Source: Tokawa Research Institute
Author: Yi Junjiang/Yang Jiankai
This article is the third issue of the "Yuanchuan Instrument Knowledge" series, focusing on the field of mobile phone chips that are widely concerned by the society, and the guest is Mr. Chu Qing, CEO of Zhan Rui.
At the beginning of reform and opening up, Yuan Baohua, former deputy director of the State Planning Commission, made a comeback, and in view of the problems in the management of state-owned enterprises that were common at that time, he pointed out that quality management was the core of the modern management of enterprises. It is precisely under his initiative that the mainland carries out the "Quality Month" activities every September, with the intention of "truly establishing the meaning of quality first".
Also starting from quality, Yuan Baohua has constructed a complete set of enterprise management theories suitable for national conditions in his country, whether it is Zhang Ruimin in the home appliance industry or Song Zhiping in the building materials industry, who are deeply affected by it.
Coincidentally, when Zhan Rui, the leader of China's chip industry, officially started the change in 2019, the new management led by Chu Qing also started from quality, and more than 100 elite engineers were drawn to form a project team called "Fire Phoenix", which took 8 months to smooth out the thorny quality problems and regain the trust of customers.
By 2021, according to the data, ZhanRui achieved sales revenue of 11.7 billion yuan, an increase of 78% year-on-year. Not only that, Zhan Rui spent three years to finally put his own position:
From a long-term laggard mobile phone kit supplier, functional machine (can only call and text) chips accounted for the vast majority of revenue, quickly transformed into the mainstream supplier of smart phone chips; from the "others" of the smart phone chip industry in statistical agencies to a market share of more than 10% in the third quarter of 2021, surpassing Samsung and ranking fourth in the world.
How does ZhanRui do it? I believe that practitioners in the chip industry or those who pay attention to Zhan Rui are no strangers to the narrative of managing change. But the starting point for management change must be a drastic change in the market environment and a fundamental shift in strategy. There is a popular view in the industry, namely:
Zhan Rui recovered, but took the previous technology to repackag, coupled with the lack of 4G core, good luck.
Is this really the case? With the questions of general concern in the industry and some universal problems in the current chip industry, Yuanchuan and Chu Qing, CEO of Zhan Rui, had a two-hour dialogue, mainly discussing three aspects of the problem:
1. Inspiration from HiSilicon's entrepreneurial experience
2. ZhanRui's 5G strategy
3. Direction and method of market expansion
The following is the dialogue between Yuanchuan and Chu Qing:
Zhan Rui CEO Chu Qing
Yuanchuan: What impact did HiSilicon's experience when he first started his business have on the management of Zhan Rui later?
Chu Qing: I returned to Huawei in November 2004, and my goal was to participate in the founding of HiSilicon, responsible for building a mobile phone and base station chip team.
In December, HiSilicon was established, and at that time, the HiSilicon wireless team had less than 10 people, including few people with chip development experience. The current industry star Huang Yuning, who just graduated that year, did not get a master's degree certificate, and came to work first. Liu Zhinong and Song Renru are both doctors and are also the top pillars of the current exhibition, but they are also fresh graduates of that year. Zhou Chen and Wang Liqiang founded the marketing team, although their work experience is only 3 years, but in the face of those fresh graduates, they are definitely seniors.
Chen Yufeng and Mi Xiaolong are old colleagues of Huawei Wireless. Yufeng is one of the earliest quality management experts trained by Huawei, and has been passed on by IBM consultants. It should be said that the IBM consultants in the early years are still very high-level, many of them have participated in the creation of the IPD process, know it, and know why it is so, and often criticize the inadequacy of the IPD process. Chen Yufeng is a person who constantly explores the essence and gets its true meaning!
HiSilicon Wireless is the first team in the world to manage hardware development with a software management system. Mi Xiaolong is a hardware expert, bringing valuable system knowledge to everyone, Su Zhen and Mi Xiaolong together founded the system design team.
In large companies, new businesses tend to get the worst resources. Because the internal culture of large companies is "money worship", those departments that earn cash for the company have absolute resource priorities, it is difficult for HiSilicon Wireless to get enough experienced personnel from within, and it is impossible to recruit enough attractive salaries from colleges and universities.
