Huaqiangbei MCU Fargo: The Carnival, Lies and Struggle of the "Chip Gambler"
Latest update time：2022-08-30
Reads：
In the "Mirror of Erised", gamblers can see the chips but not themselves.
Author | Wu You
Editor | Wang Yafeng
The chip industry has been wrapped in magical realism in recent years.
At the end of 2020, the core shortage caused by the strike of Malaysian wafer factory workers spread to the world. Insufficient MCU production capacity and structural core shortage have changed the entire industry.
The orderly market was instantly swept by fear.
And
fear is the biggest enemy of order
:
the
orderly
distribution model and pricing system
suddenly collapse
.
Terminal manufacturers skip agents and directly seek supply from original manufacturers; distributors use their personal connections to get scarce chips and make a fortune in the market; original manufacturers kneel down at the gate of wafer factories because they cannot get production capacity; the price of an automotive-grade MCU has soared a hundred times to five figures...
An anxious market is like bloody bait, attracting greedy sharks.
Buffett once said: "
I am greedy when the market is fearful.
"
The "sharks" relied on carts and poles to rush and bite in Huaqiangbei, Shenzhen, feasting and completely forgetting the second half of Buffett's words: "I am afraid when the market is greedy."
The fate of the practitioners displayed on this messed up chess game began to be ruthlessly changed.
Recently, the price of MCU has plummeted. The general-purpose MCU that used to cost 200 yuan has dropped to 20 yuan per piece, but there is still a lot of room for improvement from the actual original factory price of 6-10 yuan.
Those hoarders who try to recreate the myth of making wealth have become the people most affected by this great change. Some people are selling spot goods at low prices while there is still demand in the market. Some people are worried day and night looking at unsold goods. Others are hoarding goods. He owed a large amount of debt to Huo Huo, and he felt sad for his original misjudgment...
When the tide receded, I was already naked on the beach.
1
There are no winners at the Huaqiangbei gambling table
MCUs are sometimes in short supply and sometimes oversupply, causing terminal manufacturers and distributors to fall into chaos and entanglement, constantly pulling each other, leading to a lose-lose situation.
Hardware entrepreneurs are strangled by MCU
In March 2021, Tian Yulong, the founder of an intelligent hardware company, was choked by MCU.
The team was developing a children's education smart hardware at the time, but a supply chain crisis occurred just before production: It was originally agreed to use Acer's MCU with a unit price of 3.8 yuan. Two months later, when Tian Yulong approached Acer again, the other party... Indicates that there is no stock in our own warehouse. Orders can only be made from agents.
Tian Yulong was furious. In desperation, he contacted many agents he was familiar with overnight.
But at this time, it was different from the past. The price of the same chip in the hands of agents had been driven up to 35 yuan a piece. The sudden 10 times premium really made Tian Yulong feel that it was too high to reach.
At this time, there are only two ways left for Tian Yulong: Either use a 35-yuan chip to ensure performance, but have to increase the product price and spread the cost to consumers. Or re-modify the plan and use other chips.
During that period, the entire educational hardware market was being attacked by major manufacturers such as ByteDance, Tencent, and NetEase. High subsidies significantly lowered product prices. If the first path was taken, it would be difficult to be price competitive in the market.
Under attack from both sides, Tian Yulong had no choice but to compromise and chose the second path, switching to another company's MCU with a unit price of 6 yuan, and finally "passed" the risk.
Compromise was the norm in those days, and it was the pass for entrepreneurs to have no choice but to do so.
In fact, this price game between terminal manufacturers and dealers has never had clear rules.
With all information opaque, the chip trading market is like a black box. No one really knows how much inventory is left, and no one can see the real demand.
There are three paths for a chip to go from the factory to the terminal.
One is to directly enter the terminal products with high demand through direct sales from the original factory; one is to enter the terminal products from the original factory through agents; and the other is to go from the original factory to agents to dealers and spot dealers. , and finally enter the end customer.
No matter which way they go, the original manufacturer has little say in the market price of chips. The ones who can really control the ups and downs of the market are the agents and distributors who hold the materials.
In the eyes of entrepreneurs like Tian Yulong, agents and distributors are enemies of the industry because they rashly raise prices at the most difficult times for hardware entrepreneurs.
But this group of so-called "enemies" seem to be facing a more dangerous situation. They stand on both sides of ice and fire, making blind gambles while digging their own graves.
