On September 9th, Prospection Industry Research Institute and Shenzhen Industry Association jointly held the "Online discussion of China core future" trend seminar, to discuss how China can achieve "chip localization" curve overtaking in the era of computing power. Yu Fan micro Huang (Huang Yu) online to share their own operating status of Chinese chip enterprises and the analysis of pain point breakthrough. We have organized the wonderful speech of Mr. Huang - the digital broken road of the chip market!

Huang first made a brief introduction to his company, and disintegrated why in the overall market trend decline, Yu Fan micro can also achieve double performance and Yu Fan micro made what key decisions, can always go up. Yufanwei this company was founded    in 2017. At the beginning, we were three people, and now we have more than 100 people. And of course we're doubling our sales every year. We sold almost 800 million boxes of chips last year. It has been recognized as "National high-tech Enterprise"    "specialized, fine, special and new" and other science and technology enterprises, including the title of the 13th "National Top Ten Cattle business". And from the market structure, industry pain points and development prospects and other dimensions    of the analysis.

Multi-dimensional analysis of China's chip market and enterprise pain point analysis

China chip market structure

In terms of the overall development environment, our country has actually gone through several stages: the stage of entrepreneurship, the stage of exploration and progress, the stage of key construction, the stage of accelerated development and the stage    of high-quality development. In recent years, the emergence of artificial intelligence, digital operations, in fact, anything intelligent will involve chips.

Our country's supply chain for chip procurement is continuously increasing. From the perspective of market size, the average annual compound growth rate of China's integrated circuit (chip) industry from 2021 to 2021 is 14.82%. The industry is developing    rapidly, but according to the data of the General Administration of Customs in May 2022, the gap between supply and demand of chips in China is wide. A large number of chips still need to be imported, mainly because China's demand gap for research    and development technicians is the largest, more than 20%.

Analysis of chip Industry Chain

Some of the high tech, core stuff we make is still flawed. So why should the country propose "carbon chip" and "optical chip", like Huawei, because in fact the microchip technology such as the core technology of lithography machine is mainly controlled    by the Western countries led by the United States. So the only way to overtake on corners is to use new technology. Of course, China still does the best in chip sealing test, our Tianshuihua, some of the better encapsulation test machine is still    in China.

What is the overall trend? Japan and South Korea are overtaking Europe and the United States, Taiwan is overtaking Japan and South Korea, and the mainland is overtaking Taiwan. This is the new development path. So the country now faces the biggest difficulty    is the chip manufacturing process, compared with Europe and the United States or a big difference. For the same 8-inch film, Taiwan's technology can achieve 150 pieces, but the mainland's technology may only achieve 80 pieces. This is the core competitive    ability, so we still have a long growth process in this respect.

Supply chain processes in the chip market

A box of chips, in fact, from the original factory or directly to the means of sales only 3 paths. The first is the original factory direct sales, the second is where, is the original factory through the agent to sell out, there are so-called agents.    There is also a part of the original factory through the agent through the spot business, is the trader to sell to the terminal. The sale of anything can not escape this link, but the only master of the whole environment, can master the whole price,    in fact, in the end is the agent and spot dealer here.

Because the original factory actually can't decide the price, why? Because it will take three months for you to buy the film from us, and after three months, we will have to close the test for another month. And the market is time-sensitive, you have    no competition, you offer. So often we can control the price of a category, but what is the essence of business? The essence of business is the essence of scarcity. And we a semiconductor cycle, through the demand outbreak, stock price increase, investment   and expansion of production, production capacity released into the market, market demand contraction, overcapacity to market decline seven steps. So why did so many businesses turn into cannon fodder last year? Because he didn't understand the supply    chain process for the entire semiconductor cycle. Often obsessed with the rise and fall of the market price, as long as the rise I have been buying, if the fall is not willing to follow up. There is a saying in Sun Tzu's Art of War: In the past, a    good fighter would first be invincible and wait for the enemy to be victorious. That is to say, the general who will fight before, first let himself become invincible, waiting for others to be defeated, you go to defeat him, this is the so-called    first win and then fight. So the enterprise does not make money first do not think about him, you have to ensure that the enterprise first do not go bankrupt. Including yu every micro we can do, in fact, not because we have more severe, but because    our opponents too believe that instant pleasure, too addicted to gambling, he is willing to make this quick, he can continue to rise in price, so finally pushed the market to us, so the idea is hope everyone can have cognitive in heart.

