From knock-off old-man's electric vehicles to industrial giant

Chapter 296 Buying Tianqi Lithium at the Bottom
"I hope to develop a professional-grade external image chip to alleviate the video load on the SoC. Ideally, it should increase the controllable ISP parameter tuning space and add color, skin tone, noise reduction style, sharpening strategy... By piling on components, I can achieve a geeky style of computational photography in the image."

Xu Yi mentioned the target of mobile phone camera sub-chips.

The flagship phone's imaging capabilities are amazing, satisfying the needs of selfie enthusiasts.

It was also driven by a large amount of commercial demand.

With the rapid development of short video and live streaming industries and self-media, mobile phones have become the largest shooting medium.

From taking selfies and photographing the moon to shooting 4K videos...

In order to pursue greater power within limited hardware space, the path of "computational photography" emerged.

The typical capabilities of an external image chip are to enable mobile phones to have higher throughput multi-frame processing, stronger motion compensation, stronger color control, and real-time video recording calculation.

Take video recording and long-duration live streaming as examples. These are among the few tasks on a mobile phone that can simultaneously utilize bandwidth, computing power, power consumption, and storage to their fullest potential.

Outdoor live streamers, social media bloggers, digital bloggers...

These people have an innate need to use mobile phones as productivity tools.

Whichever flagship phone has the best imaging capabilities, people will naturally flock to it and promote and praise it on social media and during live streams.

And what about the consumers?

Regardless of whether there is a demand for it or not, it is easy to be brainwashed through subtle influence.

Thinking of this, Xu Yi heard another catchy voice in his mind: "Believe it or not, the video quality of the iPhone 17 Pro now surpasses that of almost all flagship action cameras, point-and-shoot cameras, even the Pocket 3, and some mirrorless cameras..."

-

"Camera sub-chip?"

Wu Zheng, with his extensive experience in the chip industry, quickly grasped Xu Yi's general idea.

After a slight change in his expression, he gave his approval.

Wu Zheng pondered, "Currently, flagship phones are indeed under a lot of pressure in terms of image processing capabilities. Stacking hardware together can easily reach physical bottlenecks."

If things really go in this direction, there's some reason behind it!

...

He suddenly developed a stronger interest in Xingchen's mobile phone business.

Current industry strategies primarily focus on integrating ISPs within the SoC for camera-related processing.

If we consider the high demand and hype surrounding imaging in the domestic market, there is definitely a market for it. Moreover, other companies are also touting imaging capabilities, which is another kind of "inevitable trend".

"Mr. Xu, your approach is somewhat similar to Google's phone from last year."

Wu Zheng thought of a case.

The Pixel Visual Core released by Google last year was essentially designed to accelerate multi-frame computational photography like HDR+, but it wasn't as advanced or specific as Xu Yi described.

"Well, Google is based overseas, and the image optimization function of their chip is too limited. They haven't put much effort into the lens or explored it in depth."

Google's current approach is to reduce hardware costs by using chips and AI computing for photography, while the future Android approach is to add more features to the overall system once the camera module has been built up to its limit.

Which consumer who buys a flagship phone can tolerate this imbalance?

It's okay to do without it, but it's essential to have it.

Moreover, Google itself has made too many mistakes in other aspects of making mobile phones, its design capabilities are average, and the stock Android system lacks the rich features and localized design of domestic customized systems, which means it is destined not to become popular in China.

Xu Yi chuckled and pushed the teacup off the coffee table.

"Drink tea."

The group got into a lively conversation, discussing everything from car manufacturing and autonomous driving to mobile phone computing and photography.

Wu Zhengcai discovered that Xingchen's mobile phone project was not as "hasty" as the outside world had rumored.

The idea that a phone could be made using a "car key" is pure fabrication.

They have a plan and unique insights into mobile phones.

Using imaging as a starting point is a major selling point, and StarCenter itself has the industry's strongest battery and fast charging. With the right positioning, it has a real chance to achieve profitability.

If all else fails, how much can you lose by selling the car keys?

Luxury brands like BMW, Mercedes-Benz, and Audi (BBA) sell digital car keys for several thousand yuan.

At least Xingchen gave away a phone when they sold keys; it's obvious who the good guys are!
His mouth was slightly dry.

Taking a cup of hot tea personally pushed over by General Manager Xu, I felt instantly refreshed after taking a sip.

……

Chip engineering is progressing slowly.

It's only been three months into 2018, but Xu Yi feels that this year can be described in one word—steady expansion.

Xingchen Automotive is gradually expanding into the new energy industry and the car manufacturing market. Although its sales may not seem to have increased as rapidly as it did last year, its influence is no longer what it was last year.

