Chapter 700: Planning Ahead, a New 30 Billion Project! Better to Rely on Oneself

“What is your assessment of the current state of our domestic integrated circuit industry, Mr. Chen?”

In a small conference room, Dai Zhenyu asked Chen Yansen with a smile.

“There’s a lot of room for improvement.”

Chen Yansen said euphemistically.

But inwardly, he couldn’t help but grumble, ‘If they had even a little bit of backbone, would Tiangong Technology and Hisilicon still need to go to TSMC?’

Dai Zhenyu laughed and pointed a finger at Chen Yansen. “Those words might sound harsh, but they’re the truth. From EDA software to packaging and testing processes, we really don’t have many core technologies we can be proud of. Speaking of which, Tiangong Technology has set a good example! By the way, I’m very curious. How did you convince a foreign engineer like Mike Keller to work for Tiangong Technology?”

“Mainly my personal charisma, plus a tiny, insignificant amount of stock options and cash incentives,” Chen Yansen replied with a straight face.

Dai Zhenyu shook his head with a smile, thinking to himself, ‘This kid’s skin is thicker than the city walls of Chang’an.’

He nudged Wang Guangtong beside him and quipped, “It seems the young entrepreneurs of our Hua Country are getting more and more outstanding with each generation.”

Wang Guangtong was a representative from the Business Association and would occasionally appear on the seven o’clock evening news. He gave a faint smile and looked at Chen Yansen. “Mr. Chen, are you planning to sell the Celestial Craft A100 to outside companies?”

“Huawei is waiting for the Kirin 910. Meizu, OPPO, and Coolpad think it’s too expensive. Only Meitu is interested.”

Chen Yansen shrugged and told the truth.

Because production volume couldn’t be increased, they couldn’t achieve economies of scale. Furthermore, the 28-nanometer process was still considered advanced technology in 2013, so foundry costs remained high.

Although the Celestial Craft A100 had strong computing power, low energy consumption, and decent signal performance, its price was over 30% more expensive than the Snapdragon 800. Even companies like Xiaomi, 360, and NetEase were unwilling to adopt it.

Not unless Chen Yansen was willing to sell it at cost, without making a single cent of profit.

If they used Huaxin International as a foundry, the comprehensive cost per chip would likely reach 60 US Dollars.

The current price offered by Tiangong Technology was 45 US Dollars for bulk purchases of a million units or more, and 55 US Dollars for small and medium-sized manufacturers, which was a show of considerable good faith.

But compared to the Snapdragon 800’s price range of 35 to 50 US Dollars, it was still a bit too expensive.

Of course, the more significant issue was that the Yaocheng X2 had only been on sale for five days. Competing manufacturers weren’t sure what the true performance of the Celestial Craft A100 was really like.

Given the procurement cost of the Celestial Craft A100, it would naturally have to be used in flagship models.

And who would dare to gamble with their own flagship phone?

Wang Guangtong and Dai Zhenyu exchanged a glance, then asked, “Hasn’t Mr. Chen considered Huaxin International?”

“If Liu Xunfeng can get the per-chip price of the Celestial Craft A100 under 35 US Dollars, I’d certainly be willing to give the order to Huaxin International.”

Chen Yansen said frankly.

He paused, then continued, “But the reality is, Huaxin International’s yield rate for their 28-nanometer process is just over 30%. Either I pay three times the price, or Liu Xunfeng has to cover the difference.”

Wang Guangtong’s brow furrowed slightly. From the perspective of the entire industry chain, having Tiangong Technology and Hisilicon give their chip orders to Huaxin International was the right choice. But who would cover the losses?

“Actually, Mr. Chen, why not give Huaxin International a chance? Help them improve their process as quickly as possible. In the end, both you and Hisilicon will be the beneficiaries.”

Dai Zhenyu persuaded patiently.

To completely eliminate Chen Yansen’s concerns, he even stated bluntly, “The price difference will be covered by the foundation. Give Huaxin an order allocation of 500,000 units.”

Chen Yansen fell silent. He hadn’t expected the higher-ups to be so bold.

