Those Years When I Was Forced to Top the Forbes List

Chapter 401 The Road to Acquisition
This negotiation was exceptionally grueling.

Apart from IDG and GSR Ventures, everyone else asked financial questions.

How will the investment be made? Will it be invested in stages? How much will the founder invest? When will Mr. Chen's funds be introduced? How will the R&D costs be disclosed? What accounting methods will be used?
These questions were all directed to the founder, and Chen Xuebing did not help answer them. However, Xin Mengzhen had planned everything in a very organized manner and even calculated a 2.5 times premium factor for the mass production of the "193nm dry lithography machine".

She has experience working in public funds and also runs her own company, so she has a good understanding of investors' perspectives.

However, the key to finalizing the agreement was that Chen Xuebing increased the annual premium repurchase rate from 10% to 15%.

This figure is sufficient to cover the financing costs of each institution, leaving three or four percent for management fees.

Even if they don't have the budget, they can raise funds again.

The leading domestic institutions each have some remarkable track records, often achieving returns of dozens of times. These investments are all written into the fund introductions, but no one sees the bones that have sunk to the bottom of the river. For every investment they make, there are a dozen or even dozens that fail. The prospect of stable returns is still quite tempting for them.

With this guaranteed return, even if future expectations aren't very high, there's still something to look forward to.

Before the two went home, Lin Huixiang was "just in time" arranged to work overtime at the company, so the two of them started arguing and bickering.

Career-oriented men and women alike felt an unusual excitement as this new dream began.

For Chen Xuebing, this was a long-planned scheme that had been in the works.

For Xin Mengzhen, it was a declaration of independence, a break from her family.

After taking a shower, Xin Mengzhen brought Chen Xuebing a silk shirt and pajamas to change into. The two hugged and cuddled for a while, and their rationality began to return.

"You're really not planning to do it yourself after investing so much money?"

Chen Xuebing shook his head, lit a cigarette, and slowly said:
“My background is already a bit complicated. I have close ties with the Ministry of Information Industry, the National Social Security Fund, and Central Huijin. There are also investments from Singularity, Spreadtrum, and ARM China, the 3G industry fund, as well as our collaborative R&D with Huawei. We’ve already done too much. If we produce a large amount of technology, it could trigger the U.S. export control regulations and implicate this company.”

"From a business risk perspective, the research and development of lithography machines is a bottomless pit that takes more than ten years, and financially it is likely to drag down my rate of return."

"It's best if we don't have too much of a relationship on the surface. I will transfer your 100 million yuan startup capital as the founder to your grandfather's account in the form of fund returns. My subsequent investment and holding agreements will be handled through the BVI company. The Long March TMT Foundation will make some financial investments to help you attract capital."

"When it comes to decision-making, we need to discuss it together. Most of the time, you have to listen to me."

After finishing his statement, Chen Xuebing also felt that his expression on this matter was too rational. He touched her hair with his finger and explained, "This matter is of great significance to my investment. You should understand that I am deliberately keeping a low profile in many of my current strategies because the supply chain could hold me back at any time."

Qilin dares not go out to sea now.

The homogeneous competition with Apple could impact the supply chain, and that's one aspect.

Overseas, especially in the high-end mobile phone market, it is an absolute no-go zone for Chinese manufacturers because the Chinese camp does not have a SEP (essential patent) wall.

To gain a certain market share, in addition to product strength, you must also have enough defensive patents, otherwise you simply cannot survive, as the patent camps of big companies will force you to sell your products.

Not to mention there are vampires like Qualcomm.

Currently, Qualcomm is at its most powerful in utilizing the "CDMA patent barrier" and "reverse patent licensing" strategies. Established manufacturers are charging high patent fees of 3%-5% on their mass-produced products. For example, Nokia, Samsung, Motorola, and LG Electronics charge 5% of the total sales revenue for most of their mobile phones.

The price war for multi-function machines is intensifying, and profits are already thinning. With 5% taken from the price of the whole machine, how much is left?
There are lawsuits going on against Qualcomm all over the world right now.

If there are new technologies that Qualcomm values, things are a bit easier; they can charge only 3% or even 2%. But if it's a technology Qualcomm wants, it must be reverse-licensed to Qualcomm and ready to be integrated into its chips or used for free by its other manufacturers.

For example, the waterproof antenna technology developed by Kyocera in 2006; SIRF Technology's GPS patent; PortalPlayer's MP3 decoding technology; and even Tianyu's innovative dual-SIM dual-standby solution this year have all been integrated into Qualcomm's chip reference design.

The rapid rise of Qualcomm's SoC integrated chips is not without reason.

He also consulted with Jobs and learned that even Apple uses Infineon baseband chips, and that it cannot completely avoid Qualcomm's patents, and that Apple has to pay an additional $0.5 licensing fee for each chip.

Moreover, because optimizing communication performance requires providing Qualcomm with RF front-end calibration data, and the communication protocol stack interaction logic also needs to be opened to Qualcomm for debugging, Apple chose to give up optimizing RF performance.

