In the past week, ZTE’s Sanctions against U.S. business embargoes have risen to the topic of the whole nation. The incident has caused users to discuss the issues of 'corporate compliance' and 'independent chips'.
Some emotional expressions have also emerged in these discussions, and as the party ZTE recently also made some factual clarifications.
In fact, from the announcement of ZTE's first statement to the press conference, there was no evasion of the issue of 'corporate compliance' compliance. Zeng Yinyi, chairman of ZTE Corporation, also repeatedly stressed the importance of compliance. He said, ' Even with today's refusal order, we are still self-requiring the standards of a world-class export control compliance company.
According to the information previously disclosed, as early as April 2016, ZTE Corporation has already considered compliance as the cornerstone of the company's strategy and the premise and bottom line of its operations. The measures taken include: Established a Compliance Management Committee under the direct leadership of the President. Established a team of senior export control compliance experts covering the globe; Introduced a number of consultants to provide professional guidance to build and optimize ZTE's export control compliance management framework, systems, and processes; Introduced and implemented SAP's trade compliance management tools (GTS) ) Organize employees to conduct compliance training; Cooperate with various compliance supervision officers to carry out various supervision work; And continue to invest in export control compliance.
It is reported that in 2017 alone, ZTE Corporation invested over US$50 million in compliance, and plans to invest more resources in 2018. At the same time, it also organized compliance training for more than 65,000 employees.
In some people’s eyes, “The US’s punishment was too severe. One nation’s power was used to marry a company. There was a great disparity in strength and no enterprise could parry. This incident is now at a time when the trade war between China and the United States is tense. The way of death is more like using this incident to further suppress the Chinese science and technology industry.
ZTE also expressed its dissatisfaction with such extreme sanctions imposed by the U.S. side. In a statement, ZTE noted that in this incident, Zeng’s hard work, ignoring ZTE’s compliance with export control compliance, was a huge investment and made great progress. , As well as the initiative to find and handle problems, until the relevant investigation has not been completed, the US Department of Commerce’s Bureau of Industry and Security imposes the most stringent sanctions, which is extremely unfair and unacceptable.
In an interview, Yin Yimin stated that ZTE will not give up its efforts to solve problems through communication and dialogue, and will also safeguard its own legitimate rights and interests through all legally permitted means.
At present, multiple forces have already participated in the process of coordinating the incident. On April 21, the Wall Street Journal reported that a senior U.S. Department of Commerce official said on Friday evening that the agency has approved ZTE to provide more materials. The request. This position also allows the outside world to see the hope of solving the problem.
Another discussion on the topic of 'independent chips' has been misunderstood by many netizens. For example, some people think that under the hard environment, 'two bombs and one star' were all developed. Why can't chips be used?
In fact, the chip industry can't be completed behind closed doors. In this field, there are global technologies, global standards, and global division of labor. No company or even a single country can do it alone. At present, any chip in the world will encounter a similar embargo.
In terms of industry status alone, ZTE's R&D strength is not weak. Currently, the company is already the world's top four telecommunications equipment vendors. According to the public information released by the World Intellectual Property Organization, in 2017, ZTE Corporation adopted 2,965 PCT international patent applications. Occupy the second position in the PCT international patent applicants, and ranks the top three global patent applications for eight consecutive years. It is the only company in China that has won this honor for eight consecutive years.
Especially in the upcoming 5G network, there is a strong accumulation of technology and the right to speak. According to previous media reports, ZTE has currently formed a 5G R&D team with more than 4,500 employees and invested 3 billion yuan each year for 5G R&D. ZTE Corporation The main contributors to global 5G standards research have joined almost all international mainstream standards organizations and advancing platforms. The number of Pre5G network deployments has grown rapidly. By the end of 2017, more than 110 networks have been deployed in more than 60 countries. 5G technology continues Breakthrough, in the national 5G one-stage and two-stage test to refresh a number of test records, fully prepared for the third phase of national testing; At the same time, in the 5G field and China Mobile, Qualcomm, Intel and other upstream companies in the industrial chain have cooperation.
