Yu Chengdong also leads Huawei Cloud

News around Huawei’s mobile phone business continues. On January 27, Huawei internally issued a document confirming that Yu Chengdong, the original consumer business CEO, will be added as the president of the cloud and computing business, and Hou Jinlong, the former president of the cloud and computing business, will be the chairman of Digital Energy.

Two days ago, there was news of the divestiture and transfer of Huawei’s mobile phone business in the market. At this time, 67 days have passed since the overall sale of the Honor business. Reuters further pointed out that Huawei is negotiating with companies and consortiums led by the Shanghai government on its high-end smartphone brands P and Mate series. However, Reuters also pointed out that this secret negotiation for several months may not be successful because Huawei has not yet made a final decision on the sale.

Yu Chengdong also leads Huawei Cloud

Huawei officially stood up on the day of January 25 to refute the rumor, saying that it “has no plan to sell its mobile phone business” and will continue to “persist in building the world’s leading high-end smartphone brand.”

In March 2019, before being included in the list of entities by the United States, Huawei’s consumer business CEO Yu Chengdong just announced Huawei’s “1+8+N” full-scenario smart Internet of Things (IoT) strategy. “It represents the mobile terminal, which plays the role of the main entrance of the most important thing. The status of mobile phones in Huawei’s future territory is self-evident. This is also one of the important reasons why it is difficult for Huawei to give up.

Yu Chengdong

However, with the official entry into force of the “915” blockade ban last year, Huawei’s above-mentioned ambitious blueprint was directly affected by the supply chain crisis from upstream supply chains such as TSMC, Samsung Electronics, LG Display, SK Hynix, and Micron Technology.

In the disclosed financial report for 2019, Huawei’s annual revenue was 858.8 billion yuan, of which consumer business revenue was 467.3 billion yuan. Yu Chengdong once told the media that the Mate30 series released that year had sold more than 7 million units in just two months after its launch. Coupled with P series data, it is conservatively estimated that Huawei’s high-end machines equipped with self-developed chips have contributed 100 billion yuan in revenue.

“Our mobile phone business is now very difficult, chip supply is difficult, and it is out of stock.” Yu Chengdong stated to the outside world at the 2020 Summit of the China Information Technology Association, “(The Kirin chip on Mate40) may be the last generation of Huawei’s own production. Unfortunately.”

Once Huawei’s Mate and P series become a swan song, Huawei will have to face the cruel fact that it may lose this piece of cake worth hundreds of billions. Affected by this incident, the already solidified mobile phone market pattern is likely to usher in earth-shaking changes.

A

Kirin chips are just like armors. In the past 10 years, they have protected the warrior of Huawei mobile phones, surpassing Xiaomi, OPPO, vivo, and Apple, becoming the world’s TOP2 manufacturer second only to Samsung.

“Huawei chose the chip as its core advantage and established its unique position.” Rui Bin, who was in charge of Huawei’s consumer BG strategy, commented.

Huawei has thus become the only mobile phone manufacturer in China that has challenged the success of Samsung and Apple and has become a high-end brand. A detail worthy of attention is that these three manufacturers have been insisting on self-developed chips from the beginning.

With this technological advantage, the mobile phone giants have maintained the core competitiveness of the brand in the increasingly fierce homogenization competition, and have also been able to get rid of the dependence on chip manufacturers such as Qualcomm and MediaTek, and can independently design and plan new products, even It can lead the peers and grab the time window at critical moments.

More importantly, the combination of self-developed chips and mid-to-high-end mobile phones can enable mobile phone manufacturers to master complete user usage data, and then fully understand the real user needs, and finally transform them into targeted specific design solutions to make consumption Mobile phones with better appearance and more powerful performance are the secret means for the Big Three to maintain the high-end market.

At the same time, self-developed chips can also directly help mobile phone manufacturers gain cost advantages, enhance their control over product costs, and achieve better price-performance ratios in competition with similar products.

B

The U.S. cut off the supply of ZTE chips in 2018, and the original innovation topic surrounding hard technology was once again mentioned. Ni Guangnan, an academician of the Chinese Academy of Engineering, said a vivid metaphor: “Building a house on someone else’s wall foundation may not be able to withstand wind and rain no matter how big and beautiful it is.”

China’s long-standing thinking concept of “buying is worse than buying, and renting is worse than buying”, in Ni Guangnan’s view, it is time to make changes. At that time, Huawei was praised by Ni Guangnan as a typical example for its technological breakthroughs on HiSilicon chips.

Chips, screens, lenses, and storage are considered to be the four important components of a smart phone, accounting for 50%-70% of the phone’s BOM cost.

