leonardwarren Chapter 104 Disassembly Report
Chapter 104 Disassembly Report
May 2, 2020, Nanshan District, Shenzhen.
Tianying Technology Headquarters, 17th Floor, Xia Kanghao's Private Office.
On the desk were three palm-sized circuit board modules placed side by side, next to a 47-page disassembly report with the words "Top Secret" printed in bold red on the cover.
Huang Mingzhe stood across the desk, looking exhausted, with dark circles under his eyes. Clearly, he had barely slept for the past forty-eight hours.
"I've got all three versions."
Huang Mingzhe pushed the disassembly report in front of Xia Kanghao, saying, "Our hardware team worked overnight to do a complete disassembly, and it includes the model, supplier, and cost estimate for each chip."
Xia Kanghao didn't look at the report first, but picked up the bird module in the middle that was marked "Advanced Version" and looked at it closely.
With a standardized size of 5 cm by 5 cm and double-sided surface mount technology, the layout is so compact that there is almost no extra space. The main control chip is located in the center of the front of the module, next to which is a dual redundant IMU sensor array, and the edges are a GPS dual-mode receiver module and a matching RF front end.
The back features a power management chip, an ESC driver interface, and a set of reserved expansion pins.
The exquisite craftsmanship of the entire module far exceeded his expectations.
This doesn't seem like something a four-year-old company could produce.
What model of IMU is this?
Xia Kanghao pointed to a chip in the center of the sensor array and asked. The chip's packaging had a logo he didn't recognize.
"This is the most shocking discovery we made during the entire disassembly."
Huang Ming-che turned to page twelve of the report and pointed to a close-up photo of a chip.
"This IMU is not from Bosch, TDK, or STMicroelectronics. It comes from a domestic company called Microsensor, registered in Wuxi."
"Domestic IMU?"
Xia Kanghao frowned.
"Yes. We checked the company's background—it was founded seven years ago, and the founder is Zhao Jiancheng, who used to work at the Institute of Microelectronics of the Chinese Academy of Sciences, specializing in MEMS inertial sensors. The company is not large, and it has previously been supplying automotive electronics and industrial instruments, with almost no presence in the drone field."
"Why would Hongyuan use their chips?"
"Because Su Chen personally went to Wuxi last year."
Huang Mingzhe's tone became heavy.
"According to our information, Su Chen personally visited MicroSense Semiconductor last October and stayed there for nearly two months. It's said he directly participated in improving MicroSense's MEMS process, helping them reduce the low-temperature drift from five times that of Bosch to 1.4 times."
"1.4x Bosch?"
Xia Kanghao's fingers stopped.
He understood better than anyone what this number meant. Currently, the Tianying's flight control module uses Bosch's BMI088, with a purchase price of 28 yuan per module. The reason Bosch can sell it at this price is because there are no comparable alternatives in China.
If Weisen's IMU truly reaches 1.4 times the level of Bosch, then Hongyuan will have a domestic sensor supply source with similar performance and a much lower cost than Bosch.
What is the procurement price of a micro-sensing IMU?
"We estimate it to be between eleven and thirteen pieces."
Xia Kanghao closed his eyes.
Eleven units versus twenty-eight units. Just for the IMU alone, Hongyuan's cost is nearly 60% lower than Tianying's.
"Go on."
"The main control chip is Hongyuan's self-developed HY-FC01, for which we haven't found any publicly available information. However, based on the packaging and die size, it's likely a custom SOC based on the ARM Cortex-M7 core, integrating a flight control algorithm acceleration unit and a communication protocol stack. We estimate the cost of this chip to be between thirty-five and forty yuan."
Huang Mingzhe turned to the cost summary page of the report.
"We estimate the BOM cost for the basic module to be between 190 and 210. The advanced version will cost between 280 and 310. The professional version will cost between 390 and 430."
"They sell them for four hundred and ninety, six hundred and ninety, nine hundred and ninety."
Xia Kanghao opened his eyes and slowly read out the pricing for the Flying Bird platform.
"The gross profit margin is between 50% and 60%."
Huang Mingzhe nodded. "They're not dumping products at a loss. They're making a lot of money."
This is what makes Xia Kanghao most desperate.
If Hongyuan is selling at a loss, it at least shows that the price is unsustainable, and Tianying still has the opportunity to wait for its competitors to run out of money.
But Hongyuan is different. They have a gross profit margin of over 50% on each module, which means they can maintain this price indefinitely, and there is even room for further price reductions.
The flagship version of Tianying's flight control module has a BOM cost of over 700, with a delivery price of 1,280 and a gross profit margin of less than 45%.
Its cost is twice that of its competitors, its performance is inferior, and its price is almost twice as high.
How do I play?
"There's one last question."
Xia Kanghao's voice was very soft.
"Have you clarified the airworthiness certification issue?"
Huang Mingzhe remained silent for two seconds.
"It's been confirmed. Hongyuan submitted three versions of its Feiniao platform's airworthiness pre-certification application to the Civil Aviation Administration of China (CAAC) in March. According to our sources, the CAAC has completed the initial review, and we expect to receive the official pre-certification certificate by the end of June."