So for a long time, the proportion of fresh graduates in the team was always higher than 50%, and even 80% at the beginning. The protocol stack team founded by Yang Xiangqian and Wang Bo, Gao Cai is a typical fresh graduate. There are also many great heroes who are now famous, all of whom were fledgling young people.
I used people more fiercely, and after three months I used them as old employees, giving responsibility and trust, and it turned out that they grew up very fast. There are no people who have been recruited from Qualcomm and Broadcom, because they can't see Huawei's salary at that time and are not willing to take risks in new business.
"Young people are always the protagonists of miracles", and this time did not disappoint me. The young men got together, writing zero lines of code, marching and fighting, recruiting people at the same time, and spent a short time making chipsets for mobile phones at the end of 2006 and successfully making phone calls in Hong Kong.
"Technology is not accumulated, but created." Many people don't understand this. After Zhan Rui made some achievements, some people questioned whether Zhan Rui inherited a lot of previous things and said that the previous things were new, otherwise why did so many new technologies come out in a short period of time?
In fact, technology is not an existing buried gem that can be dug out by digging everywhere. Everything we think represents the future does not exist, it has to be created first.
Therefore, stimulating creativity is the most important thing, not cutting stones in the soil, and asking for value from the past is to ask for fish. In the chaos of the management of ZhanRui in 2018, a prominent problem is that there is no documentation, the document completion rate is less than 7%, there is no documentation, how to inherit the technology? How to accumulate? This is a team that deeply believes in take-ism, not only 2G, 3G, 4G from elsewhere, but even Bluetooth, WIFI to take.
Yuanchuan : Later, from the business department of HiSilicon to the strategic department, what changes did the work content change?
Chu Qing: In the second half of 2008, according to the company's arrangement, he left HiSilicon and his new task was to establish Huawei's incubator (innovation and incubation center). It has been an unforgettable three years, continuing to stand at the forefront of innovation, continuing to do a career from scratch, and continuing to struggle with young people. Three years from scratch, completed the creation and transfer of 6 projects.
At the end of 2011, he began to turn to the strategic direction and returned to HiSilicon to establish the strategy and business development department of HiSilicon. This department later became the standard of major product lines, HiSilicon's strategy and business development department is Huawei's initiative, the research issues are quite broad, the intention is completely beyond the product, industry, including the development of the future society has also done some in-depth research, the international situation is also being analyzed.
Yuanchuan: That is, not only chips, but also some humanities and social science research?
Chu Qing: Less than 1/4 of the people in this department have technical backgrounds, and the rest have those who study economics, international relations, management, political science, small languages, and even philosophy.
These people with different intellectual backgrounds are constantly discussing and fermenting together. I also very much support you in visiting industry partners, various research centers, social organizations, and core financial institutions around the world, and have formed profound views on some issues. And in a short period of time, especially in 2012 to achieve a strategic harvest, a large number of heavyweight strategic reports have come out, including "Moore's Law and the Post-Moore's Law Era", "The Success and Failure of Communication Equipment Manufacturers", "Samsung's Business Development Strategy" and so on.
In 2015, he launched a study on the survival and development strategy of huge enterprises, which critiqued and reflected on IBM's dogma on supply chain, and thus triggered the concept of strategic supply chain system. Huge companies must have social responsibility at their core.
Yuanchuan: What kind of social responsibility is it referring to?
Chuqing: Corporate social responsibility.
Yuanchuan : Refers to the localization of the supply chain, or?
Chu Qing: Do not moralize the term social responsibility, corporate social responsibility exists objectively and has nothing to do with morality.
For example, as long as the life in the jungle survives, it has assumed social responsibility. What is the responsibility of a tiger that eats a rabbit? It is the elimination of a pest that harms the grassland, and the grass can grow better, so it is the responsibility of the tiger to eat the rabbit itself. So, I'm against understanding social responsibility as a moral vocabulary, which is problematic. Corporate social responsibility, first of all, to survive, and then to be responsible for the optimization of environmental ecology, to take the initiative to do something.