Star Technology is expanding into industries such as semiconductor chips and mobile phones, and is deeply cultivating talent and technology.

As Xingchen expresses its interest in acquisitions or investments, its reach has gradually extended to the upstream of the industry.

At first glance.

That's absolutely outrageous!
Xingchen's desire to control the "whole industry chain" model has swelled to an inhuman level.

However, the experiences and lessons of later generations have proven this.

Only by grasping the essential needs can we truly succeed in manufacturing.

The reason why manufacturing is difficult is not only because of its large scale, but also because any bottleneck in any link can cause even giants to suffer losses.

That feeling is very unpleasant.

Rather than doing that, it's better to plan ahead.

Lithium ore, as a core upstream link in the lithium battery industry chain, is the basic raw material for the production of lithium salts.

It is a core element that Xingchen has not yet mastered.

Xu Yi had previously held a meeting within Weineng Company to discuss with Liu Yongcheng the development of patented technologies for the lithium mining industry.

China has a large amount of lithium resources, but they are all brine-type lithium mines in salt lakes.

The inherent challenge of separating magnesium and lithium presents a significant hurdle, requiring extremely complex and costly processes that necessitate technological breakthroughs. Another approach involves acquiring existing equity stakes in high-quality overseas lithium mines.

Just then, Tianqi Lithium came into Xingchen's view.

Tianqi initially built its business on spodumene resources and integrated lithium salt chemical industry. Later, it took off by betting on equity in South American salt lakes. The other party acquired a total of 23.77% of SQM's shares through syndicated loans and cross-border financing, and at the same time obtained the rights to the Atacama Salt Lake lithium mine in Chile.

Barring any unforeseen circumstances, this company will become a leading domestic lithium company in a few years, and a leading "resource-based" company at that.

Owning the world's highest-grade and lowest-cost spodumene mine in Greenbushes, and also holding shares in the Chilean Atacama Salt Flat, the company boasts 100% resource self-sufficiency, making its overall lithium carbonate production costs highly competitive within the industry.

This "resource" is truly enviable.

Xu Yi was definitely drooling!

Xingchen has a business partnership with Tianqi Lithium. Initially, Xu Yi communicated remotely and offered simple terms: a fixed supply volume, a five-year term, and a one-time prepayment.

However, the contract also stipulated conditions: prices would be linked to an index and include a most-favored-customer clause; if production ramp-up or delivery schedules failed to meet targets for two consecutive periods, the advance payment would trigger the conversion of convertible bonds into shares, and the other party would be required to provide corresponding guarantee arrangements.

This move surprised Tianqi Lithium, who realized Xingchen's intentions and confirmed that Xingchen was not only interested in securing long-term supply contracts, but also in acquiring equity in lithium mining assets.

Faced with this "abrupt" action.

Tianqi Lithium would never sell its shares so easily, not even through long-term pledge arrangements. The lithium mine they hold is an asset of the highest quality on a global scale.

But unfortunately.

They had just taken on a huge investment in SQM, and their cash flow and debt repayment pressures were becoming apparent. They now desperately needed the advance payment for the five-year long-term order from StarCraft.

Among domestic new energy companies, apart from Xingchen, no other company can afford to make a larger advance payment than this.

As a result, the two sides engaged in some back-and-forth negotiations regarding the long-term contract agreement.

It was at the beginning of the year.

International lithium prices have experienced a downward fluctuation due to a significant reduction in domestic subsidies for the new energy industry, affecting not only new energy vehicle manufacturers but also the entire power battery supply chain. This fluctuation is not as dramatic as the price increase of lithium carbonate throughout last year, and it hasn't even returned to its initial price level yet...

This is truly a difficult situation for Tianqi Lithium!
They've already leveraged up, betting on a continued rise in lithium carbonate prices. Even if lithium prices don't fall, or even if they remain stable, the leverage and upcoming debt maturities could wipe out their already limited cash flow!

Under pressure from all sides, Tianqi Lithium had the idea of ​​getting in-depth contact with Xingchen Technology. A delegation led by Jiang Anqi, vice chairman of Tianqi Lithium, visited Xingchen, and the two sides had their first face-to-face meeting.

Xingchen's basic procurement volume reaches 1.2-1.5 tons of LCE/year, including an expansion volume of 0.5-1 tons. The prepayment reaches 20%-30% of the first year's contract amount, which adds up to more than one billion yuan in cash. This amount of funds and orders are what Tianqi Lithium urgently needs right now.

“President Xu, I know that Xingchen attaches great importance to battery raw materials. Tianqi is very grateful for Xingchen’s sincerity in offering long-term orders and advance payments, and can also offer more favorable prices to long-term order customers, but the debt-to-equity swap terms…” Jiang Anqi paused slightly, “Forgive me for being frank, but this is no longer at the level of procurement cooperation.”