What about us?
"us……"
Huang Mingzhe gave a wry smile. "Zhao Guoliang said that just preparing the application materials would take at least three months. From application to receiving the certificate, the normal process takes nine to twelve months."
"In other words, even if we start immediately, the earliest we can obtain airworthiness certification is the middle of next year."
"Yes."
Xia Kanghao leaned back in his chair and stared at the ceiling for a long time.
He recalled that afternoon last March—the day Haotai Capital acquired Tianying Technology for 300 million yuan. Standing before the floor-to-ceiling windows of this office, he confidently told those around him, "The drone industry has no shortage of flight control solutions; what we need to do is build a brand and distribution channels."
Three hundred million.
At the time, he thought it was a smart acquisition. Tianying had a brand, channels, and sales volume; all it lacked was capital injection and strategic upgrades.
Looking back now, what did those 300 million buy?
An S2 Pro mess.
A flight control module business whose shipments have been halved.
A technical team that hasn't even started the airworthiness certification process.
"President Xia."
There was a knock at the door. It was strategic analyst Lin Wei.
"What is it?"
"Zhou Licheng is here. He's waiting outside."
Zhou Licheng is the head of the R&D department at Tianying Flight Control. Xia Kanghao asked him to come in for a report at nine o'clock today.
"Let him in."
When Zhou Licheng pushed open the door, he was holding a document in his hand. But his expression didn't look like he was there to report on work; it looked more like he was attending a funeral.
"Mr. Xia, regarding the project for the self-developed flight control platform..."
"It must be completed before September 30th, as I mentioned yesterday."
"Mr. Xia, I can't do it."
Zhou Licheng's words silenced the entire office.
"What did you say?"
"I can't do it."
Zhou Licheng placed the documents he was holding on the table. "This is my resignation letter."
Xia Kanghao glanced down at the resignation letter, then slowly raised his head, his gaze fixed on Zhou Licheng's face.
Why?
"Mr. Xia, I've been in this industry for eleven years. Flight control platforms aren't something you can build just by throwing money and time at it. Hongyuan's Flying Bird platform, from the underlying algorithms to the hardware design, from sensor fusion to the SDK system, every layer was meticulously crafted by Su Chen and Wu Zheng and their team, bit by bit."
Zhou Licheng's voice was calm, but every word was like a nail piercing Xia Kanghao's heart.
"Our current team is down to half its core members—Wu Zheng took six people with him, and three more left last year. Of the remaining members, not a single one can independently design the flight control architecture. In five months, let alone creating a product that can compete with the Flying Bird, even creating a stable prototype is highly questionable."
So you're going to run away?
Xia Kanghao's voice turned cold.
"It's not that I'm running away. It's that I'm not capable of completing this task. Rather than taking a high salary and wasting the company's time, it's better to replace you with a more capable person sooner rather than later."
After Zhou Licheng finished speaking, he turned and walked towards the door.
He paused at the door but didn't turn around.
"Mr. Xia, there's something I shouldn't have said. But when you acquired Tianying, you said something like, 'Flight control systems are something you just buy.'"
"Now you should understand. Flight controllers are something you really can't buy."
The door closed gently behind me.
Xia Kanghao sat motionless in the chair, his facial muscles twitching slightly.
Three seconds later, he picked up the mug on the table and smashed it hard against the French windows.
The cup bounced off the tempered glass and shattered into pieces, spilling coffee all over the floor.
Hearing the noise, Lin Wei and Huang Mingzhe outside the door exchanged a glance, but neither dared to go in.
……
That afternoon, at Haotai Capital's Beijing headquarters.
Xia Kanghao's partner and Haotai Capital co-founder Qian Weiyuan is reading a report.
The report is titled "Post-Investment Evaluation of Tianying Technology (Q1 2020)".
He turned to the last page of the summary:
"Comprehensive Assessment: Tianying Technology's current market position is rapidly deteriorating. The S2 Pro product line has essentially failed, flight control module shipments have declined by 56% quarter-on-quarter, and the core technology team has suffered significant losses. Recommendation: Initiate an evaluation of exit strategies."
Qian Weiyuan took off his glasses and rubbed his temples.
Three hundred million.
Less than a year and a half after the investment, the unrealized losses on paper have already exceeded 40%.
He picked up the phone and dialed Xia Kanghao.
"Kang Hao, I've read the report about Tianying. LP has already started asking questions; you need to give me an explanation."
There was a five-second silence on the other end of the phone.
"Weiyuan, give me three months. If the situation doesn't improve within three months, I'll buy back this investment myself."
Are you sure?
"Sure."
After hanging up the phone, Qian Weiyuan leaned back in his chair and let out a long sigh.
He had known Xia Kanghao for twelve years. This was the first time he had heard Xia Kanghao say, "I bought it back with my own money."
This means that Xia Kanghao has treated the Tianying investment as a personal gamble.
In the world of capital, those who turn investment into gambling usually don't have a good ending.