Chapter 77: Supply Chain Crisis

After Su You Jie and Wu Lei quit, Zhou Kun, the former deputy captain, became the head of the product development team in Xing Hai Technologies. Chen Jin had more faith in him.

On the other hand, the human resources department released recruitment advertisements, hiring a large number of technicians, including hardware engineers, software engineers, testing specialists, etc. Hundreds of people had to be recruited. The remumerations were very generous as well. An annual salary of a million for those who had five years of work experience; three to five hundred thousand annually for three to five years of work experience; for those who had a work experience of three years or below but with great ability, the salary could reach to two hundred thousand annually… the salary and work benefits offered were among the top in the field. The travel expenses of all of the interviewees were fully reimbursed. Many interviewees flooded in and within a few days, the company had hired enough talents.

Why did Xing Hai Technologies hire so many technicians? The research and development project of “Wa-wah Robot 2.0” was officially launched. That meant the development works regarding the second generation of Wa-wah robots were officially initiated.

At the project commencement meeting, Chen Jin, the Chairman of Xing Hai Technologies, put forward several key technical indicators:

Upgrade the algorithm, and adopt a smarter cleaning mode: no need to clean for ten times in the initial use, no scene restrictions, and it should more convenient for customers to use.

Develop an “enterprise version” exclusively for use of business units. This would serve as an important supplement to the basic version.

Add the wireless charging function, and make charging more secure.

Add the social mode, like “joy”, “anger”, “happiness” and other voice packages, along with singing and dancing.

Add the OCD mode, where once the rubbish appears on the floor, the robot will clean it up immediately.

In addition, the second generation of the Wa-wah robots will be subdivided into different product segments, providing three configuration systems which include “low-end”, “middle-range” and “high end.” The corresponding prices were three thousand, five thousand, and eight thousand. This would cater to the needs of different classes.

Compared to the ultimate version of Wa-wah robot in Chen Jin’s mind, the improvements made in the Wa-wah robot 2.0 were only the tip of the iceberg, merely regular upgrades. He hadn’t even added the best functions to the robot. Still, Wa-wah robot 2.0 was highly competitive in the market. At least it could again excel the upcoming Wa-wah robots 1.0 counterfeits (copycats), establishing a solid leading advantage in the market. By the time his competitors were able to catch up, Wa-wah robot 3.0 would be almost ready to come out.

If some competitors were so talented in plagiarizing, he could also protect his interests through the legal system. One needed to bear in mind that the country had greatly enhanced the protection of intellectual property in those years. Anyway, about the market competition, Chen Jin was never afraid of his competitors. Thanks to excellent product quality coupled with the huge support from fans, Wa-wah robots would take a major market share for Xing Hai Technologies.

Besides, the development period of Wa-wah Robot 2.0 was around three months. If there were any technical bottlenecks in the process Chen Jin could tackle it.

So…Steady, steady. He couldn’t find better words to describe the current situation. Therefore, in his spare time, the issue Chen Jin studied the most was how much he could earn. How much could he earn then? Would it be the same as the amount he expected, 800 dollars of profit for every Wa-wah robot?

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He laughed bitterly. Chen Jin sighed, “Real economy is really hard. I should’ve done more research beforehand, understanding the cost in different elements. I shouldn’t be too naive and take everything for granted.”

Taking the renowned super-profitable Apple iPhone as an example, the maximum price set for the latest model XS Max was thirteen thousand, but how much did the hardware cost? Only a little bit more than $3,500, accounting for less than 30% of the retail price. On the surface, they had a profit margin of 70%. But after deducting a series of costs such as research and development, assembly, software, advertising, distribution, taxation, etc., the Apple company only received a net profit of around 3,000 per sale. The hardware took up a quarter of the price, other costs took up a half, and the net profit left was only a quarter. The net profit of the phone only accounted for 25% of the retail price.

This was only an example of the smartphone industry, and it was based on Apple, the well-known profit-generating company. As for other competitors, it would be excellent if they could reach a net profit margin of 5%. So, what was the actual net profit margin of a Wa-wah robot developed by Xing Hai Technologies?

Chen Jin invited the professional, his mom, to help him do the math. This would save him a great deal of complicated calculation process. Excluding all costs, the actual net profit margin of the Wa-wah robot was 15%… given that the price was set at $3,699. In other words, Chen Jin could earn $555 for every robot sold.

Also, for the first batch of 50,000 Wa-wah robots, Chen Jin offered a $300 discount to buyers and a $50 subsidy to Ling Feng Jing Mi Company (but the subsidy was canceled after the yield rate had raised). In other words, for the first batch of 50,000 Wa-wah robots, Chen Jin only earned $240 for each robot, with a total of 1.2 billion.

And this was achieved because Xing Hai Technologies saved a large sum of money on advertising, research and development, and distribution. This was even less than the profit gained from selling a few hundred kilograms of gold in Forever Jewels in a month.

“This is only for fun, for fun only!”

The difficulty of running a real economy could manifest itself. But Chen Jin could only continue. Indeed, he did not earn much, yet he had his feet on the ground, being fulfilled and motivated. Moreover, adopting the strategy of small profits and quick returns, Wa-wah robots entered thousands and thousands of families, achieving a sales volume of twenty million. If he multiplied that number by $555, he could also be a billionaire.

However, a phone call immediately crushed his dream. Across the phone, Wang Quan Long, the director of Ling Feng Jing Mi Company, said in a panic, “Chief Chen, there is a huge problem in the supply chain! A few days ago I sent some people to Japan to negotiate and order a batch of brushless motors and the moving parts of the mechanic arm. We placed an order of 3.3 million pieces for each item. The contract was originally well negotiated, and the price was cheaper than the last batch. Once the contract is signed, the stock can be delivered instantly. But for some reason, just now the delegates of the two Japanese companies suddenly fell out with us, saying that they can only supply a million pieces, with a 50% increase in the price. If we do not agree, they will terminate the collaboration. Chief Chen, this must be the ‘good work’ done by the local competitors. They want to restrain our supply chain and put us to death! We have two million pre-orders of Wa-wah robots, if the supply chain cannot meet our needs, we will fall into a huge passive role! Chief Chen, this is a huge crisis that we’re facing now!”

What?!

Chen Jin was completely gobsmacked. “Don’t panic, just don’t panic first!” He quickly composed himself and asked, “You talked about brushless motors and the moving parts of the mechanic arm. Aren’t there any other suppliers for substitution? Any companies in our country that manufacture the same parts? ”

“No!” Wang Quan Long shook his head and said, “A few companies in our country produce brushless motors but their quality can never reach the level of Yaskawa Electric in terms of lifespan speed, stability, and such. The difference is so huge that they cannot replace the Japanese production; there are only very few companies in the country that produce the moving parts of the mechanic arm, and the difference in quality is enormous. Even if we search around the world, we will not find a company better than Fanuc Corporation.”

“Chief Chen, we were too careless. This round, they’ve attacked us ruthlessly.” Speaking of this, Wang Quan Long gnawed his teeth and grieved, “Why, why do we have traitors in the country that cannot keep their feet on the ground and compete fairly? Why do they have to give the advantage to the foreigners?”

On the other side of the phone, Chen Jin remained silent for a while. He did not show the despondency and frustration that Wong Quan Long had.

He only murmured, “Is it really irreplaceable…” His eyes suddenly lit up and he said, “I don’t think so!”v