Naturally, a company with a hundred billion dollars is ecologically responsible and cannot emphasize efficiency alone. In fact, the primary consideration for such a large company is security, which is to make such a large economy peaceful with society. IBM's supply chain principle is exactly the opposite: efficiency as the core. In a free-market environment, there is no problem with free agents, that is, most small companies can follow this set of rules. But all big companies bring market failures.
Therefore, I propose that in order to really achieve hundreds of billions of dollars in revenue, companies must change their behavior patterns, not only can not overemphasize efficiency, but must give profits upstream, take the initiative to cultivate upstream, and support weak seeds that represent the future, rather than just focusing on the head, just staring at those who are now very powerful.
Yuanchuan: What is the rhythm of Zhanrui's 5G chip products? What is the prediction for the global 5G market?
Chu Qing: 5G is the first year in 2019. At the end of 2019, 5G commercial mobile phones began to be listed, and in December of that year, the Chinese government issued the first batch of network access certificates. Zhan Rui's 5G chip tape-out is back in the Spring Festival of 2020, and the customer's first 5G mobile phone is listed in May 2020.
My prediction is that China will be a single market for 5G for quite some time to come.
There are three locomotives for global 5G: China, Japan, South Korea, East Asia, and the three countries count as a locomotive, which will be the head goose of 5G, but the domestic markets of Japan and South Korea are too small, first of all, the land area is not enough, and the market space is not large. The United States is an locomotive, and to develop 5G, we must first solve the problem of spectrum allocation, which has caused great trouble to the United States. Europe is a locomotive, to develop 5G must first have money, the epidemic has made Europe's already weak economy worse. Only China has the conditions to lead.
Yuanchuan: Why does the development of 5G in the United States need to solve the problem of spectrum allocation?
Chu Qing: The United States is a spectrum liberalization, and the integration is extremely difficult. Originally, the United Nations had a technical standards association, itu (ITU), which gave spectrum principles to governments to follow.
But spectrum allocation in the United States is often even bottom-up. Moreover, the United States follows the principle of spectrum privatization, and some of the spectrum is sold to some private companies and stockpiled, and buyers sometimes do not use it or give it to others.
On the other hand, the U.S. states have a lot of power, and each state has a certain amount of power over the spectrum division, which leads to the sale of wireless devices in the United States is also a very troublesome thing.
Because there is no unified plan for public assets such as spectrum, former US President Trump has spoken to take back spectrum for free. But in fact, he can't do it at all, according to the US Constitution, no US president, any US government agency can do it.
Yuanchuan : Why do you say that the development of 5G in Europe has to solve the problem of money?
Chu Qing: This problem has a long history.
European operators make a lot of money in the 2G era. In the 3G era, the European government implemented the spectrum auction system, operators need to buy the spectrum of the entire Europe, the total license fee (license fee) alone spent more than 50 billion US dollars, operators suffered heavy losses, the government gave the guidance at that time is that in the future 4G can make money back. As a result, by the time of 4G, European governments are generally more financially tight, and operators are spending more money to buy 4G spectrum. At that time, Vodafone alone spent tens of billions of euros to buy 4G spectrum in major European countries.
Moreover, European operators are not profitable in the 4G era. It is reasonable to say that the density of 4G base stations is much higher than that of 3G, and the amount of data is larger. However, in the 4G era, there has been an IP revolution, and some of the 3G value-added services originally mastered by European operators have disappeared, which is particularly unlucky.
By the time 5G was built, many European operators were already in a very bad financial position.
Yuanchuan: So back to the Chinese market, like R16 ("R" for the version), is it the specific focus of China's development of 5G?
Chu Qing: This has nothing to do with China, let me tell you about the entire history of the development of mobile communications.
The first to second generations evolved from analog to digital, and GSM (2G) was the world's first digital unified system. Digitalization involves some basic modulation and demodulation techniques, before the communication was analog modulation, by the time of GSM it was all digitized.
From GSM to 3G is data, and data communication is the main feature.
IP in the 4G era. The entire old telecommunications architecture of mobile communications was completely terminated and replaced by IP, which triggered an explosion of applications. Because all application operators can no longer control it, they can circulate freely on the IP platform.
By the 5G era, its direction is no longer to serve people, but to serve the interconnection of all things, and its direction is social intelligence, including social production, management and operation.