The pain point of industry development

The first is the extreme expansion of domestic production capacity. Due to the epidemic in the past three years, only China is the most stable, so most of the production capacity is transferred to China. But then there's more demand, especially for things    like automotive chips, which take up a lot of capacity. Last year I saw the most in the domestic is, the enterprise check every day to register some closed test company at the speed of a, can imagine how much capacity. Compare that with the market    for masks, and you'll see why we have so much excess demand this year. The second is the burst of pseudo demand. In the case of scarcity, the customer originally had only 10k orders, he would place 100k, and when there was 100k, he hoped to place    500k. As a result, the whole demand was suddenly greatly amplified. And foreign countries are now open, he this demand must be pulled back, so our entire production capacity will be pulled away part.

The third part, that is to say, the entire domestic economic recession, the unstable epidemic, foreign trade e-commerce, logistics factors have a great impact. Some national policies still focus on protecting people's livelihood, so we will be limited    by some risk control measures, which will affect the production of some of our orders. The fourth part is that the investment costs are huge, not just in equipment, but in research and development. Design a chip, without tens of millions, certainly    can not hit something, and the chip this thing, with tens of millions is not necessarily successful, the investment risk is very big. That is to say, our whole market mentality, the market side of the mentality, the more the rise in the past, the    more we like to be damaged by each other, now the lower the time no one is willing to prepare inventory, we all think you will be lower, this is logic.

Business Breakthrough under the framework of rules Thinking about how enterprises break through under the restrictions of numerous rules and frameworks.

There is a saying that the masters are adapting to the rules of the game, but the high masters are making the rules of the game. So let's break down where most people live, from the rules of the game, the breaking of the game, to the following of the    game. First of all, we need to understand a phrase called "chicken soup". Then there's the question of why, in the same economic cycle, some people get away with it while others rot. What this means is that many people who make money in the first    six months or even the first ten months will not be able to make it back in the last two months. So this thing that we need to understand is a positioning called the nature of business, which we talked about earlier, the nature of business is scarcity.

Because for us, last year, a chip was a dime, but after last year's shortage hype, it became a dollar. But this year it's still a dime. So it's the same product, but why is there so much room for negotiation, so the nature of the business is really the    business of scarcity. And the nature of scarcity is that we want to be party a, we want to have bargaining power, control power, monopoly power, smart power and soft power over the entire market. These are some of the inner capabilities that we need    to build, because the nature of human interaction is equal exchange, you have to continue to create value for your customers, business is sustainable. The essence of marketing is to realize the trust, you have to let the customer feel that your company    is very good, reliable, follow you have confidence, hope, have the future, he is willing to continue to follow you to go, so the whole environment in the walk, we should be multi-dimensional show him. Finally, back to why many people he has heard    countless chicken soup, but still lead a bad life. My understanding is this, because there are many dimensions of business operation, but most of them are dealing with customers, or dealing with products, or dealing with products. There are only a    few categories. But to know that the enterprise actually want to do well, the first to look at the strategy of the enterprise, the second to look at what, your whole key customer management, the third is your supply chain management mechanism, the    fourth is your product. The fifth one is your internal management, but we tend to think when we think, which dimension do you think about, do you think about too many dimensions.

