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By Zhao Jinjie and Zhang Ruya
Source: Alphabet list (ID: wujicaijing)
The news surrounding Huawei’s mobile phone business continues. On January 27, Huawei issued an internal document confirming that Yu Chengdong, the former CEO of consumer business, will be appointed as the president of cloud and computing business. Hou Jinlong, the former president of cloud and computing business, plans to be the chairman of digital energy.
Two days ago, the market came the news that Huawei’s mobile phone business was divested and transferred. At this time, it was only 67 days since the overall sale of glory business. Reuters further pointed out that Huawei is negotiating with companies and consortia led by the Shanghai government on its high-end smartphone brands P and mate. However, Reuters also pointed out that the secret negotiations, which have been going on for several months, may not succeed because Huawei has not yet made a final decision on the sale.
Huawei officially refuted the rumors on January 25, saying that “there is no plan to sell the mobile phone business at all” and that it will continue to “insist on building a world leading high-end smart phone brand” in the future.
In March 2019, before being listed in the U.S. entity list, Yu Chengdong, CEO of Huawei’s consumer business, just released Huawei’s “1 + 8 + n” full scene intelligent IOT (Internet of things) strategy, in which “1” represents the mobile terminal and plays the key role of main entrance. The position of mobile phones in Huawei’s future territory is self-evident. This is also one of the important reasons why Huawei is hard to give up.
However, with the official implementation of the “915” blockade ban last year, Huawei’s grand blueprint was directly affected by the supply interruption crisis from upstream supply chains, such as TSMC, Samsung Electronics, LG display, SK Hynix, and micron technology.
In the disclosed financial report of 2019, Huawei’s annual revenue is 858.8 billion yuan, including 467.3 billion yuan from consumer business. Yu Chengdong once told the media that the mate30 series released in that year sold more than 7 million units only two months after its launch. Combined with the P-Series data, it is conservatively estimated that Huawei’s high-end computers equipped with self-developed chips have contributed 100 billion yuan in revenue.
“Our mobile phone business is very difficult now. The supply of chips is very difficult. We are out of stock.” Yu Chengdong made a statement to the outside world at the 2020 summit of the China informatization 100 people’s Congress: “it’s a pity that” (the Kirin chip carried by mate 40) may be the last generation produced by Huawei. ”
Once Huawei’s mate and P series become the best, Huawei will have to face the cruel fact that it may lose this piece of cake worth 100 billion. Affected by this incident, the already solidified mobile phone market structure is likely to usher in earth shaking changes.
Kirin chip is like armor. In the past 10 years, it has protected Huawei mobile phone. It has gone all the way, surpassing Xiaomi, oppo, vivo and apple, becoming the world’s top 2 manufacturer next only to Samsung.
“Huawei has chosen chip as its core advantage and established its unique position. “Rui bin, who was in charge of Huawei’s consumer BG strategy, said so.
As a result, Huawei has become the only mobile phone manufacturer in China that challenges the success of Samsung and apple and ranks among high-end brands. A noteworthy detail is that these three manufacturers have been insisting on developing their own chips from the very beginning.
With this technological advantage, the three mobile phone giants have maintained the core competitiveness of their brands in the increasingly fierce homogenization competition. They have also been able to get rid of the dependence on chip manufacturers such as Qualcomm and MediaTek. They can independently design and plan new products, and even lead their peers to seize the time window at key moments.
More importantly, the combination of self-developed chips and medium and high-end mobile phones can enable mobile phone manufacturers to master complete user usage data, thus fully insight into the real user needs, and finally transform into targeted specific design schemes to make mobile phones that consumers prefer, look better and have stronger performance. This is the secret means for the three giants to maintain the high-end market.
At the same time, self-developed chips can directly help mobile phone manufacturers to win the cost advantage and enhance their control over product cost, so as to achieve better cost performance in the competition of similar products.
In 2018, the United States cut off the supply of ZTE chips, making the original innovation topic around hard technology mentioned again. Ni Guangnan, academician of the Chinese Academy of engineering, once said an image metaphor: “no matter how big or beautiful a house is built on the wall of others, it may not stand the wind and rain.”
China’s long-standing thinking of “making is better than buying, buying is better than renting” has come to a moment of change in Ni Guangnan’s eyes. At that time, Huawei was praised by Ni Guangnan as a typical company by virtue of Hisilicon’s technological breakthrough.
Chip, screen, lens and storage are considered as the four important components of a smart phone, accounting for 50% – 70% of the BOM cost of the mobile phone.