However, the gamblers who were not favored by fate left their footprints of life on the rooftop of Huaqiangbei.
Greed is the dealer 's epitaph
"Since the second half of last year, videos of people jumping from the SEG Building have been circulating in our industry community. It is said that these are people who hoarded a large amount of chips due to loans and could not sell them. In the end, they were really desperate." Chen Yi, head of the chip supply chain software platform, told Leifeng.com.
When Leifeng.com chatted with Li Qing, a business line project engineer of a terminal manufacturer, about the rumors of jumping off a building in Huaqiangbei, Li Qing told us the story of Ajie.
"If Ajie still doesn't pay, he may eventually choose to jump off the building."
Li Qing couldn't help but lamented Ajie's fate.
Ajie is a distributor of domestic MCU manufacturer GigaDevice (GD) in Huaqiangbei. After seeing a slight price increase of GD's MCU, he was told by dozens of friends around him that the price of this batch of MCUs would continue to rise in the future. So he applied for a business loan from the bank and asked his friends to order a large batch of goods from GD.
Contrary to expectations, GD's MCU not only did not continue to increase in price, but the price fell due to excessive inventory and insufficient market demand. Ajie had to sell his goods at a loss, and the monthly income was not enough to pay the bank interest.
"In Huaqiangbei, there are many, many Ajie." Li Qing finally said with emotion.
We no longer know exactly what Ajie's fate will be. But more Ajies have drawn an eternal end to them and their stories on the rooftop of the SEG Building.
Regarding the Ajies, veterans in the chip sales industry gave different evaluations.
Big dealers responded by countering the moves, while small dealers were helpless
Liu Cixin wrote a fable in "The Three-Body Problem":
There was a farmer who raised a group of turkeys. The farmer would feed the turkeys on time at 11 o'clock in the morning.
Scientists in turkeys observed this phenomenon and came up with a law of the turkey universe. Food will arrive on time at eleven o'clock every morning.
On Thanksgiving Day, the farmer’s butcher knife falsified the turkey scientist’s “theory” in the most drastic way.
In the view of Yang Yang, a salesperson at the trader, the Ajies are the "turkey scientists" of Huaqiangbei.
Their understanding of the "farmer" of the market has a self-justifying gambler's logic, but in fact it is far from the real market laws.
Yang Yang believes that the Ajies are probably the group of people in the circle who have financial strength and think they have connections, and they think they have control of the market trends.
But in fact, information in Huaqiangbei is very closed. If you just listen to the market predictions of people around you and choose to go all in, you will often end up with the opposite of what you want.
Zehong, who has more than 20 years of experience in the electronics industry, is even more dissatisfied with Ajie. Zehong believes that Ajie must not be a veteran in this industry, and veterans will not choose this extremely risky path.
Ajie is likely to be someone who is in a desperate situation and wants to take a gamble to "make money".
Zehong currently runs a chip agency with more than 20 agency certificates, orders directly from original manufacturers, and trades with terminal manufacturers' factories.
Zehong told Leifeng.com that when dealing with larger chip original manufacturers, agents need to mortgage fixed assets and make commitments on sales. If they cannot achieve the promised sales, they will face agency certificates. Risk of Forfeiture. "If the monthly sales of a certain material number by an agent are not enough, the goods will be picked up first and temporarily stored in their own warehouses, resulting in accumulation of goods."
On the contrary, there is another situation. Sometimes agents will encounter terminal manufacturers who repeatedly delay the delivery time, especially when the demand for consumer electronics is insufficient. Zehong's company recently encountered a similar situation. An end customer promised to deliver the goods within one month, but now it is the third month and there is still no progress on this order.
But Zehong did not express any concerns about the batch of goods that had not been delivered on time. "If the customer does not pick up this batch of chip materials in the end, we will resell them to other customers, and then communicate with the original manufacturer to take less next time."
Larger agents have already formed their own systems. No matter how the outside world changes, as long as they continue to operate step by step as usual, they can ensure stable revenue.
But smaller operators cannot stand still under the impact of this wave.
This is the case with the company where Wang Weiwei works.
Two years ago, the chip distributor where Wang Weiwei worked customized 100kk MCUs according to customer demand. However, the company boss had to find a way to sell the goods himself because the customer could not deliver the goods for a long time. He called on his employees and offered a reward of 100,000 yuan to anyone who could find a way to sell the goods.
