Tech giants start by disassembling systems

Chapter 125 Enlightening Microsystems

2020 8 Month 8 Day.

Fang Xu's research report was delivered to Su Chen's desk two days later.

Meanwhile, the contract with Bosch was also officially signed – the first batch of standard BMI270 MEMS gyroscopes will arrive around August 18, and the customized optimized version is expected to be delivered in mid-October.

Zhang Lei's transition plan has also been implemented—the "six-chip version" of the Flying Bird S1 has completed its first round of testing, and its core performance meets expectations. The inventory of MEMS is sufficient to support the supply until the first batch of Bosch products arrives.

The production line did not stop.

The Asuka S1 has not been discontinued.

Hongyuan held on during the most critical moment.

But Su Chen knew this was only a temporary measure. The real solution was still on its way.

He picked up Fang Xu's report and began to read it carefully.

……

Kunshan Qixin Microsystems Technology Co., Ltd.

Established in 2012.

Formerly known as an industrialization transformation project of a key MEMS laboratory of the Chinese Academy of Sciences (initiated in 2008, and operated independently in 2012).

Shareholder structure: Kunshan High-tech Zone State-owned Assets Platform holds 35% of the shares, the original laboratory team holds 25% of the shares, and a certain industrial fund holds 40% of the shares.

Core asset: A complete 4-inch MEMS wafer manufacturing line (including a full set of equipment for photolithography, etching, thin film deposition, bonding, etc.).

Su Chen's gaze lingered on this line for a long time.

A complete set of equipment.

The weight of these four words can only be truly understood by those who have experienced supply chain disruptions.

Having a complete set of MEMS manufacturing equipment means that the entire process from design to finished product can be completed in-house. There's no need for outsourcing, no need to ask for help, and no need to worry about being held back at any stage.

This is precisely what Lin Xuan—no, Su Chen—values ​​most.

He continued reading.

Team size: 63 people, including 41 technical personnel. However, there has been a serious loss of talent in the past two years, with the core R&D personnel decreasing from a peak of 28 to the current 14.

Manufacturing process: 4-inch MEMS wafer production line, with a process level roughly equivalent to the international mainstream level five to eight years ago. It can produce medium-to-low precision MEMS accelerometers, pressure sensors, and other products, but cannot produce high-precision MEMS gyroscopes.

Product line: Mainly produces mid-to-low-end MEMS pressure sensors and accelerometers, with customers primarily in automotive electronics and industrial control.

Revenue: Approximately 2800 million RMB in revenue in 2019, with a gross profit margin of 12%.

Financial situation: Losses for three consecutive years. Net loss in 2019 was approximately 1200 million. At the current rate of cash burn, the cash on hand can probably last until early 2021.

Su Chen frowned slightly.

With three consecutive years of losses and the loss of more than half of its core talent, the company's business situation is indeed not optimistic.

However, Fang Xu added a note at the end of the report:

"It is understood that the state-owned asset platform and industrial fund of Kunshan High-tech Zone are already considering exiting. If a suitable buyer is found, they are willing to transfer shares at a lower valuation. Preliminary estimates suggest the acquisition price for Qixin Microsystems would be between 4000 million and 6000 million yuan."

A glint flashed in Su Chen's eyes when he saw the number.

From 4000 to 6000 million.

Given Hongyuan's current financial situation—its own funds plus the funds from the Lianchuang supply chain terms approved by Zhou Zhenguo—it is entirely possible to afford the purchase.

But more importantly, there is another problem: although Qixin Microsystems has a complete production line, their manufacturing process is outdated and they cannot produce high-precision MEMS gyroscopes.

In other words, after purchasing it, a lot of technological upgrades are needed before it can be truly put to use.

This is remarkably similar to the situation of Zhonghua Yun Microelectronics in the original work—possessing a complete industrial chain, but with manufacturing processes that are severely outdated.

However, for Su Chen, this was precisely an opportunity.

Because the manufacturing process is outdated, the price is cheap.

Because it was cheap, Su Chen could afford it.

Su Chen has a solution to the problem of outdated manufacturing processes.

In his drawer was a design blueprint for a MEMS inertial navigation chip that had been unlocked.

His system has an industry-benefit aura—as long as you hold more than 67% of the shares, the learning efficiency of all employees increases by 15%.

More importantly, if Levi's team at Microchip Sensing (design capabilities) and Qixin Microsystems' production line (manufacturing capabilities) could be combined—

Design + Manufacturing = Complete Self-reliant MEMS Supply Chain

In addition, there's the technical guidance of the system drawings and the efficiency advantage of the halo effect—

Catching up with Murata in three years?

Perhaps it won't take three years.

……

Su Chen put down the report and picked up the phone.

But he didn't call Fang Xu first.