Like these intelligent technical settings, R16 before only ideas and frameworks, no implementation standards, only R16 can land. For example, one of the cores of 5G, slicing technology, R15 before R16 can only do experiments, and it is possible to do a demo, but large-scale application is not OK. In R16, all slices can be used on a large scale, including high-density access, fast feedback, etc., all of which are scenes where R16 lands.
Therefore, the R16 standard is particularly important, and Zhan Rui should be the first to land and practice. In order to achieve this goal, we have a team that continues to track the predictions long before the R16 standard is frozen. After the release of the standard, ZhanRui cooperated with China Unicom Internet of Things to release the world's first R16 standard terminal equipment.
Tokawa: When is the specific time point of the R16 standard freeze?
Chu Qing : Roughly July 2020.
On July 30th, we were ready, so we launched shortly after the R16 freeze. The whole development of mobile communications is usually made by the network first, and then the terminal keeps up, but this is the first time that the terminal has led the network. Therefore, the biggest trouble encountered in debugging at that time was that the network was not supported, and Unicom did a lot of work here, including urging Huawei, ZTE and other equipment manufacturers to prepare for personal terminal debugging.
Tokawa: Can R16 be roughly understood as a pos machine, bike-sharing, and many other different kinds of terminal equipment to provide a universal network connection?
Chu Qing: These are simple applications, and R16 really deals with complex applications.
For example, a workshop in a Zhangjiang wafer manufacturing plant needs more than 100,000 intelligent veneers that can access the Internet to complete the intelligent transformation, which is equivalent to a workshop that needs 100,000 independent connections.
At the same time, to achieve feedback from such a high-density network, real-time feedback must be implemented, which is a strict engineering vocabulary with fixed standards.
By analogy, most other factories are basically in this situation if they are re-intelligently transformed according to Industry 4.0.
Yuanchuan: See the new 5G package recently released by Zhan Rui, which integrates Transferiver, power management, etc. Are all the subdivision chips in this set of chips self-developed?
Chu Qing: Right. But it is also inseparable from the third party, and we must cooperate with the third party. For example, the IP of the CPU, everyone is using ARM, and some USB3.0 interface IP, are third-party. These are normal, mobile phone SoC needs a complete industrial ecology to do.
Yuanchuan: At present, Zhanrui's 5G chips, in addition to the previously announced operator customers, have any plans for some other customers?
Chu Qing: 5G will be in full bloom this year, in addition to the two alpha customers we have announced, there are other customers. Of course their phones have not yet been released, we have to see when they are released.
Yuanchuan: Zhan Rui often holds some IPMT meetings recently, and what questions are generally asked to the people of the product at the meeting? I heard that there is a product that has been successful seven times, why?
Chu Qing: This is mainly a kind of regulation that embodies the system. As long as we stay in the mobile phone SoC industry, we will have to advance technology and compete for the upstream.
Through the IPMT meeting to mark the success of the project, the same color for the same type of chip, it can be seen that from 2019 to 2021 to complete the new project, back to the chip, mass production of the chip models include T117, T770/T760, T616/T606, W117, W517. Statistics show that the average time from project establishment to return to film, back to mass production is 8 to 12 months.
It took seven meetings to prove that some people's thinking had been left in the past. In the past, Because of the backward layout in the field of smart machines, Zhan Rui did not have confidence in doing high-end products. There are two reasons, the first is that there is no technology; the second, the lack of confidence, because the historical reputation is too poor, there is no confidence in getting high-end customers. So, at every meeting, I was not satisfied, and my request was that the technical specifications (features) must be raised higher, ahead of market demand, rather than benchmarking existing products of competitors.
Yuanchuan: Seeing that ZhanRui's 4G chip has a major revision in 2019, what optimizations will be made in this revision?
Chu Qing: The T610 has made major adjustments. Somewhat related to previous history is 9863.
But if the 9863 is not a new system, it will become the eighth failed 8-core product like the previous seven failed products, because the quality is too poor. Chaotic management systems cannot handle complex products. In order to solve the quality problem, we built a "Fire Phoenix" software code refactoring strategic project, that is, to improve quality, 9863 is the first product to be thrown in, and it is quite successful. By the end of 2019, 9863 completed the revision to meet with customers, and now it is a particularly hot product.
