Xiaomi's "surging core" was quiet for a long time, but Lei Jun built a car

China Times (www.chinatimes.net.cn) reporter Yan Xiaohan lu Xiao reported in Beijing

In terms of the two major choices of core building and car manufacturing, Lei Jun, the founder of Xiaomi, seems to pay more attention to the car-making business of "betting on all the reputations of life". On December 14, Wang Hua, general manager of Xiaomi's public relations department, said on social platforms that Lei Jun's main focus this year was on car-related matters. Prior to this, Lei Jun has successively withdrawn from a number of Xiaomi-affiliated companies.

But for the more difficult core-making business, Lei Jun does not seem to be personally involved. In the long-lasting "chip famine", the latest trend of Xiaomi core manufacturing is the establishment of Shanghai Xuanjing Technology Co., Ltd. (hereinafter referred to as "Shanghai Xuanjing") on December 7. The chip company with a registered capital of 1.5 billion yuan, the legal representative and general manager is Zeng Xuezhong, who is in charge of Xiaomi's mobile phone business. However, when asked by the "China Times" reporter about the matters related to the core, Xiaomi did not respond positively.

Xiaomi, which has writheed in the field of self-developed mobile phone SoC chips and has no problems, can it go further on the road of core making this time?

New action for core making

Shanghai Xuanjing, a chip company established in Shanghai, is considered by the outside world to be an important step in Xiaomi's self-developed chip road. The company is wholly owned by X-Ring Limited, and the company's business scope includes integrated circuit chip design and service, integrated circuit chip and product sales.

Behind Shanghai Xuanjing, there are two core executives of Xiaomi, Zeng Xuezhong, senior vice president of Xiaomi Group, as the executive director, general manager and legal representative of Shanghai Xuanjing, and Liu De, co-founder of Xiaomi, as the supervisor of Shanghai Xuanjing.

According to the "China Times" reporter, Zeng Xuezhong has more than 20 years of experience in the communications industry, and has many years of accumulation in the field of mobile phones and upstream core devices. At the end of July 2020, Zeng Xuezhong joined Xiaomi and was responsible for the research and development and production of mobile phone products. Prior to that, Zeng Xuezhong served as executive vice president of ZTE, CEO of ZTE Mobile, and global executive vice president of Tsinghua Tsinghua Unigroup.

Some people believe that after Xiaomi establishes a new chip company this time, it will further integrate with Songuo Electronics, which was previously responsible for the chip business.

Songuo Electronics was established in 2014 as a wholly owned subsidiary of Xiaomi, when it was responsible for developing mobile phone SoC (system level) chips. In 2017, Xiaomi's pinecone team released the first self-developed mobile phone SOC chip surging S1. Xiaomi was also considered to be the fourth mobile phone manufacturer in the world after Samsung, Apple and Huawei to have the capability of self-developed mobile phone SoC chips. It should be mentioned that public information shows that at that time, this 28-nanometer chip, positioned in the mid-range, only supported mobile 4G networks, and was compatible with Unicom 2G.

In April 2019, Lei Jun announced the reorganization of Songuo Electronics, and some teams split off to form a new company, Nanjing Dayu Technology, for the technology research and development of IoT chips and solutions in the semiconductor field, while Songuo continued to focus on the research and development of mobile phone SoC chips. But until now, the surging S2, which was expected to be released at the end of 2017, has not yet appeared.

Industrial economy observer Major General Ding analyzed the "China Times" reporter that the establishment of a chip company by Xiaomi this time does not rule out the possibility of doing SoC chips in the long run. He believes that Xiaomi has a strong demand for chips, and if Xiaomi can develop its own chips, it can also be used in Various Business Lines of Xiaomi in the future, including AIOT, automobiles, etc.

Burning money is not easy

Xiaomi's core manufacturing has begun since 2014, and the chip is crucial for Xiaomi, which has mobile phones as its main business.