He called Zhao Jiancheng first.

"Mr. Zhao, you mentioned Kunshan Qixin Microsystems in your previous research report—how much do you know about their production lines?"

Zhao Jiancheng's voice carried a hint of surprise: "President Su, you've noticed this company too?"

"Share your thoughts."

"Although their 4-inch production line has some older equipment, its foundation is solid," Zhao Jiancheng said. "After all, it's a project transformed from a key laboratory of the Chinese Academy of Sciences. When the line was built, it used imported equipment—SÜSS lithography machines, Oxford Instruments etching machines, and Leybold thin-film deposition systems. While these machines aren't the latest models, after modifications and upgrades, they are perfectly capable of being used for the trial production of high-precision MEMS."

What's the problem?

"The problem is that too many people left their process engineering team," Zhao Jiancheng sighed. "Equipment is inanimate, but people are dynamic. Without good process engineers, even the best equipment won't perform to its full potential."

"What if we integrated Microchip Sensing's design team with Qichip Microsystems' production line?"

Zhao Jiancheng remained silent for two seconds.

"That would be completely different." His voice became excited. "Li Wei's team has design capabilities and a deep understanding of manufacturing processes—they've worked at Murata and know how to make high-precision MEMS. If we let them directly start debugging Qixin's production line—"

"I understand," Zhao Jiancheng said. "President Su, you mean—"

"Microchip Sensing is responsible for design and process development, while Qixin Microsystems provides the manufacturing line. Together, they form a complete self-reliant MEMS supply chain."

Zhao Jiancheng took a deep breath: "If we can really achieve this... President Su, this would be a major event for the entire domestic MEMS industry."

"Therefore, I need your judgment." Su Chen's voice turned serious. "After the upgrade and modification, can Qixin Microsystems' production line support the production of high-precision MEMS gyroscopes? Give me a professional answer."

Zhao Jiancheng pondered for a moment: "An on-site inspection is needed to give an accurate judgment. But based on my understanding of the equipment models and production line configurations, the preliminary assessment is—feasible. The equipment foundation is there; the key is process debugging and talent. If the Microchip Sensing team can fill this gap, I believe that small-batch trial production of medium-to-high precision MEMS gyroscopes can be achieved within one to one and a half years."

"That's enough," Su Chen said. "I'll arrange for you to go to Kunshan for a field trip next week."

"OK!"

After hanging up with Zhao Jiancheng, Su Chen dialed Fang Xu's number.

"Fang Xu, the acquisition of Qixin Microsystems—launched."

"A full acquisition?" Fang Xu's voice carried a hint of surprise.

"A full acquisition." Su Chen's voice was calm but firm. "This company's production line is key. With it, Microchip Sensing's designs can truly become products."

What about the budget?

"The maximum is 6000 million. Ideally, we could negotiate it down to under 4500 million."

"Understood. I'll start contacting the Kunshan High-tech Industrial Development Zone and the industry fund right away."

"And—" Su Chen added, "we're also simultaneously advancing the 30% strategic investment in Microchip Sensing. Two parallel tracks, the faster the better."

"receive."

After hanging up the phone, Su Chen leaned back in his chair.

A clear strategic picture gradually formed in his mind—

Microchip Sensing (Suzhou) – MEMS design capabilities, Li Wei's team, 47 patents.

Hongyuan will initially invest 30% as a strategic stake, with plans to pursue a controlling stake later.

Qixin Microsystems (Kunshan) – MEMS manufacturing production line, complete set of equipment, 4-inch wafer line.

Hongyuan acquired the company in its entirety, gaining 100% control.

When the two are combined—design + manufacturing—they form a complete closed loop of the MEMS autonomous supply chain.

In addition, the system provides MEMS inertial navigation chip design blueprints as a technology roadmap, and offers a 15% efficiency boost from the industry gain halo effect—

Su Chen is confident that he can catch up with Murata's level within two years.

Even—surpass.

However, there is still a thorny problem to deal with.

Qiming Venture Partners, an existing investor in Microchip Sensing.

Just as Su Chen was pondering this question, Fang Xu sent him a message:

"I just received a message. Wang Minghui, Investment Director at Qiming Venture Partners (the parent company of Microchip Sensing), stated that they are open to strategic investment from Hongyuan, but have reservations about Hongyuan acquiring a 67% controlling stake in the future. He requested a face-to-face meeting."

Su Chen looked at the message and a slight smile appeared on his lips.

"Reserved attitude" - as expected.

Qiming Venture Partners currently holds a 22% stake in Microchip Sensing. If Hongyuan aims to increase its controlling stake to 67%, Qiming Venture Partners' share will be significantly diluted. For a VC firm, watching its stake shrink from 22% to single digits is difficult to accept.

But Su Chen wasn't worried.