In addition, Apple is a closed system, and its functional source code is difficult to extract. Even if you extract it, Qualcomm might not be able to use it. Qualcomm's first CEO had a good relationship with Jobs, so he gave up on extracting Apple's patents.

Jobs repeatedly reminded him that the idea of ​​not using Qualcomm basebands was correct; otherwise, with Kirin's numerous new design patents, there would be a lot of trouble, and Apple did not want a bunch of homogeneous competitors licensed from Qualcomm to appear in the European and American markets.

It remains to be seen how much self-interest was behind this suggestion.

However, Jobs also revealed to him that Qualcomm was very dissatisfied with Spreadtrum's technology integration efforts in the Chinese market. Qualcomm did not want TD to become stronger, and the early licensing of TD seriously delayed Qualcomm's development in the Chinese market. Therefore, he, the head of Spreadtrum, was also on Qualcomm's target list. The information Jobs learned about him before coming to China was provided by Qualcomm.

Chen Xuebing absolutely believed this.

If Kirin wants to go global, it will become a target for Qualcomm to exploit its patents. Therefore, manufacturers in Huaqiangbei who want to use the Kunlun system and Singularity's interactive patents to go overseas must sign contracts with baseband manufacturers in advance. If they are targeted by Qualcomm after going overseas and Qualcomm uses this to threaten Singularity to hand over its patents, Singularity can only say that it is powerless to help.

Whether it's communications or chips, they all require a patent wall that others can't bypass. It's impossible to avoid sanctions; every major manufacturer is embroiled in lawsuits.

If there are no means to retaliate, one can only take the beating and stand at attention.

Therefore, he spent a huge sum of over a billion yuan to allow Spreadtrum to share Huawei's 4G R&D achievements and conduct joint research. If he could accumulate some necessary patents for the 4G LTE era, his Kirin could go out and dominate the market.

Thinking of this, he sighed and said, "Dry lithography machines are hard to get started, and immersion lithography is even harder, but we must overcome them. Immersion DUV is the mainstream of the future, and most manufacturers will have to use it. I estimate that EUV will not even be able to get close to it in eight or ten years, and international progress will not be very fast either. However, we must try to seize the opportunity if we have it. Even if we can't make it, as long as we can get some patents for the necessary processes, it will be a success."

Xin Mengzhen's delicate eyebrows furrowed with a hint of helplessness.

"You're putting too much pressure on me."

Chen Xuebing smiled faintly: "I'm not putting all my hopes on you. TSMC developed double exposure last year, and I will contact domestic wafer manufacturers to develop it in a targeted manner."

Xin Mengzhen's eyes lit up: "Do you have any information on double exposure technology? I saw in Nature that double exposure requires the lithography machine itself to support the basic hardware functions needed. It mentioned that the workpiece stage controls the nanoscale movement and positioning of the silicon wafer, which gave me some inspiration, but it wasn't explained in much detail. I've been looking for information on this technology."

“Yes.” Chen Xuebing nodded and said, “The relevant papers haven’t been published yet, but I have video footage from the IEDM (International Electron Devices Meeting) in December 2006. TSMC gave a presentation for more than half an hour. I can send it to you. In the future, you can just come to me with any semiconductor information you need. There are people who collect it for me.”

"That's great!" Xin Mengzhen exclaimed eagerly. "How did you do the exposure? How did you manage to bypass the resolution limit of a single exposure?"

If double exposure is transformed into quadruple exposure, that would be the key to unlocking a new manufacturing process! "There's a formula, I've forgotten it, but it's roughly about how insufficient resolution can cause light diffraction to blur the pattern. However, by splitting the chip pattern and using two exposures to complete the lithography, reducing the density of the pattern in each exposure, we can avoid mutual interference and overlap of the photosensitivity. Then, through nanometer-level precision alignment, we can ensure that the patterns from the two exposures can be perfectly combined, achieving a doubling of the pattern density. However, this requires very high precision equipment."

"Oh," Xin Mengzhen realized something, and her expression turned serious: "If we want to do four exposures in this way, the overlay error alone will double."

Her family is in the OEM business, so they know a lot about precision equipment. They naturally know that it would take at least several years, or even more than ten years, to double the precision of automated instruments.

Chen Xuebing chuckled: "Of course, the yield of this method is too low. Without a breakthrough in industrial precision, the cost of further exposures will increase explosively. To complete four exposures, a more precise method would be needed. This thing is not some magic that transcends process limitations; at most, it is just another manifestation of materials technology and precision technology."

Using multiple exposures to trace the manufacturing process requires overall technological advancements. The photoresist cracks after multiple exposures, the mask precision is not fine enough, the DUV precision can be aligned, the FinFET process can be integrated, and there is corresponding EDA software to break down the chip design. Each step is a major hurdle.