In addition, especially in the competition of enterprises, most of the pressure we see is from the market side, but have you ever thought about our real pressure, in fact, after the market side pressure, there is also the pressure of suppliers, peer pressure,    and so-called customer pressure. On top of that, there are internal pressures on us because when the Big Circle is not growing, when the internal environment is not growing, in fact, a lot of internal problems are exposed. So there is a saying called    performance to cure all diseases this sentence is not wrong. When your business stops growing, any internal team problems are magnified. Another part of it is that my other industries are difficult to do, right? For example, clothes are not easy to    sell, fried rice noodles are difficult to get. I think the chip industry can be, can I invest some money in it, and have we increased our moat? So when I break the game, I must look at the five-dimensional model, how do we do this competition through    the five dimensions, what is our strategy on the other side, do we need to have a flow pool, can have enough flow to affect the upstream. For downstream, my service, my differentiation can do it, can you give customer some new thinking, including    your peer competition, when you peer competition, your moat, your differentiation competition have done, your inside the so-called ERPS, CRM have done the talent mechanism, That's what we've been thinking about.

You have to think about a problem, the same is everyone in the rising period, the same is everyone in the sea, but some people are gambling network, some people are addicted to gambling. Qi Baishi said that everything is for me, but many people want to    own, he does not want to enjoy. A good person is learned to share, standing on the shoulders of others' success, make the cake bigger, learn to share, borrow people, borrow ambition, borrow, this is a point we want to think about. Schumpeter once    told an economic theory: the so-called invention is not to invent something from scratch. Innovation is to split some elements from the existing system and put them back together. This is innovation. I hired 10 engineers to design a new chip, and    I drew the board drawing myself. This is called innovation, but it is not so, because what you design does not fit the market at all, and what you make is not as cost-effective as others. You see when we are doing Jiuqi, Jiuqi is how to evaluate the    market, the same is eight inch piece, I never care how much money in the market, but what, but I see how much money I can sell. I take a guy's wafer out, how much can he cut in an eight-inch piece, you can cut 100k, I can cut 150k, I'll do the job.    If you can cut to 100k and I can only cut to 80k, I will not do this business.

What is the domestic market, as long as you have money, I will recruit people to do it, so this is the logic, when you are the boss, you should learn to carry out what is called self-revolution, you must constantly attack yourself, this time you can sit    in the boss position. It's not like when a business is done, I think I'm going to be harvesting for the rest of my life. So, as I said before, innovation is taking elements out of an existing system and putting them back together, that's innovation,    and combining old elements with new elements is innovation. I understand this saying that achievement is the reason why we have been able to develop Yu Fan micro good reason is that I am not addicted to I must design chips, but I have measured, do    a boss must have a ability, called "the lesser of two evils". When making decisions in life, people say that life is not satisfactory nine out of ten things, but you think that we can survive now, we only have one or two unsatisfactory what can not    understand. So sometimes when we make a choice, we must learn to choose, two things in doing, there must be a loss, but you must choose the most suitable for you, rather than you want, both want, and want, this is how I build my competitive advantage.

Operation of digital transformation strategic mode

Supply chain strategy

Most people buy and sell, so I've always believed that a good supply chain is better than a good customer. The model in the future must be the competition of supply chain, because the customer never belongs to you, he belongs to himself, because the customer    is to seek advantages and avoid disadvantages, who is cheap I will find who take, I can find you to take, can also find a to take b to take and can find c to take. So don't think too much that this client is mine must follow me. So what is the supply    chain strategy, we always believe that a good supply channel is better than a good customer, the supply chain is, you can do 1kk, suddenly can do 10kk, I not only give you a price cut, I also give you a longer account period.

An enterprise is to say that the first win and then seek, the enterprise to make money you do not tube, you first ensure that they do not fail, do not fail what is the premise, is to ensure that the company has cash flow, no profit he will not die, but    the enterprise has no cash flow he will die 100 percent. So many people are obsessed with profit, but when you don't even have volume, you can't break the bottle of supply chain, you can't break the bottleneck, so you need to have a supply chain management    thinking, the supply chain to win the world.