Wang Weiwei thought this was a good opportunity for promotion and salary increase, and looked around for shipping opportunities. However, two years later, the goods have never been sold.
Finding the most suitable "sewer" and flushing away the dead goods that are about to rot in their hands has become something that operators think about day and night.
2
Dead things that "miracles" can't save
The dead goods redemption plan is being carried out in Huaqiangbei in two forms: "high-profile strikes" and "wandering in the gray area."
In the movie "Miracle: Stupid Kid", the protagonist Jing Hao started from a mobile phone repair pawn shop in Huaqiangbei. By recycling mobile phone parts, he successfully built an industrial chain for mobile phone component recycling and eventually founded his own mobile phone company.
In reality, Zhang Jiacheng is a miracle kid in the MCU circle.
"Can anyone incorporate this MCU into a solution?" Zhang Jiacheng asked in a WeChat group of 500 people.
Zhang Jiacheng has been working hard in Huaqiangbei for more than ten years and has accumulated a group of engineers who can make their own solutions. When he cannot sell chips that he is willing to sell at a low price, Zhang Jiacheng will shout in the community to see if there are any. Engineers have the ability to embed "obsolete" chips into the overall solution. If there are, Zhang Jiacheng will recycle this batch of chips at a low price and earn a certain profit from them.
After the message was sent, someone contacted Zhang Jiacheng 20 minutes later and said that they needed this batch of goods and wanted to discuss cooperation matters with him.
"Not everyone can adopt Jiacheng's business model. A large number of engineering resources are the key, and the needs of both parties also need to be aligned," said Chen Yi, a friend of Zhang Jiacheng in the industry.
MCUs that have no market are also sold in quantities of millions, and only a small portion can be recycled through integration. Therefore, there is another illegal method circulating in the industry that consumes a large amount of MCU inventory.
"Nowadays, the market for general-purpose MCUs has been saturated and even reduced in price, but automotive-grade MCUs are still out of stock. Many people will grind off the logos of general-purpose MCUs, tamper with them into the certification logos of automotive-grade MCUs, and then sell them on the market, making a small profit," an industry insider told Leifeng.com.
This method has already touched the red line of the law, but there are still gamblers who are willing to go all out for it.
According to the official explanation, the requirements and difficulty of automotive-grade MCUs are higher than those of commercial and industrial grades, and second only to military grade. They have strict requirements on safety, reliability, and operating temperature, and must meet a series of industry standards such as AEC Q100 and IATF 16949. The certification cycle is often as long as two years. In addition to the requirements for design companies, upstream and downstream companies such as wafer fabs and packaging plants are also required to comply with relevant standards.
Dan Zehong said that automotive-grade MCUs simply have higher requirements for temperature and environment, and the circuit principles are the same. The chip itself can pass the original manufacturer's certification and can still pass the certification test even after adding the automotive-grade logo.
However, these "miracles" that can bring dead goods back to life do not happen often. After the market demand declines, the general MCU business has become increasingly difficult. This is not only reflected in extreme cases such as hoarding goods and jumping off buildings, but also in the sales performance of chip distributors.
Yu Xi, who used to engage in online education, joined a chip dealer as a sales manager a few months ago under the guidance of his senior brother. Before joining the job, Yu Xi heard many myths about how to make money by buying and selling chips, and he was full of motivation. .
After joining the company, Yu Xi's daily job is to call the terminal manufacturer's procurement department to ask if they need chip materials. Often the second sentence is still in his throat, and he will be choked back by the hang-up sound on the other side. He dials out in one day. After 120 phone calls, only one customer expressed willingness to further communicate with Yu Xi.
Faced with the company's performance target of selling orders worth RMB 200,000 to become a regular employee, Yu Xi felt a lot of pressure.
"The interns who came in the first half of last year could basically close a deal with just one phone call. Customers were scrambling to get the goods, and they were successfully converted to full-time employees within a month. However, my colleagues who joined the company in September last year have not been converted to full-time employees to this day. Now that general-purpose MCUs are no longer in short supply, it has become more difficult to sell chips." Yu Xi believes that he missed the right opportunity.
"But our boss said that in this business you have to have a good attitude and be able to endure it." Yu Xi pretended to be relaxed and swallowed the boss's pie, then continued on the phone, "Maybe good luck will be on the next phone call."
