Tech Giants: Starting from Bankrupt Companies

353: Chapter 353 Global Chip Price CutsIn April, the sky over Shenzhen was as blue as if it had been washed.

The Xinghuo Chip Global Sales Center was located in the core area of the Science and Technology Park. In an open office area spanning an entire floor, over three hundred sales representatives were busy at their respective workstations. Telephones rang one after another, and the sound of keyboard typing was incessant. A huge circular screen on the wall displayed the order systems and inventory data of five hundred customers worldwide in real-time.

Li Wanqing stepped out of the elevator.

The thirty-eight-year-old President of Xinghuo Chip wore a dark gray shirt and black trousers, with her sleeves rolled up to her forearms. She held a piece of paper in her hand with only a single line of handwritten text:

”Xingchen 7nm chips, global unified price reduction of 30%, effective immediately.”

In the sales center, someone looked up and saw her and immediately stopped their work. Then a second person, then a third. In less than ten seconds, everyone fell silent, their gazes focused on her.

Li Wanqing walked to the control console, and the technical director had already stepped aside.

She picked up a pen and signed her name on that piece of paper.

Li Wanqing

Then she handed the paper to the technical director: ”Send it.”

The technical director took it and tapped a few times on the keyboard.

A red confirmation box popped up on the huge circular screen: ”Confirm pushing new prices to 500 customers worldwide? This operation is irreversible.”

He took a deep breath and clicked ”Confirm.”

Three seconds later, prompts of successful pushes began scrolling across the screen.

European customers: 137, pushed.

North American customers: 98, pushed.

East Asian customers: 165, pushed.

Southeast Asia customers: 52, pushed.

Other regions: 48, pushed.

In the sales center, someone lightly started clapping.

Then the applause grew louder and louder.

Li Wanqing looked at the screen and murmured, ”It’s their turn to suffer.”

9:03 AM, New York.

In the Nasdaq futures trading hall, traders were staring at their screens, drinking coffee, and waiting for the market to open.

Suddenly, someone exclaimed: ”TSMC’s ADR is falling!”

People nearby leaned in to look: ”8%? It’s down 8% before the market even opens?”

Another voice rang out: ”Samsung is falling too! 7%!”

”Nvidia 3%, AMD 4%, what happened?”

The traders looked at each other in bewilderment.

Someone finally found the reason, their voice trembling: ”Xingchen chips price drop of 30%... global unified...”

A dead silence fell over the trading hall.

In the boardroom of TSMC’s headquarters, the atmosphere was even more oppressive than the rainy day outside. Twelve directors sat around a huge oval long table, with a financial report placed in front of each person.

On the large screen was Xingchen’s price adjustment notice.

The CFO stood up to report, his voice as heavy as if he were reading an eulogy: ”After the 30% price reduction for Xingchen 7nm, it’s 35% cheaper than us. If we don’t follow suit, we will lose a large number of customers. If we do follow, our 7nm profit margin will drop from 50% to 25%.”

Silence filled the meeting room.

A director spoke up: ”What about our 3nm R&D? We’ve already invested fifty billion New Taiwan Dollars.”

The CFO shook his head: ”If profits are cut in half, R&D funding will be slashed by at least half. 3nm might have to be delayed by two years.”

Everyone looked at Chairman C.C. Wei.

The sixty-five-year-old Chairman of TSMC sat in the main seat, the wrinkles on his face appearing exceptionally deep at this moment. He remained silent for a long time.

Then he finally spoke, his voice raspy: ”Follow the price reduction. For 3nm... suspend it for now.”

No one spoke.

C.C. Wei stood up, walked to the window, and turned his back to everyone.

Outside the window, the sky over Taipei was gray, and it was raining.

In Seoul, in the meeting room of Samsung Electronics’ headquarters, there was a similar atmosphere.

Vice Chairman Lee Jae-yong sat in the main seat; the fifty-year-old Samsung heir looked solemn. Before him was the report just submitted by the President of Samsung Semiconductor, Kim Ki-nam.