However, this path is much simpler than EUV manufacturing. If we can continue to obtain the latest version of DUV with the highest overlay precision, we can follow in the footsteps of advanced generations and play with 7 nanometers, or even 5 nanometers.

He constantly consulted technical documents and sought explanations from others, gradually gaining a clearer understanding of the principles of lithography machines, and his fragmented knowledge from his previous life became more lucid.

However, the upgrade to multiple exposure still needs to be completed by the foundry. SMIC, which can secretly obtain advanced DUV, seems to be in a lot of trouble recently. It was sued by TSMC shortly after its listing in 03. In 05, it couldn't withstand the pressure and settled out of court for US$1.75 million. As a result, it was sued again last year, with even higher demands and shares.

This time, they also demanded that Zhang Rujing step down.

Zhang Rujing was a good person.

He was even a great man, a man who transcended vulgar interests, and a man who laid the foundation for China's semiconductor industry.

But Chen Xuebing could only mourn for him in his heart. He hoped that Zhang Rujing would lose the lawsuit and withdraw as soon as possible. If TSMC did not completely settle the matter and kept thinking about him, SMIC's path of multiple exposures would be difficult.

After all, double exposure is a patent of TSMC.

He watched the IEDM video clearly. TSMC explained the principles in great detail. Double exposure technology requires the cooperation of the entire supply chain, including lithography machines, photoresists, EDA tools, and metrology equipment. They are actively promoting the development of the double exposure industry chain and achieving technological maturity.

Since they dare to share their know-how with everyone, they must have applied for a large number of rigorous and unavoidable patents related to the core innovations of the technology.

The major settlement between TSMC and SMIC was only reached in 09, with Richard Chang resigning. Only then did TSMC grant SMIC a series of limited paid patent licenses. Without this step, SMIC would have had no legal protection to engage in this activity.

He needs to find some time to talk to Zhang Rujing. If Zhang Rujing is really unwilling to step down, it seems he will have no choice but to start from scratch.

…This makes it even more difficult.

SMIC has been building factories and now has four wafer fabs. They have basically poached all the relevant talents who can come to the mainland. If they want to build one, it will take at least two years.

Doesn't that mean we still have to wait until 09?

You should ask him to return it.

While Chen Xuebing was lost in thought, Xin Mengzhen suddenly got up from the bed, tiptoed, and took a piece of paper from her work bag.

"Since you have someone collecting information, then... could you help me look this up?"

Chen Xuebing accepted it.

It was a few lines of handwritten text.

Objective—To acquire capabilities in precision manufacturing, fundamental optics, and motion control.

Taiwan Precision Machinery Factory

The target type is a small to medium-sized Taiwanese manufacturer (a competitor of HIWIN Technologies) that produces high-precision linear motors, air bearings, and precision guide rails for Japanese and German companies.
Chen Xuebing saw through her intentions: "You want to make the worktable first? Why a Taiwanese company?"

"It's not just about workpiece stages. High-precision linear motors involve motion control of semiconductors and integrated module design. Air bearings involve optical inspection and precision machining. Precision guides are used to make machine tools and robotic arms. A factory like this can complete the entire transmission system from guides and lead screws to modules."

"My family's contract manufacturer has machining technology, but the precision is insufficient. The people I have the most confidence in taking over the technology are those who can do so completely."

“There should be several companies in Taiwan that are manufacturing for ASML and Nikon. I have seen the fees paid to Taiwan in their financial reports. They are generally listed as being used for precision manufacturing, so I don’t know the exact number. But it’s impossible for the two companies to use only one company. If you follow this clue, you should be able to find it.”

Xin Mengzhen's meticulous thinking brought a smile to Chen Xuebing's face.

Why is it described as a "competitor of HIWIN Technologies"?

"Because HIWIN Technologies is too big, the largest in Taiwan. They are definitely one of our suppliers, but they are not easy to acquire. We have to find their competitors. They can't be too bad either. They have to be able to compete with them."

"Oh."

HIWIN Technologies is not well-known, so its market value is probably not too outrageous. However, Chen Xuebing did not ask "how big is it?" in a show of wealth, because the largest company is the most conspicuous and it would be inconvenient to make a move. If you want to transfer technology and talent from Taiwan, it is better to keep a low profile.

“Okay, I’ll help you find one… Actually, I’ve also planned to acquire a company.”

"Which one?"

"Zeiss, Germany".

Chen Xuebing spoke lightly, and Xin Mengzhen's eyelashes trembled.

Zeiss, the global benchmark for optics and optoelectronics.

Medical, industrial, semiconductor, camera lenses, eyeglass lenses.

A company worth tens of billions of dollars.

"Are you crazy? If you can acquire Zeiss, you might as well just acquire ASML."

Chen Xuebing chuckled dryly: "Let's keep an eye on them for now. I didn't say we'd acquire them all. Some businesses and overseas branches can be spun off, just in case they need money. But inspired by you, let's keep an eye on a few more."

(End of this chapter)