Yuanchuan: How are the customers of large OEMs such as Glory and Realme attracted step by step?
Chu Qing: They first have to see if the product performance is ok, and the specifications are too low. Therefore, the best selling of ZhanRui in these manufacturers is the T610, the king of 4G performance. Six of the eight mobile phone sales champions of jd.com 618 are 610, which proves everything.
Yuanchuan: To persuade the big OEMs, what changes have been made?
Chu Qing: The first thing they will find is that Zhan Rui's products are completely different from before, and they are surprised. At that time, T610 did not have a tape back (sample back) began to communicate with people, the other side of the eyes of a bright, the same product performance actually exceeded all friends, but there are still doubts. After getting the sample, we sent the reference design to the partner, and the test was OK. Then we began to talk seriously, and it turned out that we didn't care about this side at all.
Of course, it is not easy to capture these customers, and it took Honor and Realme almost half a year from the beginning of the exchange to the final signing of the contract.
In particular, the domestic OEMs have a very bad appetite. Although the main leaders of Honor are my old colleagues, it is still about products and technology to talk about specific things.
Enkawa : There are still some Korean customers who have been pulled back, do they have to visit in person?
Chu Qing: This customer has no new cases since 2015, all sales are functional machine products, and it is declining year by year, customer relations have been dead for 6 years, and this customer continues to sell at negative gross profits, in fact, it is subsidizing customers, the more it does, the more it loses, it is not a normal business.
We rebuilt our marketing and technical support team in Korea. Korean customers re-chose us, they saw a major competitor adopted ZhanRui's chip, they respected this competitor very much, and then they took the initiative to come to the door. In 2021, the smart machine products shipped by ZhanRui and domestic big-name OEMs were very popular after listing, and a success helped us win new success.
Our smartphone sleeves not only made their way into this customer, but they were in the middle gear, establishing a normal business that was entirely mutually beneficial. In the cooperation with the manufacturer, Zhan Rui not only learned a lot of things from the other party, but also obtained a good economic return.
Yuanchuan: How to analyze the causes of this round of chip shortage? And, in this wave of chip shortage, how does ZhanRui do price control, inventory management and supply chain management?
Chu Qing: A long time ago, our CEO's office issued an official document specifically analyzing what caused the shortage and how to control it.
Why the shortage?
First, all the big manufacturers in accordance with the previous high efficiency practice, the inventory requirements are not higher the better, but the lower the better. For example, there can only be 72 hours of stockpiling, more than 72 hours, the COO will have to grasp the responsibility of the operation department, otherwise it will occupy more of the company's funds and reduce operational efficiency. But now, there are 30 days of inventory feel unsafe, some people even to 3 30 days, 6 30 days to stock, how can this not be out of stock? Therefore, everyone does this, one hoards a little, the other also hoards a little, all dug are reservoirs, all are dammed lakes, and how much water is not enough.
Second, the chain from the chip to the consumer's hand is stretched. In the past, the entire manufacturing and delivery process of smart phones from chips to mobile phones was about 7 to 10 days, but now it is not necessarily three months.
Therefore, the chip shortage is equivalent to a person who has been eating, but there is a problem in the esophagus, the food is stuck in a place and has not gone down, the stomach has not eaten, so it is constantly hungry, and the result is "mouth", that is, the upstream there is an increase in production capacity. In fact, the process of just eating the mouth into the stomach has become longer, it used to be about 20 seconds, and now it may take an hour.
However, the more there is a shortage of chips, it is precisely to prevent damming the lake. The behavior of hoarding and dumping goods will be severely cracked down upon once discovered. Zhan Rui investigated and punished some agents, and even canceled the agency rights, and the punishment was very severe.
Because the total number of chips has not decreased, but the total demand for downstream products such as mobile phones has not increased.
The epidemic continues to affect the operational efficiency of the entire human society, but it does not affect the relationship between supply and demand, which is the essence. Individuals, businesses and governments have all become poorer, so why is demand increasing?