Xu Yi didn't rush to refute, but simply raised his hand, signaling his assistant to push another document over.

"Chairman Jiang is right."

Xu Yi smiled gently, "The procurement contract won't solve your maturity curve, and we don't want to portray our cooperation as taking advantage of someone's misfortune. So, the debt-to-equity swap doesn't have to be a hard trigger; we'll change it to—strategic investment and private placement..."

“As an industrial strategic investor, Xingchen will inject cash into the company. You can use this money to offset the financial contract pressure of the syndicate. What we want is not immediate control—but there must be a guarantee, right? Using a reasonable equity ratio to bind both parties into a community is very cost-effective.”

Tianqi is currently relying entirely on luck and waiting for lithium prices to rise. If it cannot significantly increase its profit margin in the third quarter, its cash flow will soon be exhausted.

If they can't get the platoon leader's order, Xingchen won't only have Tianqi as a raw material supplier. Several other companies are also very willing to compete for this big client, and they might offer some special terms behind the scenes.

Jiang Anqi paused for two seconds, also considering her options, and asked, "How much do you want to bet?"

Xu Yi gave a negotiable range: "10% of the strategic investment after the initial investment, with a subscription amount of six to seven billion."

"You can withstand the pressure of foreign currency financing. Post-investment, 20% will be allocated, ranging from 13 to 16 billion. We don't require you to take the full amount at once. The first phase will be 10%, leaving a window for the second phase, depending on your subsequent financing pace and production capacity realization..."

Jiang Anqi did not respond immediately.

She looked down and turned to the page on "Board Seats" and "Special Voting Mechanisms" of the terms and conditions.

“Mr. Xu, whether it’s 10% or 20%, the numbers can be calculated. The key point is—you also want board seats, isn’t that overreaching?”

She was quite tempted by the money and the long-term orders.

But the Starry Sky clause is a bit too harsh.

"What we need is simply to ensure the supply chain and cost anchoring. Board seats are not for directing operations, but for ensuring no unexpected events occur. Tianqi's current debt structure includes foreign currency, syndicated loans, and collateral arrangements. Once financial problems are triggered, the syndicate will demand supplementary guarantees or early repayment..."

Xu Yi shrugged.

Xingchen has been watching Tianqi Lithium for quite some time. Buying at the bottom isn't something you can do casually; of course, you have to calculate all the risks carefully.

"I hope you will give this matter more consideration. If Xingchen's money is just for filling holes and there is no sufficient guarantee of trust, then I might as well distribute the long-term contracts and advance payments to other companies."

As soon as these words came out.

The air in the meeting room went stagnant.

The team from Tianqi felt the pressure.

Xu Yi is right. There aren’t many lithium salt plants in China that can take over Xingchen’s scale, but Tianqi is definitely not the only one. Moreover, Xingchen has a strategy of purchasing from multiple sources. If they are willing to spend the time to operate, there are many lithium mine equity options available overseas.

The tone was strong, but it also demonstrated strength.

Suppressing her discomfort, Jiang Anqi finally compromised, saying, "President Xu, I can take the long-term contract and terms back to report, and then make a decision at an internal meeting."

"Okay, I also hope to receive good news from Tianqi within three days."

Xu Yi remained calm and composed. Such long-term contracts and fixed-investment agreements were not easy to reach. Tianqi Lithium's debt problems were on the surface. Even if they did not accept Xingchen's conditions, they would have to seek other ways to raise funds.

The two sides concluded their exchange at this point.

"President Xu, aren't the conditions we offered Tianqi a bit too much..." Liang Shouzhou said after the Tianqi Lithium group left. "Six to seven billion in investment, plus 10% and extended order prepayment, that would be enough to negotiate a very good exchange with any lithium group. Or we can wait until their debt pressure is even greater before we make our offer."

"There seem to be many conditions, but it's still worthwhile relatively speaking."

Xu Yi nodded and said, "Developing and operating overseas equity in lithium mines is too slow. Now we're starting with Tianqi to determine the supply schedule and priorities for the next five years, which can be considered as securing our lifeline."

The biggest problem with operating overseas and mining independently is the slow pace, with cycles lasting one to two years.

It's worth noting that Tianqi Lithium's acquisition of SQM underwent a six-month anti-monopoly review.

Once global lithium prices skyrocket, it will be too late for these actions.

Wait two days.

The reply from Tianqi Lithium came faster than expected.

The other party surprisingly compromised on the issue of long-term contracts and strategic investments.

　Happy New Year!
　　
　
(End of this chapter)