Who made MCU salespeople go from making tens of thousands a day to struggling?
The person who ruined the dreams of hoarders: local MCU manufacturers
In the world of chips, MCUs are lower-level silicon-based creatures compared to high-performance SoCs.
With the expansion of domestic production, the price of MCUs has dropped year after year. Some foreign chip design companies have simply given up the low-end general MCU business, or sold related business lines to local companies.
During the period of core shortage, local general-purpose MCUs were attacked with unprecedented ferocity, coupled with insufficient downstream demand, which became an important reason for the decline in MCU prices.
GD's MCU revenue growth in the past two years and Hangshun's rapid growth in the past year are the best proof.
So how did domestic manufacturers rise from the margins and squeeze out part of the market share of overseas companies?
Around 2010, the first batch of wafer fabs in mainland China matured and local MCU companies began to replace them under the banner of pin to pin.
During this period, international MCU manufacturers not only accumulated thousands of MCU models, but also cooperated with various universities to cultivate user habits of prospective engineers, and then expanded to every corner.
However, domestic manufacturers have not kept up yet and can only compete on the general solution with the largest shipment volume.
"Product technology is one aspect. But the main reason why people have not been very receptive to domestically produced MCUs is because the learning cost is too high. To switch to a new MCU product, engineers need to spend about three months or a year to familiarize themselves with various configurations and programming methods. Not all engineers are willing to spend such energy." Li Qing said when talking about the development of domestically produced MCUs.
It is not easy to completely switch from MCU products of international manufacturers to domestic MCU.
It often takes more than a year from contact to complete introduction
.
Although Li Qing's company serves overseas giants that rely more on international customers, due to policy restrictions, it has to use a large number of domestic MCUs. In addition, it has encountered a supply chain shortage in the past two years and overseas MCUs cannot be supplied. Li Qing's colleagues can only It takes a lot of time to modify the solution code, and at the same time, it is necessary to introduce cheaper domestic MCU solutions to European and American customers.
Even if customers relent and agree to import domestic MCUs, these MCUs may not be able to be packaged and tested in domestic fabs, nor can they successfully meet all the needs of overseas customers at one time. Many engineers often work overtime for this.
During the core shortage period, a local MCU manufacturer designed an MCU chip for massage chairs against TI. Its target customers happened to be the end customers that Zehong Company manufacturers cooperated with, so they reached a cooperation with Zehong Company to speed up the implementation of their own MCUs. process.
However, this accelerated replacement still
needs to go through sample certification testing, small batch certification testing, small and new project replacement, and finally old and large project replacement
.
"Both agents and end customers need to bear certain risks, so they need to advance steadily. Our participation in this domestic MCU replacement project lasted about a year and a half." Zehong said.
This coincides with the time period when general-purpose MCUs went from shortages to price increases and then to a big plunge.
In just this year and a half, the world of MCU chips has been completely different.
As the uncertainty in Sino-US relations and the shortage of imported cores intensifies, many downstream manufacturers have gradually become aware of the instability of the international supply chain, and are actively or passively changing their user habits and trying to join the trend of using local MCUs. Come in.
Symus, which develops testing instruments, took into account the fragility of the semiconductor supply chain before the chip shortage came, and made redundant selections at the beginning of product design. The redundant design was completed in 2018, and all analog devices were domestically produced in 2021.
Because of its advanced layout, Symus was hardly affected by the price increase.
When the international MCU showed a clear price increase trend, the MCU products used in Symus' cleaning equipment were successfully switched from ST's products to GD's E103VBT6, the latter's price was less than one-tenth of the former.
In Symus's view, Ajie's behavior is almost absurd: "My monthly order volume is only a few hundred chips, all of which are directly supplied by the chip manufacturer. I really can't understand why speculators would stock up on GD chips."
Agents and distributors also play a key role in the domestic replacement of MCUs.
Zhong Yin's company was originally a distributor of major international manufacturers. MCUs from major international manufacturers such as TI, ST, and Microchip were originally the company's advantageous source of supply. However, during the core shortage period, it was unable to provide the chips customers needed or the chip prices were seriously excessive. Customer budget problems occur from time to time, so in 2020, the company adjusted its market strategy and established a new domestic chip agency company. Chipway, a domestic automotive-grade MCU manufacturer, is among them.