Global demand for smartphones exceeded 1.7 billion units in 2019, compared to just 1.4 billion last year. More than 200 million units have fallen, and the negative growth of double digits is still a very serious problem. The proportion of shipments of ZhanRui is a reverse climb, with a market share of more than 10%, so the shipments of competitors must be reduced.
Yuanchuan : Therefore, the fight against hoarding is actually to eliminate pseudo-demand and make the transmission of market information smoother.
Chu Qing: Yes, hoarders are creating false demand. As the people who bear the greatest responsibility for the industrial chain, as managers, we must restore the industrial chain to its true face, and the closer it is to the real situation, the healthier the industrial chain. Speculators will surely end up in vain, and all those who dare to speculate in this regard are playing with fire.
Yuanchuan : After that, Zhanrui will be more inclined to increase the unit price of the main products, or will it expand more business units horizontally? Let's say car chips.
Chu Qing: Now the upstream is raising prices, so we have to raise prices. Because if the price is not raised, it is equivalent to digesting the burden of the entire industrial chain.
I'm not advocating expansion, I'm advocating more focused. Especially when the market share is increased to a certain extent, it is necessary to focus, and at this time, it is not focused to bring high risks.
Yuanchuan: In addition to expanding the overall market share of 4G products, will there be a leap in the models applicable to The Sharp chip? We see MediaTek trying to do this.
Chu Qing: We have our playing style, and Zhan Rui is not aiming at competitors to develop strategies, but only has a prejudgment of the trend.
For example, at the end of 2018, I made a decision after careful consideration: Zhan Rui wants to kill a back carbine in 4G, why? For any market, existing successful players can only concentrate on the next high ground, they must fight for 5G, this is fatal to him, he has no choice, but Zhan Rui has a choice. The only flaw of the big players is the strategic flaw, they have very little space, and we have the choice.
All along, Zhan Rui has been carrying heavy hopes for China's chip design industry, but it has also carried many asymmetrical expectations accordingly.
An often overlooked fact is that until two years ago, Zhanrui's pillar customers were still widely distributed in Asia, Africa and Latin America, and they mainly purchased feature machine chips. With the huge structural changes in the mobile phone market, Zhan Rui is like being in the stage of extremely rapid decline of the parabola, and anyone who dares to catch this hot potato only has a very short time to turn the situation around.
Because, from functional machines to smart machines is a paradigm shift.
In the past, it was not difficult to do a selling point (feature) on the function machine, add a flashlight, a speaker, or put a low-resolution picture playback, the key is fast. Therefore, both MediaTek and Spreadtrum at that time adopted a tactic similar to multi-unit rapid guerrilla warfare to quickly occupy the high ground of different selling points of functional machines.
However, once it enters the era of smart machines, the playing style is completely different, the market entry threshold is greatly improved, and the complexity of the product increases sharply. A large number of chip suppliers have fallen in the era of smart phones, and almost all of them are famous players in the chip industry: FREESCALE, BROADCOMM, TI, Renesas, INTEL, etc., all of which are shining names.
It is also at the juncture of the functional machine to the smart machine that MediaTek and ZhanRui have entered a painful transition period. The difference is that MediaTek completed the change from guerrilla to legionnaire combat as early as possible under the iron-fisted reform of Cai Mingjie and Cai Lixing. However, due to various changes, Zhan Rui has finally gained a new life until the last three years of smashing and restarting changes.
Therefore, the transformation of ZhanRui from a functional machine to a smart machine is essentially a story that stops bleeding at the end of the parabola of the first growth curve and finds the second and third growth curves in a short period of time; it is a story of growing wings and learning to fly in the process of falling off a cliff. It is precisely because it is at such a point in time of life and death that no large organization has broken down or lost in mediocrity. Once the period of strategic opportunity is missed, only disasters will be lost.
In fact, not only Zhan Rui is facing such a problem, such as Huiding, Montage and many other Chinese chip designers are experiencing the same changes, in the context of the original main business boom how to create the next future, it is worth pondering.
After all, in Chinese traditional political view, ZTE is more difficult than starting a business.
Recommended to see: Just now, Shanghai issued: integrated circuit new deal! 28nm tapelet subsidy 30%, domestic EDA subsidy 50%; the first rotation of film, the first equipment, the first batch of material optimization support!
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