Kim Ki-nam was sixty-five years old and had worked at Samsung for forty years, rising from a grassroots engineer to President. He had seen countless industry fluctuations, but this time, his hands were trembling slightly.

”Chairman, our 7nm cost is 30% higher than Xingchen’s. If they drop the price by 30% and we follow suit, we will lose 5% for every unit sold.”

Lee Jae-yong asked: ”And if we don’t follow?”

Kim Ki-nam smiled bitterly: ”All our customers will run away. Qualcomm is already in talks with Xingchen, and Apple called Li Wanqing yesterday.”

Lee Jae-yong was silent for three seconds.

”Follow it. We must maintain market share even if we lose money.”

He paused: ”What about R&D?”

Kim Ki-nam shook his head: ”3nm will have to be delayed by at least three years.”

A dead silence fell over the meeting room.

April 10th, Cupertino.

The Apple CEO’s office was in a circular building at the center of Apple Park. Through the floor-to-ceiling windows, one could see the entire park’s lawn and the distant mountains.

Tim Cook sat behind his desk. The fifty-eight-year-old Apple CEO wore a dark blue shirt, his signature attire. But at this moment, his expression was not as composed as usual.

On the computer in front of him was the procurement budget for the Apple A13 chip.

Original plan: TSMC 7nm, three hundred million US dollars.

Now: Xingchen 7nm, 20% higher performance, 25% lower power consumption, and 30% cheaper.

It was a choice that required no thought.

He picked up the phone and dialed Li Wanqing’s number.

It rang three times before the call was connected.

”President Li, this is Tim Cook.”

Li Wanqing’s voice came through the receiver, as calm as if she were talking about the weather: ”Hello, Mr. Cook.”

Cook paused: ”Apple wishes to renegotiate the procurement contract for the A13 chip.”

Li Wanqing said: ”Mr. Cook, Xingchen’s quote is already the lowest. It’s a global unified price, treating all customers equally.”

Cook said: ”We can sign a three-year long-term agreement and double our annual procurement volume.”

Li Wanqing laughed, her laughter carrying a hint of satisfaction: ”That can be discussed.”

In the reception hall of Xinghuo Chip’s headquarters, the atmosphere was livelier than a wet market.

The waiting area, over two hundred square meters, was filled with representatives from chip design companies from all over the world. They wore different suits and spoke different languages, but their faces all bore the same urgent expression.

MediaTek Chairman Tsai Ming-kai came in person. The sixty-five-year-old godfather of the Taiwan semiconductor industry sat in the first row, tightly clutching a draft contract.

Qualcomm Senior Vice President Christian sat next to him. The fifty-year-old American was dressed in a suit and leather shoes, but fine beads of sweat were seeping from his forehead.

There were also representatives from Nvidia, AMD, and CEOs from over a dozen small and medium-sized chip design companies.

Li Wanqing’s secretary came out from inside, holding a list.

”Everyone, President Li said that Xingchen’s production capacity is limited, and orders will be scheduled in chronological order. Those who came today can register first.”

Tsai Ming-kai was the first to rush up, almost at a jog: ”MediaTek, five hundred thousand units per year, signing for five years!”

Christian followed closely behind: ”Qualcomm, three hundred thousand units per year, signing for three years!”

People behind them surged forward, scrambling to be first.

The secretary was surrounded in the middle, and the registration forms in her hands were instantly snatched up.

4:00 PM, Li Wanqing’s office.

The secretary knocked and entered, handing over a summary sheet: ”President Li, today twenty-three customers registered, with total intended orders of 4.2 million units per year. Including previous long-term customers, our 7nm production capacity is already scheduled through 2022.”

Li Wanqing took the form, glanced at it, and nodded.

She walked to the window.

Outside the window, the water of Shenzhen Bay shimmered in the setting sun. In the distance, several planes were landing; it was unknown how many customers were on board, rushing to sign contracts.

She murmured, ”Only when the price blade falls do you see who’s been swimming naked.”