With the increasing homogenization competition, mobile phone manufacturers are even ridiculed as “supply chain composers” by some outsiders because they may be using Samsung screens, Sony cameras, Qualcomm chips and Hynix memory modules. This aggregation trend, in the process of helping mobile phone manufacturers achieve high performance and low cost, increasingly exposes a drawback: the access threshold of mobile phone manufacturers is decreasing, but the core competitiveness is weakening.
But there are three exceptions. Around 2011, with the arrival of the wave of smart phones, Samsung, apple and Huawei have made the same determination to develop their own chips.
Samsung was the first to rise. It had its own mobile chip before 2011. High end mobile phones such as Galaxy S and note series all use self-developed exynos chips. The first three generations of Apple iPhone products just launched also use Samsung chips.
Even under the blow of note 7 explosion and global recall, Samsung’s profit in 2016 still reached 29.24 trillion won by virtue of exynos chip and semiconductor manufacturing business, and there was no loss situation worried by the outside world. In the public financial report, Samsung Electronics said frankly that the strong performance of its memory chip business and display panel is the main driving force for its profit.
Not to be outdone, apple is also early in chip development: in 2008, it acquired a small fabless semiconductor company, p.a.semi, to release the signal of self-developed chips for the first time; then, in 2010, it acquired the chip manufacturer, infinity, and finally launched the first processor, A4, and carried it into the iPhone 4. After 10 years of iteration, a series chips have become one of the core competitiveness of iPhone, and together with app store, Apple’s closed system has become more solid.
Looking back at Huawei in China, when it was transforming into its own brand mobile phone in 2012, Yu Chengdong, who took over Huawei’s consumer business, determined seven strategies, including upgrading from low-end to medium and high-end intelligent terminals, abandoning ultra-low-end function mobile phones that sell a lot but don’t make money, and enabling Huawei Hisilicon quad core processor and Balong chip.
Ren Zhengfei once said to the head of Hisilicon chip R & D: “I will give you 400 million US dollars of R & D expenses every year and 20000 people. We must stand up and appropriately reduce our dependence on the United States.”
From the toddler k3v2 to the continuous evolution of Kirin 910, 960, 980 and 990, Hisilicon Kirin will become the only top five 5g chip designers in the world in 2019.
According to the counterpoint Research Report, in April 2020, Huawei’s mobile phone sales will catch up with Samsung and apple and become the first in the world.
However, with the popularity of Kirin 9000, Huawei has lost the foundation of its first position.
“It will take at least 20 years and a generation for China’s chip technology and industrial development to reach the summit of the world.” Professor Wei Shaojun, director of the Institute of microelectronics of Tsinghua University, made a conclusion in the core issue published in July 2018.
At that time, the “915” blockade ban had not yet taken place, and the United States had not completely blocked Chinese science and technology enterprises. Looking back, the crisis of Kirin chip outage is forcing Huawei to make up for this long lesson and start the story of the second half of Kirin.
The first half story of Huawei chips can be traced back to the integrated circuit design center established in 1991. On this basis, in October 2004, Huawei established Hisilicon Semiconductor Co., Ltd. and started the research and development of smart phone chips in 2006. The k3v1 and k3v2 before 2014 can be called the darkest time of Huawei chips. The P1 / P2 / P6 and other models equipped with k3v2 are very hot, and even the game can not be loaded. Rui bin recalled: “as long as you mention Huawei k3v2, netizens almost have bad comments.” Huawei mobile phone is also jokingly called “Wannian k3v2” by netizens.
This situation was not gradually alleviated until Kirin, the “core” brand, emerged in 2014. By the advent of the Kirin 990 Series in 2019, Huawei Hisilicon has successfully ranked among the world’s leading smart phone processors, and its performance is no worse than that of Qualcomm snapdragon, Samsung exynos and apple A-Series chips.
The “three highs” of investment in IC chip industry high risk, high investment and high output have already become the consensus of semiconductor industry. And with the evolution of Moore’s law, only the top few in the industry can survive in making digital chips.
Faced with the uncertain future, Huawei made great determination to continue to invest in Hisilicon at that time. In Rui Bin’s words, “it’s not only a hot gold sucking doll, but also a Dou that can’t be helped up in a short time.”.
A typical paragraph circulated in the industry is described as follows: Ren Zhengfei set a goal when Hisilicon was founded – annual revenue of more than 3 billion yuan and employees of more than 3000 people. As a result, the number of employees target is achieved quickly, but the revenue target is never achieved, and it seems to be far away.