Because he has a card that hasn't been played yet.

Qiming Venture Partners invested in Microchip Sensing because it values ​​the promising future of the MEMS sector and the technological strength of Li Wei's team. However, Microchip Sensing's current fatal weakness is that it lacks its own manufacturing line, meaning its products can only remain in the design stage and are still far from large-scale mass production.

This means that Qiming Venture Partners' investment return cycle will be very long.

And Qixin Microsystems, which Su Chen is about to acquire, happens to be the missing manufacturing line.

If Su Chen can prove to Wang Minghui that Hongyuan's involvement is not just about funding, but also about a complete MEMS manufacturing line, a large number of guaranteed orders, and accelerated R&D due to a 15% increase in learning efficiency—

Then Microchip Sensing's valuation will increase several times within one or two years.

Even if Qiming Venture Partners' shares are diluted to below 10% by then, their absolute value will far exceed the current value of 22%.

This is the story of "a sesame seed and a watermelon".

Choose sesame seeds or watermelon—the answer is self-evident.

Of course, VCs often need to see tangible results to be convinced.

Therefore, Su Chen decided to first complete the acquisition of Qixin Microsystems and obtain the manufacturing line, and then discuss the controlling stake with Qiming Venture Partners.

At that point, he would have the most convincing bargaining chip.

"Fang Xu, reply to Wang Minghui—a face-to-face meeting is possible, but not in a rush. Let's finalize the framework for the 30% strategic investment first; we can discuss the controlling stake in two months."

After sending the message, Su Chen stood up and walked to the window.

Outside the window, it was a hot and dazzling August afternoon in Shenzhen.

A clear timeline came to mind—

Mid-August: Bosch's first batch of MEMS arrived, and the Flybird S1 resumed normal production.

Late August: Signed a strategic investment agreement for 30% of Microchip Sensing. Zhao Jiancheng completed a site visit to Qixin Microsystems.

September: Initiate negotiations for the full acquisition of Qixin Microsystems. Simultaneously launch the joint R&D project with Microchip Sensing.

October: Completed the acquisition of Qixin Microsystems, activating the system industry's aura of added benefits. The packaging and testing collaboration with Xinyuan Micro officially commenced production.

November-December: The Microchip Sensing team moved into the Qixin production line to begin the process development of high-precision MEMS gyroscopes.

First half of 2021: Advance the holding of Microchip Sensing to 67%, and complete the full closed loop of the MEMS independent supply chain.

Six months.

In six months, Su Chen will build a complete independent MEMS supply chain from scratch.

This is a task that seems almost impossible to outsiders.

But Su Chen knew that he had three things that others didn't—

First, the system provides MEMS design drawings that far exceed contemporary standards.

Second, the 15% efficiency bonus from the Industry Gain Aura.

Thirdly, his memories from his previous life told him which detours he didn't need to take.

"bring it on."

Su Chen said softly.

His voice was as calm as if he were talking about tomorrow's weather.

But beneath this calm lies an unprecedented challenge launched by a 26-year-old against the entire low-altitude economy industrial chain.

Meanwhile, on the same day that Su Chen laid out his independent MEMS supply chain—

A deputy director of the Shenzhen Science and Technology Innovation Commission secretly met with Zhou Ming.

"I heard that Hongyuan has recently made some big moves in the MEMS sensor field?"

Zhou Ming nodded cautiously.

The deputy director smiled slightly:

"Please convey to General Manager Su that if Hongyuan needs any policy support in the area of ​​MEMS self-sufficiency, please feel free to contact us. Shenzhen has special funds to support domestic substitution projects in the core supply chain of the low-altitude economy."

A hint of surprise flashed in Zhou Ming's eyes.

Policy support.

This means that Su Chen's MEMS self-reliance strategy is not just the behavior of one company—but has received recognition and support from the government.

That evening, Su Chen received a message relayed by Zhou Ming.

He looked at the message and remained silent for a few seconds.

Then he remembered that line from the original work—"No matter how much money it costs, we'll support you."

In this world, although the scale and form may differ, the recognition and support from a higher level are essentially the same.

Su Chen took a deep breath.

Four years ago, when he took over Hongyuan, there were only two million in the account and fewer than thirty employees.

And now—he is building a complete industrial chain from MEMS design to manufacturing, backed by the capital support of Lianchuang Group, the policy endorsement of the government, and the trust of more than 370 ecosystem partners.

The road ahead is still long.

But the direction has been clear.

Su Chen turned off his phone and lay down on the bed.

Starting tomorrow, he will officially embark on a completely new path—

He is no longer simply the CEO of a flight control company, nor is he the creator of communication protocols.

Rather, it is the builder of the entire industrial chain of China's low-altitude economy.

This road is destined to be difficult.

But he was already prepared.