Since Dai Zhenyu had approached him, he would most likely approach He Boting next.

A quick calculation showed it would cost at least four or five hundred million. Was it worth it?

But on second thought, he realized Dai Zhenyu had no choice. The higher-ups had no choice either.

The reason Huaxin International’s yield rate for its 28-nanometer process was so low was, first and foremost, a lack of accumulated technology and process experience.

Companies like Mountain Star, TSMC, and MediaTek all followed a gradual upgrade path for their production processes, moving solidly from 45-nanometer to 32-nanometer, and then to 28-nanometer, one step at a time.

And what about Huaxin International?

Previously, their most mature processes were 40-nanometer and 65-nanometer. Now, they had suddenly jumped into the 28-nanometer field. The technological leap was huge, and the cost of trial and error was too high.

Furthermore, Huaxin International’s 28-nanometer process relied on technology licenses from Qualcomm. Key technology patents were monopolized by the likes of TSMC and IBM, forcing Huaxin to use design workarounds, which in turn increased process complexity.

Without taking detours for two or three years, it would be very difficult for Huaxin International to bring down costs and raise its yield rate.

Therefore, even if the Big Fund stepped in to subsidize the price difference, Chen Yansen didn’t want to give the order to Huaxin International.

Who could guarantee that the Celestial Craft A100 Chips produced by Huaxin International would be free of problems?

If any defects appeared, it would affect tens or even hundreds of thousands of Orange Mobile Phone users.

Wouldn’t the reputation that the Yaocheng series had worked so hard to build be destroyed in an instant?

At this thought, Chen Yansen’s eyes held a hint of a smile as he looked at Dai Zhenyu and Wang Guangtong. “I believe that with Huaxin International’s capabilities, they will certainly be able to perfect their 28-nanometer production process in two or three years. But in two or three years, Orange Mobile Phone’s annual global shipments will likely be in the range of two to three hundred million units. Qualcomm and MediaTek won’t just stand by and watch Tiangong Technology compete with them for market share. So, it’s better to rely on myself than on others. I’d rather build three to five of my own 28-nanometer production lines.”

Dai Zhenyu was stunned. The move from chip design to chip manufacturing might seem like a small difference on paper, but the work models, technology patents, and production equipment required were completely different.

“You want to venture into the chip manufacturing sector?” Wang Guangtong let out a laugh, finding the idea preposterous.

“A year ago, when I founded Tiangong Technology, countless peers and subordinates also tried to persuade me otherwise.”

Chen Yansen leaned back and said nonchalantly.

The CMOS architecture, strained silicon, immersion lithography, and double patterning techniques involved in the manufacturing process might be difficult for others, but for him, they weren’t insurmountable technical hurdles.

With the strength of his Spiritual Power, he could only activate his [Planck Clock] talent for six seconds each day.

But those six short seconds were enough for him to complete six hours of overclocked thinking.

The smile on Wang Guangtong’s face vanished instantly. He understood the subtext of Chen Yansen’s words.

Tiangong Technology had also started with no foundation, yet hadn’t it jumped to become a top-tier chip design company all the same?

“You’re not joking, are you, Mr. Chen?” Dai Zhenyu asked, his expression serious.

“A first-phase investment of 10 billion, with an additional 20 billion in the second phase, for a total of at least 30 billion over three years. We’ll focus exclusively on high-end process technology. I refuse to believe we can’t pull it off,” Chen Yansen replied with conviction.

“Money alone can’t solve the problem,” Dai Zhenyu retorted.

If it were that easy, the banks would have built their own lithography machines by now.

Chen Yansen fought the urge to roll his eyes and grumbled inwardly, ‘What do you care if I can handle the 28-nanometer process or not?’

‘The whole point of me saying this was to get you guys to cough up the money!’

Wang Guangtong understood. He immediately promised, “The Integrated Circuit Industry Fund can provide 30% of the capital.”

“Can you make it all from the ’01 Special Fund’?”

Chen Yansen asked shamelessly.

The three main characteristics of the 01 Special Fund are that it’s non-repayable, designated for a specific purpose, and separately accounted for.