"When the chips are unavailable on the market or the chips are too expensive, we will compare the production capacity and specifications of each chip manufacturer to provide customers with suitable domestic alternative solutions," Zhong Yin said.
It is precisely because local automotive-grade MCUs are still in their infancy, their performance and specifications are far from the international level, and there are very few models that can be replaced. Therefore, while domestic general-purpose MCUs are dominating the market, automotive-grade MCUs have been able to "survive" and their prices remain strong.
Long-termism in the chip business
The price of chips in the semiconductor industry has always been subject to uncontrollable fluctuations.
The storage industry has obvious capital expenditure and capacity cycles, and industry prices and revenue fluctuate greatly. Non-storage industry spending is stable, but there is also an obvious inventory cycle. There is a one-quarter lag from the time a chip design company places an order to the time the chip is produced by the foundry. Fluctuations in supply and demand affect chip prices.
A complete semiconductor cycle usually needs to go through seven stages: demand explosion, shortage and price increase, investment and production expansion, gradual release of production capacity, shrinking market demand, overcapacity, and price decline.
The first four stages are called the semiconductor boom cycle, during which the market is booming and prices are rising.
This is a good time for semiconductor companies to make profits.
Not only them, but also agents, dealers and spot traders in the chip distribution system have come to the rising market to "catch the sea" and take the opportunity to make a fortune.
But in the same rising cycle of going to the sea, some people still diligently repair their boats and mend their nets after going to the sea, while others have lost themselves in the pleasure of this "gambling".
In the wave of core shortage, many spot dealers who have just entered the industry have tasted the sweetness after discovering that they can obtain the supply of goods certified by the original factory and control the pricing power. Since then, they have become turkeys who think they have understood the laws of the universe and look forward to it every day. Food will appear automatically.
But once you embark on the path of hoarding and speculating on goods, you will find that the risk factor is actually extremely high and it is not a long-term solution.
Wafer fabs have raised prices due to the capital investment required to expand production and build factories. Most chip design manufacturers have no bargaining power. If they do not accept the price increase, they will face the risk of not being able to obtain production capacity and losing opportunities to cooperate with wafer fabs. They have no choice but to raise prices. way to control your own costs.
In the general MCU field where the technical threshold is not too high, low-priced products have certain competitive advantages. In order to do long-term business, chip design manufacturers will control the increase within a certain range even if the price increases, and openly "cut ties" with dealers who participate in price speculation.
Agents who grew up as dealers have already experienced the ups and downs of the industry. Even if they participate in the "rush to the sea" carnival in the upward cycle, most of them use the spot dealer's price as a bargaining chip with the terminal manufacturer to increase the price appropriately. Maintaining customer relationships is the first priority.
During the period when chip prices skyrocketed, Zehong had plenty of opportunities to sell the shortage of chip materials to dealers at higher prices, but Zehong did not do so. In his opinion, although selling to dealers could Huge profits can be made in the short term, but dealers focus on the lowest prices in the market and lack loyalty, so they cannot develop into long-term customers.
"End customers have real needs and will not change suppliers casually. They are more loyal partners." Adhering to this business experience, the small stall that Zehong set up when he first came into contact with the electronics industry ten years ago has now grown into A formal agent that has begun to take shape.
They deeply understand that "catching the sea" is only a temporary pleasure. Only by practicing hard the skills of fighting the sea can they overcome the turbulence that may appear at any time in the future.
When chip agents develop to a certain scale, they will have the opportunity to consider transforming and upgrading to chip original equipment manufacturers.
Before founding Hangshun Chip, Liu Jiping was just a salesperson at Hetai, a chip distributor;
Yu Renrong also worked in the field of component distribution for more than ten years. In 2006, he became the largest electronic distributor in Beijing before establishing Weier Technology.
Zehong, which adheres to long-termism, is striving to transform and upgrade into a chip original equipment manufacturer.
But Ajie and Ajie may never wait for their own day.
Chip distribution is only one link in the chip industry chain. The chip industry chain is long and complex, and there are many more exciting stories and advanced technologies worth writing and discussing. If you want to know more about Huaqiangbei's chip stories, please add the author's WeChat Yolanda_Zuu for communication.
(At the request of the interviewees, all names in this article are pseudonyms)
京公网安备 11010802033920号