IDC data shows that in the third quarter of this year, Xiaomi slipped from the second position of global smart phone shipments to the third, and shipments decreased by 4.6% year-on-year. And just in August this year, Lei Jun also publicly announced in his personal speech that Xiaomi's next goal is to achieve the first share of global mobile phones in three years.

The biggest reason affecting Xiaomi's shipments is the long-standing shortage of chip supply.

Xiaomi President Wang Xiang said on the earnings call that the chip shortage has a great impact on the shipment of Xiaomi mobile phones. He believes that the problem of chip shortage will not ease until the second half of 2022. IDC also believes in the report that Xiaomi faced supply problems that it had not encountered in the previous quarters in the third quarter of this year.

It is not only the burning eyebrows at the moment, but also the collective dream of mobile phone manufacturers to grasp the core upstream supply chain through self-developed chips. But in addition to the problems that are difficult to avoid such as time window and technology accumulation, investing funds is also an old problem.

"For xiaomi with a scale of 100 billion, a billion cores is not a small number, but if it is enough to spend a billion, it is a very small number for me." Lei Jun said so in an interview after the release of the surging S1 in March 2017.

But in reality, to build a billion yuan is only the starting line. According to public information, the upfront research and development cost of the first generation of mobile phone SoC chips released by Xiaomi at that time had already spent 1 billion yuan. Lei Jun also mentioned in the above interview that the investment in each generation of flagship chips is more than one billion US dollars.

However, the "cost performance" route taken by Xiaomi is not easy to support long-term large-scale investment. According to the third quarter report of this year, Xiaomi's net profit during the period was about 790 million yuan, down nearly 84% year-on-year. Based on the adjusted net profit of 5.175 billion yuan, Xiaomi's net profit margin is only 6.6%.

Liang Zhenpeng, an observer of industrial economy, analyzed the "China Times" reporter and believed that it was completely impossible to invest 1.5 billion yuan to develop and design the mainstream high-end flagship machine SoC system-level chip on the market. "It can only be said that this action represents the direction of Xiaomi's future development, and Xiaomi wants to enhance the brand's scientific and technological content and bargaining power by making cores."

Choose a delaying tactic

After the folding of the first generation of SoC chips in 2017, the Xiaomi surging S2 has not had news for a long time, and the outside world once believed that Xiaomi has given up making cores. But in August 2020, Lei Jun denied this claim, saying that "since the release of the first generation of surging chips in 2017, it has indeed encountered great difficulties, but the chip plan is still continuing." ”

The path Xiaomi has chosen now is more like a delaying tactic of last resort.

In March this year, Xiaomi did not continue to release the second generation of SoC chips, but released the first ISP (Image Signal Processing) chip Surging C1. This Xiaomi self-developed image signal processing chip was first launched on the Mi folding screen mobile phone MIX FOLD. However, Zuo Kunlong, the lead developer of the Xiaomi surging C1 chip, said in an interview that Xiaomi still has to return to the development of the "heart device" SoC of the mobile phone.

In fact, cutting from image chips to the field of self-developed chips is also a common practice for domestic mobile phone manufacturers. On December 14, OPPO officially released its self-developed imaging NPU chip using TSMC's 6nm process process. In September this year, VIVO also released its first image chip V1. Behind this, mobile phone manufacturers look forward to competing for the autonomy of the industrial chain and gaining a differentiated advantage in fierce competition.

Major General Ding told the "China Times" reporter that in addition to Huawei, other domestic mobile phone manufacturers do not have the ability to develop and design high-end SoC chips. The ISP chip, which is relatively simple to develop and crucial to mobile phone imaging, has become the entry point for major mobile phone manufacturers to make cores. He believes that mobile phone manufacturers can create differentiated advantages in images and other aspects through self-developed image chips, thereby enhancing the competitiveness of products and brands.

However, Liang Zhenpeng told the "China Times" reporter that the image chip is many times lower than the technical content of the system-level chip, and the difficulty will be much smaller, which is of little significance to mobile phone manufacturers. He believes that "Xiaomi wants to design Huawei's chip level in the first two years and still has 3-5 years." ”