Regarding the discussion on the 'independent chip' of the network, Yin Yimin stated that ZTE Corporation is leading the world in 5G wireless, core network, bearer, and terminal products. The company’s major products use a large number of self-developed chips, but there are also a large number of common applications. Devices are inevitably outsourced. This is also the demand and trend of the global market development.
For the future, Yin Yimin stated, 'The company will continue to increase its investment in technology to make our capabilities stronger.'
2. ZTE Continues to Suspension and Will Take Certain Actions Under US Law
On the evening of April 25th, ZTE Corporation issued an announcement that the company’s management has decided to take certain actions related to US government orders that can be taken under relevant US laws to continue the suspension. ZTE stated that the public disclosure of the operation will depend on Advice from the company's US legal advisors and the company’s communications with relevant U.S. government agencies.
The following is the full text of ZTE's announcement:
3. ZTE Communication is forbidden to call Qualcomm/Intel etc.
Sina Technology reported that the U.S. government banned U.S. technology companies from selling products to ZTE last week. This move will not only affect ZTE, but will also have a huge impact on the global communications equipment supply chain. According to ZTE insiders, the company It is forbidden to call or conduct technical exchanges with Qualcomm, Intel, Broadcom and other business partners from the United States. Some media reports indicate that although ZTE’s current inventory components can support production for about one month, ZTE’s actual production is currently underway. The pace has gradually eased. ZTE and the U.S. Department of Commerce reached a settlement agreement in March 2017. The U.S. government believes that ZTE violated a U.S. ban between 2010 and 2016 and exported telecommunications equipment to Iran and North Korea. , And hide these transactions through shell companies. ZTE acknowledged this practice and agreed to pay a fine of 1.19 billion U.S. dollars to suspend the implementation of the 7-year export embargo. However, during the delay in the implementation of the embargo, ZTE Corporation continues to provide false statements, causing the U.S. Department of Commerce to launch ZTE as 7-year ban.
Some people believe that this move by the United States is a crackdown on smart phone manufacturers supported by the Chinese mainland government and the Chinese communications industry, because ZTE is a listed state-owned enterprise in mainland China. ZTE Corporation last year became the world’s ninth-largest smartphone manufacturer. Shipments amounted to 43 million, of which approximately 70% of equipment was exported overseas, and about half of the equipment entered the US market. According to statistics, ZTE has a market share of approximately 12% in the US smart phone market, and this share has become the US market. The fourth largest smart phone manufacturer. In terms of key technologies, ZTE relies heavily on U.S. partners. The U.S. ban will undoubtedly have a huge impact on this; ZTE manufactures smart phones, and U.S. suppliers provide spare parts at all About 30% of the components, and ZTE annually imports a large number of processors from American chip makers such as Intel and Qualcomm. In addition to hardware, the software is also a huge problem for ZTE, which is used by mobile phones made by ZTE. Is an Android system, but the U.S. ban may prevent ZTE from using it for the next 7 years This system.
In addition, the U.S. ban is also very likely to affect ZTE’s 5G network development plan. ZTE originally regarded this technology as the company’s future growth driver. At the end of February this year, the company just announced that it has been in this field with Intel and Qualcomm. Cooperation was reached. In addition to ZTE, trade frictions between the United States and China may also hit China’s largest communications equipment manufacturer Huawei. On April 7, this year, the US Federal Communications Commission (FCC) stated that it planned to ban US operations. Businesses use the Universal Service Fund to purchase equipment from 'security threat companies'. The FCC is targeting Huawei and ZTE. The US government suspects that China may use the equipment of these two companies to monitor the U.S. public. Because both Huawei and ZTE have the Chinese official background. Insiders believe that the U.S. ban on ZTE not only hurt Chinese companies, but also ZTE and Huawei, which are the main buyers of Qualcomm and Intel chips. The trade dispute will also harm these American companies. MoneyDJ
4. After the ZTE incident, how to invest in chips? Investors divided into two groups
The ZTE incident is still fermenting.
On April 17, ZTE announced a temporary suspension due to the US Department of Commerce’s Industry and Security Bureau’s activation of the refusal order. The day before the suspension, the U.S. Department of Commerce announced that it would prohibit U.S. companies from selling components, goods, software and products to ZTE for the next seven years. technology.