In the ever-increasing homogeneity competition, mobile phone manufacturers have even been ridiculed by some outsiders as “supply chain combiners” because they may be using Samsung screens, Sony cameras, Qualcomm chips, and Hynix memory Article. This convergence trend has increasingly exposed a drawback in helping mobile phone manufacturers achieve high performance and low cost: mobile phone manufacturers are lowering the barriers to entry, but their core competitiveness is weakening.

There are three exceptions. Around 2011, when the smart phone wave arrived, Samsung, Apple, and Huawei all made the same determination-self-developed chips while transforming.

Samsung was the first to take off. It had its own mobile chips before 2011. The high-end mobile phones Galaxy S and Note series all use self-developed Exynos chips. The first three generations of Apple iPhone just launched use Samsung chips.

Even under the impact of the Note 7 explosion and the global recall, Samsung Electronics still achieved 29.24 trillion won in profit in 2016 with Exynos chip and semiconductor manufacturing business profits, and there was no loss of concern from the outside world. In the public financial report, Samsung Electronics bluntly stated that the strong performance of its own memory chip business and display panel is the main driving force for its profitability.

Not to be outdone, Apple is actually planning chip development early: In 2008, it acquired a small fabless semiconductor company, PASemi, and released the signal of self-developed chips for the first time. Subsequently, it acquired chip manufacturer Intrinisty in 2010 and finally launched it. The first processor-A4, and carried it to iPhone4. After 10 years of iteration, the A-series chips have become one of the core competitiveness of the iPhone, and together with the App Store, Apple’s closed system has become stronger.

Looking at the domestic Huawei, Yu Chengdong, who took over Huawei’s consumer business when transforming from 2012 to self-branded mobile phones, has determined seven major strategies, including upgrading from low-line to mid-to-high-end smart terminals, and giving up on high sales but not Ultra-low-end feature phones that do not make money use Huawei HiSilicon quad-core processors and Balong chips.

Ren Zhengfei once said to the head of HiSilicon chip research and development: “I will give you 400 million U.S. dollars a year in research and development expenses and 20,000 people. We must stand up and appropriately reduce our dependence on the United States.”

From the toddler K3V2 to the continuous evolution of Kirin 910, 960, 980, and 990, HiSilicon Kirin became the only 5G chip designer in the world in 2019.

The CounterPoint research report shows that in April 2020, Huawei’s mobile phone sales have surpassed Samsung and Apple, and has become the world’s number one.

But with the Kirin 9000’s sound, Huawei has lost the foundation to stabilize this number one position.

C

“China’s chip technology and industrial development will take at least 20 years and a generation of hard work before it is possible to climb the world’s peak.” Professor Wei Shaojun, director of the Institute of Microelectronics, Tsinghua University, published in July 2018 Argued.

At that time, the “915” blockade ban had not yet occurred, and the United States had not completely blocked Chinese technology companies. Looking back, the crisis of the Kirin chip supply is forcing Huawei to make up this long lesson and start the story of the second half of Kirin.

The story of the first half of Huawei’s chips dates back to the integrated circuit design center established in 1991. On this basis, in October 2004, Huawei established HiSilicon Semiconductor Co., Ltd. and started the research and development of smartphone chips in 2006. The K3V1 and K3V2 before 2014 can be regarded as the darkest moments of Huawei chips. The P1/P2/P6 models equipped with K3V2 became very hot, and even the embarrassing situation that the game could not be loaded appeared. Rui Bin recalled: “As long as Huawei K3V2 is mentioned, netizens’ comments are almost completely bad.” Huawei phones were also jokingly called by netizens. As “Wannian K3V2”.

This situation was not gradually eased until the release of the “chip” brand-Kirin in 2014. By the time the Kirin 990 series comes out in 2019, Huawei HiSilicon has successfully ranked among the world’s leading smartphone processors, and its performance is no different from Qualcomm Snapdragon, Samsung Exynos and Apple A series chips.

The “three highs” of investment in the integrated circuit chip industry-high risk, high input, and high output, have long been a consensus in the semiconductor industry. And with the evolution of Moore’s Law, only the top few in the industry can survive when making digital chips.

Facing an uncertain future, Huawei made great determination to continue investing in HiSilicon. In the words of Rui Bin, “It is not only a hot sucker doll, but also an Adou who can’t be helped in a short time.”

A typical story circulating in the industry describes it like this: Ren Zhengfei set a goal when HiSilicon was founded-annual revenue of more than 3 billion yuan and more than 3,000 employees. As a result, the target for the number of employees was quickly achieved, but the revenue target was never achieved, and it seemed to be far away.