Especially after the poor performance of k3v2, the voice of doubt from the outside world is even louder. However, it was thanks to the two-year deep running in between k3v2 and P series that Kirin series became successful.
According to Ren Zhengfei, “eat your own dog food first” and “jump your own parachute first”. Only when Huawei uses Hisilicon on its medium and high-end mobile phones, can it have a real insight into the real needs of users, and then transform it into a specific design scheme, and finally realize the continuous iteration of the chip. In addition, the process of facing users directly has also cultivated the R & D team’s super fighting power in the face of the consumer market, enabling Huawei engineers who are used to to to B to understand the different design logic of to C products.
With the development of technology and the change of Huawei’s mobile phone brand construction, from the “gentleman like orchid” of P7 to the “Jazz life” of mate7, a series of advertising slogans highlight Huawei’s high-end brand tone. In particular, the black swan incident of Samsung Galaxy note 7 explosion in 2016 prompted Huawei’s mobile phone to take over the high-end mobile phone market left by Samsung.
With the help of Hisilicon chips, Huawei mobile phones do not rely on any chip manufacturers, and no longer need to adapt to the chips of Qualcomm and MediaTek. They can design and plan new products independently, and even become pioneers to seize the time window at the critical moment.
The direct competitive advantage of the launch of Kirin chip is to help Huawei’s mobile phones, including glory, gain cost advantage and increase product cost control. In the competition of similar products, the cost performance is better. Yu Chengdong said many years ago, “high R & D investment will bring high-quality products, and glory products will greatly surpass Xiaomi in the future.” In 2017, sinor data showed that the annual shipment of glory mobile phones began to surpass Xiaomi and become the first brand of Internet mobile phones.
The self-developed chip cake looks really attractive. Four years after its establishment, Xiaomi also tried to embark on the road of self-development of mobile phone chips. In 2017, it launched surging S1, but the response after its debut was flat. The follow-up surging S2 has not been able to wait for mass production because of technical bottlenecks.
In 2017, oppo established Jinsheng communication, whose business scope includes “integrated circuit design and services”, and was found by the media. In 2018, it opened the recruitment of chip design engineers. In addition, oppo has also set up a chip technology committee, which has successively recruited people from Hisilicon, MediaTek and Spreadtrum on a large scale, including Zhu shangzu, chief operating officer of MediaTek, Li Zonglin, general manager of wireless communication business department of MediaTek, etc. the research and development team of oppo’s mobile phone chips has formed and started to enter a new stage of mass production.
Vivo, Xiaomi and oppo have taken a different path: cooperate with Samsung to “build core” and participate in product pre definition and technology research and development: joint research and development of dual-mode 5g AI chip exynos 980 in 2019; joint research and development of exynos 1080 in 2020. According to Hu Baishan, executive vice president of vivo, the move can not only reduce the cost of trial and error, but also better meet the needs of consumers.
The compromise route of vivo reflects the great risk of self research chip: the initial capital investment is huge, and in the end, once the scale does not go up, the huge cost will inevitably be wasted.
For the current Xiaomi OVS, they are temporarily in the dilemma of being worried about entering and being worried about retreating. If there is no self-developed chip, it is difficult to impact the high end. Take Xiaomi as an example. Although it has been working hard on the high-end road for ten years, it is still in the quagmire of “cost performance”. At the Yabuli China Entrepreneurs Forum in November 2020, Lei Jun mentioned the misunderstanding of the low and medium end of Xiaomi from the outside world, and said slightly wrongly: “after ten years of working, people think Xiaomi is still low and medium end. I’m very depressed.”
Even adhering to Huawei’s gene, the new glory after independence will encounter the same problems as Xiaomi ov. In the previous article “down with Huawei” in the alphabet list, it was written that without the aura of Kirin chip and Huawei’s technological blessing, the difficulty coefficient of breaking through the high end of glory will undoubtedly increase greatly.
Raising prices and changing the brand image are all about fine decoration, and their own self-developed technical strength is the skeleton and structure of building a house. When Samsung’s “Note7 explosion” happened, Huawei won 80% of the market share at one stroke, relying on the technology precipitation of the past 30 years.
Nowadays, Huawei may be forced to withdraw from the high-end market due to its “lack of core”, which leads to a series of problems that can subvert the market structure of the mobile phone industry: whether the P and mate series can continue to be proud of the world, and whether the Xiaomi ov glory can take advantage of the high-end market As for the answer, it’s still in the wind.
(statement: This article only represents the author’s point of view, not Sina’s position.)