According to the CICC research report, ZTE currently has spare parts inventory for January-February. If it does not reach a settlement within 1-2 months, it will affect the normal production and sales of its communication equipment and mobile phone business. It is reported that ZTE is in China Telecom. The equipment market has a nearly 30% share. This is undoubtedly a deadly blow for ZTE.
According to statistics from the China Semiconductor Industry Association, the value of domestic integrated circuit imports in 2017 was 260.1 billion U.S. dollars, which was China's largest import commodity, and the IC trade deficit hit a record high.
The background of ZTE’s sanctions against the United States was the Sino-US trade war that began on March 23. The predicament of ZTE at this time also caused widespread discussion among investors. Some investors stated that they will increase input and research on the underlying chips in the future. Other VC investors are cautious about this. Why did China not have a good chip company in the past? For investors, has the investment opportunity of technological innovation been ignored in the past? Is VC suitable for chip investment? How to better use it? Capital power to develop the chip industry?
In the past two days, my circle of friends has been filled with all sorts of arguments about how to look at the chip and the underlying innovation. I think we need to return to the nature of business. 10 years ago, our internal fund strategy was to ignore the so-called original underlying technology. Innovation, and today we boldly propose that we must pay close attention to the underlying technological innovation. Why?
Let's take a look back at every successful element of technological innovation. From PCs, mobile internet to today's artificial intelligence, every generation of technology companies faces a certain window period. The real barrier established by this window for technology companies is ecology and the entire market. , Leading companies can use the window period to build huge technological barriers.
In the past, China replaced technology with the market. We missed the development of the chip in the 1970s and the development of the PC in the 1990s. In 2000, we only caught up with the Internet model innovation window.
But today, China has the opportunity to use the market to create technology, because this timing is right. Our talent and capital have the opportunity to create original technologies on the same starting line, relying on China's powerful market size.
In 2004 we voted for China Microelectronics. Now this Mr. Founder is 70 years old. He is working on the equipment in the semiconductor industry. It has been 14 years since 2004 and it has only just appeared on the surface. Everyone saw the Chinese in the media. How to resist all kinds of pressure to return to China's story.
There are many such talents in China. They are only small. The core of semiconductors has just been mentioned. In the past ten years, the United States has not voted, and China has not voted. But I think there is an opportunity for the future. The cost of production is half that of the United States. I don't know how many companies can succeed 1-2 times. But I think many opportunities will be left to China.
I am from Shenzhen, ZTE. Recently, we may have more attention to Shenzhen. What implications does this incident have for the venture capital industry? I think that VC organizations need to pay more attention to and invest in genuine core original things because core innovation has vitality and competition. force.
Generally speaking, companies that are able to grow in the long term must have their own core competencies. Some are technology and others are models. The wave of model innovation may have passed, but the greater opportunity lies in technological innovation, including Biology, AI, and chip industries. (Possible) LPs don't understand, but we have to stick to it. Only in this way can we earn more. Although companies that invest in technological innovation have a long time, they don't grow as fast as the model, but sticking to them can be rewarded.
I studied semiconductors. After entering the investment industry, this field has always been the focus of my concern. After 2001, the US industry has not voted. The reason is very simple. The entire capital market does not support the high-tech chip industry.
But China happens to be a mismatch. We know we have to invest in this industry, but my return in this industry is the worst in the entire category, not the worst but also the penultimate. Why? Because the US capital market is no longer supported. , China's capital market is also not supported.
Recently this piece has made great progress. China has a lot of big funds and hopes to invest in important and strategic industries, such as semiconductors. But there are also many problems with this, that is, investment in state-owned assets cannot lose money, so they will be abroad. The mature company got it back, and then it took another round of money in China's capital market. This is not very good, it caught the attention of the United States, and did not approve such investment.
Actually, there are great opportunities in the Chinese market because the applications of chips are all in China, but the challenges are even greater. How can we practise it, build our own capabilities, and patiently invest in a technology company that has an impact on the industry? This still has today Certain challenges and difficulties.
In fact, we did not vote for chips. Before we voted for several companies that did chips, we lost all our money and contributed to China’s technological innovation.