To put it bluntly, it was a government grant, requiring no repayment obligations or equity transfer.

He didn’t want to be on the losing end of the deal at all.

However, it was precisely this confidence that convinced Wang Guangtong and Dai Zhenyu that he genuinely intended to enter the chip manufacturing industry.

“Equity investment is a crucial basis for the fund when deploying capital. If we allocate it all as special funds for you, Chairman Wang and I will be making a mistake. If you’re unwilling to accept a partnership in the form of an equity stake, then the maximum funding we can provide is 10%. The specific amount will depend on your actual capital investment in areas like specific technology R&D and equipment upgrades.”

Dai Zhenyu said after a moment of thought.

Chen Yansen was making him empty promises, and he was doing the same right back.

He and Wang Guangtong were both seasoned old foxes. They never acted without seeing a clear advantage, and they certainly wouldn’t offer concrete policies based on Chen Yansen’s words alone.

The Big Fund had a state-owned background, which Chen Yansen didn’t actually mind. It was the equity ratio that needed careful negotiation.

Just like with Jingdongfang, Yanjing had invested a sum, and Luzhou had invested another.

As a result, the chairman was more like a professional manager, with a pitifully small shareholding ratio.

Although Chen Yansen wasn’t the type to keep all the profits for himself, he didn’t want to give up too much equity either.

After all, the other party was state-owned capital, not easily pushed around like a foreign investor such as Digital Sky Technology.

He had a tendency to make too many subtle moves, which could easily provoke dissatisfaction from the higher-ups.

Therefore, the ratio had to be negotiated properly from the very beginning.

Following that, the three of them began a discussion centered on issues such as the site selection for industrial land, the initial capital required for factory construction, equipment, and R&D, as well as the first year’s operating funds.

What took Chen Yansen by surprise was that he had originally thought Dai Zhenyu and Wang Guangtong only understood the operating rules of the Central Bureau and would be unfamiliar with the technical specifics.

But as soon as Dai Zhenyu opened his mouth, he had already calculated the approximate investment cost for each production line for him.

Ten NXT 1950i lithography machines, about 60 million US Dollars each, for a total cost of 600 million US Dollars.

Fifty etching machines, about 3 million US Dollars each, for a total cost of 150 million US Dollars.

Fifty thin-film deposition systems, about 2 million US Dollars each, for a total cost of 100 million US Dollars.

Thirty inspection and metrology tools, about 4 million US Dollars each, for a total cost of 120 million US Dollars.

Buying all core equipment new, the total cost would be about 1 billion US Dollars.

If they opted for used equipment instead, the cost could be reduced by 50% to 60%.

“Don’t worry about the equipment. If you dare to do it, we can help pull the strings and secure the supply sources. But you’ll have to figure out the technology on your own.”

Dai Zhenyu specifically reminded him.

After all, how could they provide something they didn’t have?

A minimum of 1 billion in targeted, non-repayable subsidies and 1 billion in equity investment, plus partial patent licensing from the Huake Science Association.

After pondering for a few seconds, Chen Yansen gave a firm nod.

Of the initial 10 billion investment, he would contribute 3 billion at most.

As for the remaining 5 billion, he could easily approach Luzhou, Shencheng City, or Hu City to negotiate.

Whichever city dared to bet on him winning, that’s where he would locate the company.

By the time the three of them finished their preliminary discussion, more than an hour had passed.

Chen Yansen returned to the main conference hall and chatted idly with the heads of various packaging, testing, and equipment manufacturing companies.

Taking in the scene, Chen Yansen grinned slyly.

‘I wonder if He Boting will agree to give a portion of the Kirin 910 foundry orders to Huaxin International?’

About twenty minutes later, He Boting returned. Her brow was slightly furrowed as she leaned close to Chen Yansen and asked in a low voice, “President Chen, did you also agree to a foundry partnership with Huaxin International?”

“Nope,” Chen Yansen answered truthfully.

“?!” He Boting stood frozen, utterly confused.

‘How is this different from what I expected?’

Chen Yansen didn’t bother to explain further. Leaving a bewildered He Boting behind, he ambled over toward Wang Chaixin.