, "We can increase the number of players in the battle. We can support 4 players in a battle on a 3G network and 6 players in a battle on a 4G network. It's more fun with more people!"

Upon hearing this, Wang Teng's face immediately fell, and he complained incessantly, "President Chen! Please spare us! Just achieving stable synchronization for two and four people has almost made our programming team bald!"

"If we add more users, the network latency and stability will be under too much pressure, and the user experience will not be guaranteed!"

Chen Mo couldn't help but laugh at his exaggerated expression and pointed out, "Who told you to use all real players?"

"Think more carefully!"

In a 6-player battle, why don't you just assign 4 real players and shove in 2 computer-controlled players to be at the bottom?

This design creates a lively atmosphere while ensuring a pleasant experience for most real players!

Wang Teng blinked, paused for a few seconds, then slapped his thigh, his eyes lighting up: "That's it! Use computer-generated characters! Mr. Chen, I get it! I guarantee it will be both lively and smooth, ensuring every user has a great time!"

All key matters have been discussed and finalized, including the hardware configuration, software compatibility, and pricing strategy for the Orange 3 phone.

Chen Mo stood up, clapped his hands vigorously, and announced loudly, "Alright! The general direction is settled!"

"All departments, act immediately and cooperate closely according to the decisions made at today's meeting. I have only one requirement: get the engineering prototype of the Orange 3 out as soon as possible! Meeting adjourned!"

Everyone stood up in response, and the conference room was filled with a sense of urgency and enthusiasm.

A crucial meeting that will determine the future of Orange phones has come to an end, but a battle surrounding gaming phones priced under 1,000 yuan has only just begun.

Chen Mo knew that holding onto the 999 yuan price point would be a tough battle, but for the sake of oranges' foundation in the lower-tier market, even if it meant losing nearly 4% of the profits, this battle had to be won.

(End of this chapter)