Chapter 1052 Financial Pressure

Under the control of Kumho, even though Zhongjing Microchip could only engage in mid- and low-end chip foundry at this time, its profit was not low.

SVCD decoding chips do not have high requirements for wafer process technology, but the core intellectual property rights are mastered by three companies: Kumho, Deyi and Scope. Even if the price has been adjusted, the shipment price of SVCD decoding chips remains above 20 US dollars per chip. Zhongjing Microchip can at least make more than one US dollar profit per chip from the foundry order of SVCD decoding chips.

The flash memory chip market, Kumho, Toshiba, and Samsung are three-pointers, and all three are willing to enjoy the huge profits brought by flash memory chips. After Kumho completely digests the flash memory chip technology, in addition to meeting internal needs, it mainly supplies Scoop, and actively gives up other market share to Toshiba and Samsung for digestion. The global 32 M storage specification flash memory chip shipment price remains above US$60 per chip - so that every time Scoop's executive president Emer sees Chen Xinsheng, Su Jindong and other senior executives of Kumho grit their teeth. The profits of Kumho's flash memory chips are even far up to the profits of the sales of IPlayer products - after all, the marketing cost of IPlayer sales overseas is huge, and the sales of flash memory chips are almost no extra cost except manufacturing and R&D. Kumho's monthly sales of flash memory chips exceed 24 million US dollars, and the gross profit margin is higher than 60%, or even higher.

Such tacit cooperation also allows Samsung to maintain rational restraint when the Chinese market is suppressed by Kumho, and Zhongjing Microchip can also obtain considerable subsidy profits from the foundry orders of flash memory chips.

Compared with other foundry companies alone, Zhongjing Microchip can obtain at least nearly 20 million US dollars in additional annual income, which is particularly important for Zhongjing Microchip, which is in the early stages of growth; this also makes Zhongjing Microchip still have the spare time to make long-term and continuous investment in wafer process research and development under the survival pressure of the early stages of growth.

After a private banquet at the home of Deyi CEO Angelber, Zhang Ke, Chen Xinsheng, Liu Zhicheng and others took a car to return to the hotel. Angelber deliberately left Deyi Vice President Deyi and Deyi China President Zhou Zhengqing to speak.

"According to observations from the science and technology intelligence search department, ESS's recent invention patent applications should be closely related to the development of baseband chips," Delfasey was not restrained in Angieber's private house. He held a red wine glass and stood in front of the windowsill looking at the towering trees in the vast courtyard. He said to Angieber, "It seems that when Kumho first accepted digital mobile phone manufacturing technology from us, he was planning to develop baseband chips... he just didn't know which step they did?"

Zhou Zhengqing sat aside without saying a word, but was surprised in his heart.

Others are in China and are not responsible for R&D, so they are not very clear about some news. He did not expect that Kumho would have the courage to launch a baseband chip project. Not to mention that Samsung had broken it twice on baseband chips, even IBM was defeated and suffered a great loss. Kumho not only had the courage to launch a baseband chip development project, but had already been on it?

Angelaber smiled and said, "Zhang Ke, probably the most ambitious Chinese I have ever come into contact with," he recalled with a frown and said, "To this day, I still care about the first email he sent me..."

Zhou Zhengqing said flatteringly: "It was Mr. Angelber's email that created Kumho at this time."

"You can't say that," Angelaba shook her head and said, "There is an old Chinese saying, "What's the name of 'Gold scales are things in the pond'?" Angelaba looked at Zhou Zhengqing without confirmation, "If you want to rise, you will always have to rise. If you don't have that email, you may just miss the opportunity to cooperate with Deyi and Kumho."

Zhou Zhengqing thought I didn’t know where Angelabe heard that there was an old saying in China. I could still understand it. But I couldn’t figure out Angelabe’s deep meaning. Seeing that he admired Kumho’s success so much, is he a tendency to transfer the 0.18 micron wafer manufacturing process to Zhongjing Microcore this time?

Delfassi could understand what Angieber meant and said with a smile: "I'm afraid they still hide their heads and tails, so it's hard to judge..."

After hearing Delfassi say this, Zhou Zhengqing understood a little.

Deyi has always focused on the development of high-end chips. Even if Kumho successfully develops a baseband chip, it will not pose any threat to Deyi's high-end baseband chips. The real pain is those manufacturers that compete directly with Kumho in the terminal market. If Kumho successfully develops a mid- and low-end baseband chip, then Kumho's cost advantage in the mid- and low-end mobile phone market will be too great - it is almost impossible to imagine who else has the ability to completely suppress Kumho except for major high-end model markets such as RB in Europe and the United States?