I think there are several difficulties in China's chip technology. First of all, China's chip companies are mostly single-product companies. Single-product companies have problems in the long-term, because the life cycle is very short and they soon drop to the average. Because of the large initial investment, R&D personnel and tapeout are all high costs, and the valuation of the company is not high. Unlike Tencent, Alibaba has a market value of US$450 billion, and the most successful listed company is 10-20. Billion US dollars. For VC, the investment and the return are disproportionate.
Secondly, from a medium-term perspective, any large industry has a cyclical nature. The first to come out is definitely to be a hardware company. For example, in the PC era, Intel, IBM, Cisco, and NVIDIA come out first in artificial intelligence. Smart, China still has a chance.
Once the chip investment forms a platform, new companies will find it difficult to do so. In particular, the initial investment of chip companies is very large. If your competitors take advantage of the opportunity to occupy the market and amortize equipment costs, you cannot compete with them. The cost curve will Far from lagging competitors, you cannot compete unless you rely heavily on government subsidies and support.
However, there are still opportunities in the artificial intelligence chip. We recently voted one or two in the AI chip company that was very hot on the market.
In my opinion, in China, it is more reliable to accumulate capital and strength first and then follow the technical route. Today's Internet giant, whether it is Ali, Tencent or Didi, spends a lot of money on core technology R&D. The United States established a laboratory and recruited a lot of outstanding engineers. This is the path I think is more realistic.
China’s real-standard VCs are making large-scale investments in China, which is the case from 2004 to 2011. There are a lot of people who cast chips during this period. In fact, many companies that now produce basic application chips are also investing at that time.
However, there are several problems with the chip. First, it either succeeds or fails. Unlike some model innovations, this path can be changed without delay.
Second, early VCs were not large. In the late 1990s, 100 million U.S. dollars were big funds. When most of the chips were put into production, they were basically an average profit. They did not bring monopolistic profits. Therefore, after the second half of 2000, it is very difficult for everyone to enter this field of chips.
For VCs, it likes to invest in projects that can generate greater demand and get money back quickly. You say that it's good to beat drums to make money, and how many times you actually get profits.
In the second half of 2000, mainstream VC investment chip companies mainly invested in the third round, basically 90% did not go into the first round, and the remaining 10% did the second round, put things out, the second round of The valuation of the third round will not be far apart, so everyone will vote in the third round. For this reason, some of the things related to our basic level are basically invested by the state. Because capital is profitable, The point is beyond reproach.
When it comes to the chip problem, unless it is a true AI chip today, it can generate high profits in the short and medium term, and other things even if you make, that is, the average profit, or zero profit status. This is the actual situation, the actual situation will affect Business investment behavior, this is still hope that everyone can understand. Chinese entrepreneurs
5. Domestic chip industry outlook: We chat with the chip industry's frontline staff
The technology is falling behind, and talents are being squeezed by the Internet industry. Domestic chip makers need to have a very good heart.
The fall of ZTE caused the Chinese people to fall into an unprecedented panic about the long-known vocabulary of 'chip'.
According to the report “Analysis of Current Status of China's Integrated Circuit Industry in 2017”, China’s domestic chips have a very low share in core integrated circuits. In many parameters such as general-purpose electronic systems, the share of domestically produced chips is even zero.
Since 2014, the state's investment in the integrated circuit industry has reached a scale of 100 billion. The industry's commonly known 'large fund' (the National Integrated Circuit Industry Investment Fund) is also about to usher in the second phase of investment of 200 billion yuan.
However, compared with Intel, ARM and other semiconductor giants for decades of research, even if China’s scientific research is swift, it can only be ignored.
The cost of trial and error of the chip is high, and it is difficult to troubleshoot. The patent is monopolized by giants, making the development of this industry difficult. In this dilemma, how are the status of first-line employees living and how the views of the industry are worth considering.
Interface News interviewed relevant individuals in the digital chip industry. Some of them are senior designers who have worked in the industry for 10 years. Some have already switched careers, and others are still stagnating at universities.
Through the stories of these front-line personnel, we tried to explore how the domestic chip industry has its own characteristics and how the entire industry will go in the midst of the times when the international trade war started.
