Domestic chip companies roll up to new heights

In the spring of 2023, domestic chips will see not hope, but complete competition and white-hotness, and are extremely involuted and consumed.

After running customers in Shenzhen for a few days, I gained a word. Domestic chip companies told customers that they plan to make 100 million sales in 2023 and prepare to lose 40 million yuan.

With 100 million sales to finance 200 million, a loss of 40 million, but still earned 160 million. What a deal!

No guns, no cannons, the enemy makes them for us. No technology, no products, no sales, investors will help us build.

As long as the domestic chip boom is together, everything can turn decay into magic. Everything has cause and effect, and everything has samsara. Domestic chip track, the inner roll rises because of the core.

Involution, first from the American anthropologist Giertz's "Involution in Agriculture - The Ecological Change Process in Indonesia". It refers to the phenomenon in which human society, after reaching a certain form at a certain stage of development, stagnates or cannot be transformed into another advanced model. When social resources cannot meet the needs of all, people compete to obtain more resources.

Domestic chips have entered the era of involution, and also realize that this involution is essentially meaningless internal consumption. However, it is inevitable that this is not caused by the personal factors of chip entrepreneurs, but is a product of the times.

Our only remaining resources in the roll mentality and in the roll industry can only win and tomorrow if we participate in the middle of the "roll".

All this started in 2019. The chip craze, capital flocked in, company valuations continued to rise, and almost every investment achieved substantial profits on the books, which has continued to this day. Domestic chip design companies have increased from more than 1,600 in 2018 to more than 3,200 in 2022.

Looking back, there is a cause and effect. From investment, it is attributed to involution. Investment volume, investment volume, investment volume completed recruitment roll; Recruitment roll, recruitment roll, recruitment roll to complete the capacity roll; Capacity roll, capacity roll, capacity roll sales volume; Sales rolls, sales rolls, sales rolls, and finally a chicken feather.

I have seen the craziest look of capital, finding ways to participate in the investment of domestic chip projects through various relationships. Some domestic chip companies are crowded, and investors are endless. Sanwuwei and I became spectators, and at the height of capital, we were not pityed and favored. Standing alone in the wind, just to not miss this beauty, Sanwu Wei used the 10 million of the angel wheel to carry it for 3 years. Except for laboratory equipment and equipment, the annual expenditure does not exceed 3 million RMB, including employee salaries, R&D tape-outs, and company operations.

At the beginning of many chip startups, only the boss did not do things, after getting the investment, he poached people everywhere, recruited people and then financed, and then recruited people. The salaries of R&D engineers and talents in the industry have skyrocketed in this way, so the bosses and HR of chip companies are sighing that it is difficult to recruit people.

After that, there was a phenomenon that the company whose talent was hollowed out could not go up technologically, stopping at the original technology and product level. The people who were poached quickly repeated the original company's technology and products, resulting in a very serious homogenization of products in the market. With products is to stock up on the market, and each company releases production capacity, resulting in tight production capacity. The tight production capacity further leads to the involution of production capacity, which in turn stimulates chip companies to increase stocking. Inventory is thus generated, low-end products continue to consume inventory, foreign high-end products are not affected, and may be out of stock.

When the capacity rolls out, the next step is roll sales. Faced with inventory pressure and further financing pressure, the only way to solve the worry is sales. The era of domestic chip storytelling financing has passed, and it is impossible to refinance without solid sales. Earn money by selling chips? It's just a dream, and the ending is empty. In 2019, I wrote an article "The Sales Dilemma and the Way Out of Domestic Chip Companies", which mentioned that domestic chip companies have products that are not sold, and there is no profit in sales. Several years have passed, domestic chip sales are getting more and more volumed, profits are luxurious, sales are life-saving drugs, and loss-making sales are not spared.

Domestic chip sales, rolled up to a new height. Who wins from the involution in the end? How much power does capital have?

The first wave of beneficiaries and winners of domestic chip companies is domestic replacement companies. This wave of low-end chip replacement is basically completed, high-end chip replacement requires longer and more investment, and foreign companies are also thinking of various ways to get rid of Chinese chip companies. Companies that have completed domestic substitution are either already listed or are about to go public. Those companies that are still some way from going public are basically replacing domestic companies.

There are two ways to replace domestic chip companies, one is to kill low prices to seize the market, and the other is to bring market opportunities through new technologies to achieve curve overtaking. It takes time to wait for the market opportunities brought by new technologies, which domestic chip startups cannot face and bear, pressure from investors, pressure from the supply chain, and pressure from within the company. Even if Sanwu Micro can be the first to enter the mass production of WiFi7 FEM, it takes time for the WiFi7 market to rise, and it can only choose to live in the present first.

WiFi7 test data provided by NI China Innovation and Development Center

Therefore, the low-price killing market has become the road that must be taken at present, and companies with more financing can lose more, and companies with less financing can only lose less. In the current homogenization of products, capital once again plays a very important role, in this chip sales involution, capital will undoubtedly become the biggest loser.

Differentiated products and differentiated markets are a drop in the bucket for today's domestic chip startups. No matter how small the market is, there are a bunch of people doing it, just like the WiFi FEM track was a relatively segmented track before, but today there are nearly 30 companies involved.

How to roll up is a test for every domestic chip startup. Don't say to be friends with time, because there is not much time left for domestic chip startups.