Especially after the poor performance of K3V2, the voice of doubts from the outside world became even stronger. But it is also thanks to the two-year deep running-in between the K3V2 and the P series that the success of the Kirin series later occurred.

According to Ren Zhengfei’s words, “eat your own dog food first” and “jump the parachute produced by yourself”. Only when Huawei uses HiSilicon on its mid-to-high-end mobile phones can it truly gain insight into the real needs of users, and then transform it into specific design solutions, and finally achieve continuous iteration of the chip. In addition, the process of facing users directly has also cultivated the R&D team’s super combat capability in the consumer market, allowing Huawei engineers who are accustomed to To B to understand the difference in To C product design logic.

With the insight of technology, coupled with the changes in Huawei’s mobile phone brand building, from P7’s “Gentleman as Orchid” to Mate7’s “Jazz Life”, a series of slogans highlight Huawei’s high-end brand tone, especially in 2016 The black swan event that Samsung Galaxy Note 7 exploded in the global recall last year prompted Huawei mobile phones to take over the high-end mobile phone market left by Samsung.

D

With the help of HiSilicon chips, Huawei mobile phones do not rely on any chip manufacturers, no longer need to adapt to Qualcomm, MediaTek chips, can design and plan new products independently, and even become the first mover to seize the time window at critical moments.

The direct competitive advantage of the Kirin chip is to help Huawei mobile phones, including Honor, gain a cost advantage and increase product cost control. In the competition of similar products, the cost performance is better. Yu Chengdong said many years ago, “High R&D investment will bring high-quality products, and Honor products will definitely surpass Xiaomi in the future.” In 2017, Sino data showed that the annual shipments of Honor mobile phones began to surpass Xiaomi and become the Internet. The first brand of mobile phones.

The cake with self-developed chips looks really attractive. 4 years after its establishment, Xiaomi also tried to embark on the road of self-research of mobile phone chips. In 2017, the Surging S1 was launched, but the response was mediocre after its debut. The follow-up Surging S2 has not been able to wait for mass production due to technical bottlenecks.

OPPO established Jinsheng Communications in 2017. Its business scope includes “integrated circuit design and services”. It was discovered by the media that it opened up the recruitment of chip design engineers in 2018. In addition, OPPO also established a chip technology committee, successively digging people from HiSilicon, MediaTek, and Spreadtrum on a large scale, including Zhu Shangzu, the chief operating officer of MediaTek, and Li Zonglin, general manager of MediaTek’s wireless communications business unit. This is the OPPO mobile phone chip research and development team. Forming, began to enter a new stage of mass production.

Vivo, Xiaomi and OPPO have taken a different path: cooperate with Samsung to “make cores” and participate in product pre-definition and technology research and development: joint research and development of dual-mode 5G AI chip Exynos 980 in 2019; joint research and development of Exynos in 2020 1080. According to Hu Baishan, executive vice president of vivo, this move can not only reduce the cost of trial and error, but also better meet consumer needs.

Vivo’s compromise route reflects the huge risk of self-developed chips: the initial capital investment is huge, and finally, once the scale fails to increase, the huge cost will inevitably be overwhelmed.

For the current Xiaomi OVs, they are temporarily caught in a dilemma of worrying about advancement and worrying about retreat. If there is no self-developed chip, it is difficult to hit the high-end. Take Xiaomi as an example. Although it has been working hard on the road to high-end in the past ten years, it is still stuck in the quagmire of “cost-effective”. At the Yabuli China Entrepreneurs Forum in November 2020, Lei Jun mentioned the outside world’s misunderstanding of Xiaomi’s mid-to-low-end, and said aggrieved: “After ten years of work, everyone thinks that Xiaomi is still at the mid-to-low-end. I am quite depressed. ”

Even if it inherits Huawei’s genes, the new glory after independence will encounter the same problems as Xiaomi OV. According to the previous article “Honor “Down with Huawei” First Machine”, the letter list stated that without the Kirin chip halo and Huawei’s technical blessing, the difficulty coefficient of Honor breaking through high-end is undoubtedly greatly increased.

Raising prices and changing the brand image are all fine decoration work, and its own self-developed technical strength is the skeleton and structure of a house. When Samsung’s “note7 explosion” storm occurred, Huawei won 80% of the market share in one fell swoop, relying on technology precipitation over the past 30 years.

Nowadays, Huawei may be forced to withdraw from the high-end market due to the “lack of cores”, which has caused a series of questions that can subvert the market structure of the mobile phone industry: can the P and Mate series continue to be proud of the world, and can Xiaomi OV glory take advantage of the high-end This market…As for the answer, it is still blowing in the wind.