Rebirth 08: Can a mobile game company also build a tech empire?

Chapter 133 Reference

"We can start with low-end chips, accumulate experience, and train a team. Once the technology matures, we can move towards high-end chips. There are no shortcuts when it comes to chips; we can only take it one step at a time."

Lin Bing nodded thoughtfully.

This approach is feasible.

"but,"

He raised a new question.

"Who will we sell the chips we design?"

This is a very pointed question.

The chip was designed.

It's not something you just put there to look at.

It needs to be used in products to generate value.

No customers, no orders.

No matter how well designed, it's still a waste product.

"As you just said, we can only start with low-end chips, but there are so many mature solutions on the market for low-end chips. Spreadtrum, HiSilicon, and MediaTek are all making them. What makes our chips so appealing that customers will buy them?"

Lin Bing continued, her tone serious.

"Customers want stable, mature, and cost-effective solutions. If our chips can be successfully taped out on the first time, it's already a good thing. Their performance is definitely not as good as mature products. Who would risk using chips from a new company?"

Phone manufacturers dare not, and solution providers dare not either. If one chip malfunctions, the entire batch of phones would have to be recalled. Who can afford that risk?

"Even if someone is willing to try it, the volume won't be large. Without volume, there's no opportunity for iteration. Without iteration, performance can't be improved. If performance can't be improved, even fewer people will use it. It's a vicious cycle."

Lin Bing's analysis was very insightful.

The chip industry has high barriers to entry.

It's not just because the technology is difficult.

Furthermore, the market has already established a stable structure.

For newcomers to try and get in, it's as difficult as climbing to heaven.

"Mr. Lin, you're right."

Lu Chen did not refute.

Instead, he nodded.

"It is indeed a problem that no one uses the chips we design. The market will not give us the opportunity to develop slowly, and customers will not pay for our growth."

He paused, a slight smile appearing on his lips.

"But someone has already found a solution to this problem for us."

"Who?"

MediaTek.

Lin Bing certainly knew about MediaTek.

This design company.

In the era of feature phones, it relied on an innovative business model.

They practically dominated the low-end mobile phone market in mainland China.

"Around 2004, MediaTek proposed a concept called 'turnkey'."

Lu Chen began to explain.

He drew a simple diagram on the whiteboard.

"The traditional mobile phone manufacturing process requires mobile phone manufacturers to handle chips, screens, batteries, casings, and software themselves. Each link requires a lot of effort, which small manufacturers simply cannot handle and can only be left behind by large manufacturers."

"But MediaTek changed the rules of the game."

"They package chips, software, and reference designs together to provide a complete solution. Manufacturers only need to buy MediaTek chips, which is equivalent to buying a mobile phone manufacturing package. They can then find a foundry to assemble the phone according to MediaTek's solution, and a mobile phone will be produced."

Lin Bing nodded.

He had certainly heard of MediaTek's turnkey model.

The biggest advantage of this model.

This lowers the barrier to entry for mobile phone manufacturing.

Previously, only giants like Nokia and Motorola could play these games.

Now even small workshops in Shenzhen's Huaqiangbei district can participate.

The result was between 2005 and 2008.

A massive number of counterfeit feature phones have appeared on the market.

Those cell phones come in all sorts of shapes and sizes.

It has all sorts of functions and is incredibly cheap.

The driving force behind this is MediaTek's turnkey solution.

"MediaTek's logic was a great success in the era of feature phones."

Lu Chen continued.

"And in the era of smartphones, what if they apply this logic again?"

"This will also lead to a proliferation of counterfeit smartphones."

Lin Bing nodded thoughtfully.

"So, what you mean is?"

"Our chips will definitely not be as good as Qualcomm's in the early stages."

Lu Chen took over the conversation.

"The performance is slightly worse and the power consumption is higher, which is inevitable. Big manufacturers don't want to sell to them, but we don't necessarily have to sell to them."

He paused for a moment, then explained the core idea.

"We can learn from MediaTek and create a turnkey solution for smartphones."

"This solution includes chips designed by ZT, reference designs by ZT, and software adaptations by ZT. Small and medium-sized manufacturers can directly produce smartphones after purchasing this solution."

"Our target customers are small factories that want to make mobile phones but lack R&D capabilities, and counterfeit manufacturers that want to transition from feature phones to smartphones."

Lin Bing's breathing became rapid.

This idea is brilliant!

The high-end market is dominated by Qualcomm, Samsung, and Texas Instruments, which ZhengTu cannot enter for the time being, but the low-end market is a vast blue ocean.

How many counterfeit mobile phone manufacturers are there in China?

Hundreds, even thousands.

They used to make feature phones.

It relies on MediaTek's turnkey solution.

The era of smartphones has arrived.

They also want to transform their business, but they lack the technical capabilities.

If they could buy a ready-made smartphone solution from Journey.

Just like when we bought MediaTek's solutions back then.

They can just find a contract manufacturer to assemble it and ship it out.

That's for the Conqueror chip.

It's a ready-made sales channel!

Moreover, the era of feature phones ended too quickly.

MediaTek hasn't had time to make adjustments yet.

The era of smartphones has arrived.

Their advantage in feature phones.

It's almost useless on smartphones.

Manufacturers like Qualcomm and Texas Instruments.

They are far ahead in the field of smartphone chips.

MediaTek is struggling to catch up.

Therefore, this is a once-in-a-lifetime window of opportunity!

"and,""

Lu Chen continued.

"This model also has a huge advantage."

"What are the benefits?"

"Trial and error".

Lu Chen's tone became serious.

"When phones equipped with our chips are sold, we can obtain a large amount of user data, such as which features are popular, which designs have problems, and which performance needs to be improved. This data will be fed back into the design of the next generation of chips."

"Each generation of chips is iterating and improving. With the accumulation of experience, the performance will get better and better, the power consumption will get lower and lower, and the integration will get higher and higher."

"Five years from now, ten years from now, we may be able to catch up with Qualcomm's level."

Lin Bing listened to Lu Chen's entire plan and remained silent for a long time.

He repeatedly considered the feasibility of the plan in his mind.

They were calculating the potential risks and challenges.

Shortage of chip design talent, high tape-out costs, difficulties in market expansion, and potential competition from MediaTek.

Every problem is tricky.

But every problem seems to have a solution.

Finally, he raised his head and looked at Lu Chen.

"President Lu, this plan is theoretically feasible."

He didn't say it was entirely feasible.

It wasn't said that success was guaranteed.

Given Lin Bing's personality.