What happened when OPPO suddenly disbanded the Zheku chip team?

Tech 2023-05-15 12:25:45 Source: Network

A chip design company that once compared Huawei Qilin and Qualcomm Snapdragon, claiming to be about to stream and commercialize chips, suddenly went into shock without warning and announced its immediate dissolution?!As the saying goes, if something goes wrong, there must be a demon! So, where exactly did the "demon" come from when OPPO suddenly disbanded the ZEKU team?Let's take a look at the business information of "Zheku Technology (Shanghai) Co., Ltd

A chip design company that once compared Huawei Qilin and Qualcomm Snapdragon, claiming to be about to stream and commercialize chips, suddenly went into shock without warning and announced its immediate dissolution?!

As the saying goes, if something goes wrong, there must be a demon! So, where exactly did the "demon" come from when OPPO suddenly disbanded the ZEKU team?

Let's take a look at the business information of "Zheku Technology (Shanghai) Co., Ltd." below.

This is a wholly-owned subsidiary of Guangdong Oujia Holdings Co., Ltd., also known as OPPO, with 100% equity. It was only registered in Zhangjiang Science City, Pudong, Shanghai in August 2019, and has been less than four years now! In recent years, Zheku has recruited many high paying people from chip design companies such as Huawei Hiss, and also recruited many fresh graduates from the campus. According to business information, there were 1261 insured individuals in the previous year, and it is estimated that nearly 3000 people were recruited by social and school recruitment from last year to this year. If suddenly disbanded, I don't know how many people would cry from the "pit".

What's wrong with Zheku? What exactly happened to OPPO? Everyone is looking for answers, and in my opinion, there are mainly two points.

1 Being 'targeted'

Exactly four years ago, on May 16, 2019, Huawei was included in the "physical list". Afterwards, Huawei Hisense He Tingbo announced overnight that the "spare tire" had become a full-time employee. However, even more brutal hardships followed, cutting off EDA software and ARM authorization, and even prohibiting Hisense chip OEM.

Fortunately, HiSilicon did not fall, and Huawei survived. In Ren Zhengfei's words, in the past three years, Huawei has completed the replacement development of over 13000 devices and the repeated replacement development of over 4000 circuit boards. In recent years, Huawei has invested hundreds of billions of yuan to take root and tackle technological challenges, finally ushering in the return of the steering wheel to its own hands.

However, the penetration experience of Hisense and Huawei cannot be replicated by any other enterprise worldwide, as will be further elaborated below.

Take the example of neighboring Japan again. At that time, Japan's semiconductor industry was very strong, second only to the United States. At a time when it was at its peak, due to fear of the United States' technology war, it actively avoided the war and chose to "survive by cutting off its arms", compressing investment in technology and innovation, resulting in the current "lost 30 years". Strong as Japan, still choosing to take the initiative to avoid war, resulting in the disappearance of the past, leaving people deeply moved!

Ambitious Zheku/OPPO, ambitious but unfulfilled, why did it come to a sudden halt? It must have been relevant information or someone has passed it on. If we continue to follow the path of Heisi, the outcome can be imagined. Think about it, Zheku/OPPO, can they bear the weight? Therefore, it's better to make a quick decision and break your arm to survive.

2 Business considerations

Let's take a look at the global shipments of various mobile phone manufacturers in the first two quarters. In the fourth quarter of 2022, according to Omdia data, the total global shipments were 301.5 million phones, a decrease of 15.4% compared to the previous year. The following figure shows the ranking of various manufacturers in Q4 2022, with OPPO ranking fifth, with a year-on-year decrease of 20.3% on a quarterly basis and 29.1% on an annual basis.

Looking back at the first quarter of 2023, according to data from research firm Counterpoint Research, the total global smartphone shipments in Q1 2023 decreased by 14% year-on-year and 7% month on month, to 280.2 million units. As shown in the figure below, OPPO ranks fourth by manufacturer, with a year-on-year decrease of 10%.

The key question is, when will the downturn in the mobile phone market come to an end? At present, we have not seen that there are still many uncertain factors in the future. Relying on the meager profits of mobile phones to support the particularly expensive chip research and development is clearly not enough for mobile phone manufacturers.

When we look at Huawei Hiss again, the situation is completely different.

On the one hand, the profit margin on Huawei's device side is much higher than that on the terminal side, which is sufficient to support the research and development of HiSilicon chips. Huawei's rotating chairman, Xu Zhijun, once said that even if Haisi loses 10 or 20 years, Huawei can afford to support it, and Huawei can continue to support it.

On the other hand, Hisense's position in Huawei cannot be replaced. Haisi has several businesses, in addition to supplying Huawei mobile phones/terminals, more importantly, supplying Huawei network equipment. Haisi chips build the competitiveness of Huawei equipment. It can be said that without HiSilicon chips, Huawei's wireless network/optical network/data communication and other devices cannot reach the leading position in the industry. It is no exaggeration to say that HiSilicon chips are the cornerstone of the entire Huawei building!

In addition, Hisense also has the so-called "Little Hisense" business, which refers to chips sold to the outside world, such as video encoding and decoding chips, IoT chips, etc. These are all shipped in large quantities, with a market share of up to 70%, and are Hisense's continuous "cash cow". Moreover, the vast majority of these chips are mature processes, not advanced processes below 14nm. Even during the most difficult period when Haisi was cut off from OEM, Xiaohaisi shipped them and quickly recovered. The external data saying that Hisense's shipments have dropped to nearly zero is nonsense.

So, there is no global chip company that can replicate the model of Huawei HiSilicon. Comparing with Hisense, it can be seen how difficult it is for any manufacturer that only produces mobile phones to support their own chip research company!

Based on the above financial considerations, OPPO's termination of chip self-development is also considered a wise move!

Summary: Due to the possibility of being "targeted" and the enormous financial pressure, the sudden dissolution of Zheku does not appear abrupt.

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