Operating strategy

We've spent about $3 or $4 million in the last two years on our talent replication system, our organizational operations system, our equity system and our tax system. Why do we want to do this? Do we like to see old Chinese medicine when we see a doctor?    Why old Chinese medicine? Because he has experience, but experience he has success and failure. We do business should study, master and master for six years, have a doctor's certificate, have the blood sample procurement cost can be a large number    of copies. Therefore, why should an enterprise have an operation strategy? You need each module to be able to operate digitally, and the salesman should be able to produce in batches.

We Yu Fan micro spent money, do a set of business talent replication system, the previous training of a salesman to 3 months, now can do a month. Through the school-enterprise cooperation of talent replication system, a college student can accelerate    the process by organizing the process training system manual and other training, so as to save the cost of two months, the talent can continue to iterate, and then accelerate the operation, the whole efficiency will be high.

Digital Strategy

The third is the digital strategy, we are using SCRM, ERP system, through these systems and short video, to speed up marketing. Including the speed of customer follow-up, so that the whole stickiness of customers to become higher, so this is actually    the future trend. Only digital just up to now, many people especially do chip, the digital still don't understand enough, and is especially the application of short video depth is not enough, I think this is the largest bonuses in the future, I hope    you can visit our company if you get a chance, take a look at this digital we are how to build.

Financing strategy

The fourth is capital strategy, why is called capital strategy operation, is where many enterprises he bad things come from, is because his positioning is not good, marketing is not good, so every day to do sales. But if you have a good business model,    or if you have a good positioning, your whole business will be easy to sell. So the funding strategy is that we need to take advantage of good policies, take advantage of the dimension of the model. Here is a brief introduction to the positioning    and mode of this, most of the value of the chip is to earn the price difference by buying and selling, and to earn the price difference by the agent.

When others buy chips, we buy monocrystalline silicon to earn money for processing. Second, we can earn money for application development. What is the third? We have integrated the supply chain, and a large amount of money in the supply chain is in our    hands. Our industry is the month of the closing, I have a large amount of money in hand, this bank can bring huge profits. The other part is that we have some legal compliance to the government and some policy support from the government, so I have    five or six channels to pay, while you only make money by trading products. The competition between us is completely different.

Fourth, strategic core

There is a saying in the Art of War called "Zhenghe Qi Sheng". "Zhenghe" means that your normal business model can guarantee the immortality of the whole company. What is "Qi sheng"? You've got to have a dimensionality reduction model, you've got to have    a lot of sources of money, and then you've got to cover the market. What is dimensionality reduction? When people sell a box of chips, I take the active and passive components and seal them together. I help customers save 30% of the cost, reduce the    cost of the whole market, and then improve the application efficiency of customers.

Therefore, our real innovation and core is actually about what valuable contributions you have made to the market and customers, so what is strategy? The core of strategy is to learn to choose and choose. Battle is battle, which is not a strategy, but    an omission. You have to give up 9 profitable projects, not to say you both want and want, but also not to say to give up your 9 unprofitable projects, choose a profitable project, life is often in the time to do, you can't have your cake and eat    it. The second is to learn to differentiate the competition, many people are obsessed with is I want to achieve a very low price, the most efficient market for Chinese people is, my chip can do 1, then some people sell 90 cents, some people sell 87    cents. But you should know that other giants are better than you, they also work harder than you, and they have more money than you, so you can't play with them.

Therefore, it is better to learn dislocation competition. It is better to be different than better. It is better to find its differentiation than to persist in price, carry out flanking war or guerrilla war, and choose subdivision track. From selling    models to selling product applications, can we find the application of differentiation and market segmentation, which needs a deeper understanding for each of us. There is also the integration of strategy, the integration of upstream and downstream    capital chain, so an enterprise can do better. My understanding of entrepreneurship is that there are many contingencies in entrepreneurship. It has opportunities, resources, human costs and environmental costs. However, if a business can continue    to do well, it must be that people around it all wish it well, so you should have an altruistic heart!