In general, most of the employees in the chip industry have highly educated and prestigious backgrounds. Once they enter the industry, they rarely choose to change careers. But a cruel reality is that there is a serious shortage of fresh blood, and fewer and fewer young graduates are willing to choose Chip industry.
Wei Wei: Chip Design Manager 10 years of practice
After graduating from Fudan Microelectronics, Wei Hao joined the chip manufacturing company currently employed. In this company, he stayed for ten years.
Ten years ago, Chinese people were more optimistic about the chip industry than they are now. The momentum of the Internet has not been so overwhelming. Chip design is still the top choice for sophisticated industries. Fudan graduates like Wei Wei, even with a bachelor's degree, are still Is the camphor on the job market.
Wei Yu’s sexual aggression is not very ambitious for making money. After finding a job, he feels professional and can stay in Shanghai. Chip design is a good job. During the ten years of his work, he and his wife bought a car in Shanghai. Buying a house, having a child, also witnessed the entire process of moving the company’s headquarters from overseas to Shanghai.
The company where Wei Wei is located is a Sino-foreign joint venture established in 1995. Two years ago, China vigorously supported Ziguang Guoxin and provided a favorable mechanism for overseas registered companies like them. Under the bonus, the company moved its headquarters back home Domestic, headquartered in Shanghai.
Although the company is registered overseas, Shanghai’s research office has always been a research focus. For chip designers like Wei Wei, the migration of the headquarters did not change his working environment, but instead he obtained more project opportunities for his team. .
The semiconductor company specializes in the design of chips for consumer electronics, focusing on highly-integrated multimedia soc chips. It specializes in sound processing and system memory. It has branches in California, Shanghai, Shenzhen and Hong Kong. Lynx, smart audio The introduction of other products has brought more projects for Wei Wei. Many smart speaker cores in the industry can find the shadow of this company.
Designers plan drawings and models, and the company outsources manufacturing processes to TSMC and other companies for chip manufacturing. Finally, the finished chips are returned to the company for reprocessing.
Wei Wei revealed that apart from Huawei Hass, Chinese companies currently do not have the ability to independently manufacture chips. The company outsources manufacturing to TSMC, the main reason being that the technology is iteratively backward.
The most precise size of semiconductors that can be achieved by head companies such as TSMC and Intel is 7nm, and the products produced by other companies are mostly from 14nm to 16nm. This figure is still 28nm for domestic companies. More precisely, it is Crosses from 28nm to 14nm.
The finer the size of the process, the lower the production cost. If the same chip, if China wants to produce its own, the cost is at least twice that of TSMC. If the time is measured, the gap between domestic companies and TSMC is more than 5 years of research time. , The current level of technological development is equal to the previous generation of TSMC.
After many years of work, the company where Wei Wei is located has always been an upper-middle player in the industry. Which machine can make machines and which ones do the best are accumulated achievements for several decades. It is not a matter of money that can be changed. He gradually felt that the giants had laid down the country, and they could not shake it.
Shanghai's work is relatively busy. Wei Wei goes out every morning at eight in the morning, drives an hour's car to the company, and is almost off every day at eight o'clock. The normal state of the weekend is only one day off. In the project period, to fight speed with his peers, he You also need to lead the team to work overtime continuously. During the year, it takes about three to five months.
For career development and the future of the domestic chip industry, Wei Xiao did not show too much enthusiasm. Peer workers rarely switched careers because hardware-to-software technology has to face technical difficulties. Even in the same industry, it is difficult to get a job. Pay twice the salary.
Wei Wei believes that the domestic chip industry is currently facing the dual dilemma of business and government.
In such a technological field with huge input and infrequent output, government support is the basic requirement for improving the status quo of the industry, but the external opponents are so strong. How the country leads enterprises to catch up is the second-to-none difficulty. For chip companies, to get rid of technological flaws, they no longer rely on imports. In addition to strengthening scientific research, the market and anti-monopoly are also long-lasting wars.
When asked if China’s chip technology has the opportunity to be equal to the United States, Wei Wei reluctantly said, “Who knows. I also hope we can achieve it, but this day may never come.”