How much has Kumho invested in technology research and development over the years? Zhou Zhengqing was thinking about this question. Will he discuss this issue directly with Chen Xinsheng tomorrow? It won’t be difficult for him to wonder. Angelber and Del Fassey could not judge the development process of Kumho’s baseband chips at this time. If Kumho had successfully developed a mid- and low-end baseband chip and cooperated with Kumho in the field of mid- and low-end chip production, it is no longer a temptation that Deyi can refuse. Unless it is completely let go of the mid- and low-end chip market, otherwise, exchanging technology for increased holdings is Deyi’s best choice. If Kumho is still half-baked in baseband chip research and development, and it is even likely that he will repeat the old path of Samsung and IBM manufacturers, then Deyi will not have to withstand the pressure from the media and the public to bring out the 0.18 micron wafer process technology together.

At the Husum International Hotel in Dallas, Zhang Ke, Chen Xinsheng and Liu Zhicheng were also considering how to make Deyi make concessions, and of course he would not fully expose his technical trump card to Deyi.

Showing the trump card, although it can convince Deyi to transfer the 0.18 micron wafer process technology together, Deyi will inevitably ask for more shares. Zhang Ke would rather spend cash to buy technology from Deyi than let too much Zhongjing Microchip's equity fall into Deyi's hands.

Deyi already held 10% of Zhongjing Microchip at this time, and Kumho's holdings in Zhongjing Microchip were just above the controlling stake. Other shares of Zhongjing Microchip were scattered in Yunyuan Group, the Monetary Authority of Singapore and the management. It was already the limit to make Deyi's shareholding ratio reach 20%, but it was not clear whether 20% could satisfy Deyi's appetite.

It is nothing for Kumho to give up its absolute controlling rights, but the ultimate control cannot fall into the hands of foreign capital.

When introducing 0.25 and 0.18 micron wafer process technology, we will definitely build another large wafer factory with high specifications. Compared with the first wafer factory, Zhongjing Microchip's second wafer factory can obtain financial support from the central and local governments. If you have to bear more than half of the huge funds of more than one billion US dollars, Kumho will feel pressure.

Kumho Commercial has collected more than 2 billion US dollars in total. These funds look very large, but it is not enough to deal with existing projects.

Nearly half of the preliminary reclamation project of the tens of million-ton steel industry base has been completed. Next, Donghai United Steel and Dongshan Steel will officially merge to start the construction of the tens of million-ton steel industry base, with a large investment of 30 to 40 billion yuan. Even if Kumho Commercial only accounts for 20% of its shares, it will have to solve 60 to 7 billion yuan of funds on its own. There is also the iron ore project in Perth, Western Australia, and the one billion US dollars is just a bottom.

It is not difficult for Zhang Ke to understand why Samsung owed nearly 20 billion US dollars in foreign debt during the Asian financial crisis in 1997. If Kumho had the opportunity, he would not mind owing 20 billion US dollars in foreign debt for expansion.

At this time, Kumho only hopes that the country will not deliberately suppress it, and does not expect that the country will provide strong support in financing. If you want to develop, you still have to solve the problem of funds yourself.

Zhang Ke participated in the negotiations on the final stage of technology introduction in Dallas and stayed until the end of August.

During this period, ESS also officially established a mobile phone chip research department to hint that they have made critical progress in baseband chip development and no longer mind letting the outside world know their ambitions for baseband chips. Although the industry is full of doubts about whether Kumho can successfully develop baseband chips, this hint was sent to DE Yi.

Deyi finally agreed to transfer 0.25 and 0.18 micron wafer process technology to Zhongjing Microchip in the form of equity plus cash. Zhongjing Microchip has obtained relevant wafer process technology authorization license. Deyi's shareholding in Zhongjing Microchip has increased to 15% plus 50 million US dollars in cash, and there is also a 5% stock subscription authority.

This is just the first step. The transaction needs to be approved by the Deyi Board of Directors and the US technology export regulatory authorities, and also needs approval from the Zhongjing Microchip Board of Directors; in addition, investing more than one billion US dollars to build a wafer factory in China also requires approval from the State Council Planning, Development and Reform Commission and other departments. The transaction will only be established after all the approval procedures are completed.

Although it is not clear whether things will go back and forth, there are still many things that need to be done in front of Kumho. First, we must convince the Monetary Authority of Singapore and Yunyuan Group, the two major shareholders, to agree to increase capital to build a second wafer factory. One of them is unwilling, and Kumho will have to bear an additional financial pressure of US$100 million or 200 million. Although the Monetary Authority of Singapore is abundant, after the Asian financial crisis, investment is still a little timid and may not be willing to increase capital in Zhongjing Microchip; Yunyuan Group is in the midst of industrial structure adjustment and has a relatively high financial pressure; in addition, Zhongjing Microchip's holdings management collectively cannot provide much capital; Deyi doesn't mind investing in the proportion of shares at that time, but Deyi only holds a total of 15% of the equity; the other 85% of the pressure is almost on Kumho.
Chapter completed!