Keeping up with Gree's pace, another home appliance giant officially entered the semiconductor industry

[Follow Gree, another home appliance giant formally entered the semiconductor industry] Recently, the domestic veteran home appliance company Konka announced the establishment of semiconductor technology division, formally entered the semiconductor industry. Zhou Bin, president of Konka Group, said that it will take 5 to 10 years to join the ranks of the world’s leading semiconductor companies and strive to become the top 10 semiconductor companies in China. The annual revenue is expected to exceed 10 billion yuan.

Previously, Gree also disclosed in the 2017 financial report "to enter the semiconductor integrated circuit industry." Dong Mingzhu, chairman of Zhuhai Gree Electric Co., Ltd., said in an exclusive interview with CCTV Financial Channel recently: “Even if it invests 50 billion yuan, Gree will have to succeed in chip research.”

Gree, Konka have entered the semiconductor industry, what is the intention? In the generous investment at the same time invariably put out rhetoric, where their confidence comes from?

Each application-level direction focuses on the dimension of the integrated circuit in terms of function structure, manufacturing process, application field, and use, and can be divided into many different types. If divided from the perspective of the industry chain, Gree, Konka's current layout of the semiconductor business are mostly related to IC design, packaging process. From the information currently revealed by the two companies, it can be seen that in the future they will expand their semiconductor business areas in different ways.

In 2017, Gree announced the establishment of a microelectronics division and plans to build its own chips. It is reported that Gree Microelectronics Department is a subsidiary of Gree Communications Technology Research Institute and has a complete R&D team covering the entire chip design process, including digital front end, digital back end, analog design, layout design, hardware design, software design, and power device design. For air-conditioning products, it involves a variety of chips, including external chips, internal chips, and compressor chips. According to relevant media reports, Gree Electric Co., Ltd. has already started to manufacture IGBTs (Insulated Gate Bipolar Transistors, which are semiconductor power devices, AC frequency conversion technologies such as air conditioners require such components for support), and the main chip for air conditioners. It has also been able to carry out design, and it has taken the form of outsourcing processing for parts that cannot be designed. According to industry sources, Gree's current chip is mainly designed to satisfy its own use.

Recently, Li Hongyi, vice president of Konka Group, in an interview with the media, also revealed the future direction of Konka Semiconductor's main business development. He said: "The storage and IoT chips are the two major directions of Konka Semiconductor's business in the future. First of all, Konka's terminal sales are large, and the market will be bigger and bigger in the future. The storage business is worthwhile to do in a down-to-earth manner. In addition, the future of the Internet of things chips Technology will bring new opportunities for development. Focusing on this technology will be very important for a company in both practical and strategic terms."

In addition, he also said: "Semiconductors are not an overnight industry. The upstream industry chain also needs attention. Konka will continue to invest in the production line, design, and packaging." At the same time, Li Hongyi also made it clear that Konka will not lay out semiconductors for the time being. Round related business.

During the critical period of transformation and upgrading, we have mastered the core competitiveness “Gree, mastering core technologies”. This is Gree's classic slogan, but in the past Gree did not seem to attach too much importance to upstream chip technology. According to industry insiders, Dong Mingzhu was asked in an earlier interview about "why not do chips." Dong Mingzhu said frankly: "The chips are very cheap, only a few dollars."

Today, Dong Mingzhu's release of the "500 billion yuan rhetoric" must also be aware of the dangers of the upstream supply chain being subject to human beings, and draw lessons from the "Zhongxing Incident". According to professionals, China has become the world's largest market for IGBTs, but it still relies mainly on imports. In addition, the market for ADC (Analog to Digital Mixer) control chips is basically in the hands of companies such as the United States and Japan, and these chips are becoming more and more important. They are used in almost all emerging fields that are currently developing rapidly. In the future, the Chinese market will accelerate its consumption upgrade, and household appliances such as air conditioners will also be geared towards high-end and intelligent development. Enterprises without underlying technology support will certainly lose at the starting line. Gree's entry into the semiconductor industry can be understood as preparing for the "next decade."

Compared with Gree’s “learning lessons”, Kanga’s expansion of the semiconductor business is the epitome of the overall strategic transformation of Konka Group.

At a press conference held recently, Konka announced that it will restructure its business structure into four major business groups and two major science and technology divisions (including semiconductor technology divisions). In the future, Konka will strive to “build technology-driven innovations. Platform-based companies are the core positioning. In detailing the chip business, Li Hongyi said in an interview with the media: “At present, the core technology of the chip is still dominated by foreign countries. However, the Internet of Things is a brand-new technology field, which gives many companies the opportunity to overtake the curve. In the future, Konka is also We will appropriately adopt cooperation or mergers and acquisitions, acquisitions, etc. to expand our influence and technical strength in the semiconductor field."

As a well-established domestic appliance company, Konka had caught up with the market dividend brought about by China's rapid economic growth, but it is also facing a difficult transition period. Until 2015, Konka was still at a loss. In today's consumer upgrades and key strategic deployment phases of major companies, it is not unreasonable for Konka to target the rising emerging semiconductor industry as a breakthrough.

Challenging hidden dangers and vigilance against risks of falling behind teams “From the perspective of state responsibility, I am in favor of making chips for home appliance companies. However, from a business perspective, I hold a negative attitude.” A few days ago, home appliance industry observer Liu Buchen said in an interview with reporters: "The chip and even the semiconductor industry need a lot of capital investment. At present, there is not a Chinese household electrical appliance company that has the absolute strength to afford it." As you can see, Chinese home appliance companies and other industry giants have announced their entry into the semiconductor industry and have successfully attracted the attention of the general public. Chinese companies are determined to build China's "core", but at the same time some potential challenges and hidden dangers cannot be ignored either.

First, from the point of view of business operations, the layout of new industries means continuous and substantial investment, and it will not realize the profitability of foreign sales in the short term. This requires companies to have strong enough integration, digestion, and healthy finance as support. Pressing down on consolidation strengths, looking at the financial situation alone, presents a huge challenge to eager home appliance companies.

Taking Konka as an example, according to its published annual report for 2017, during the reporting period, the Group achieved a total operating income of RMB 31.2 billion and a profit of RMB 5 billion (mostly from outward sales of real estate). This is Konka's best annual report in recent years, but it seems to be incompetent to support its development goals in the IC industry.

Zhao Weiguo, chairman of China's integrated circuit leading enterprise, Ziguang Group, once stated publicly: “To be an integrated circuit, if you want to enter the first group, you will need large-scale capital investment. You cannot invest 10 billion US dollars in a year and you cannot enter the first place. The Group's "The ability to burn money" in the IC industry is evident. Comparing the financial report data of Konka and Gree in recent years, we can see that there is still a long way to go for the development of their semiconductor business.

Of course, to learn to avoid being heavy, to play Chinese expertise in some “specialization” areas, or to open up new ways. Dong Min, the vice president of Orville Cloud Network, told the “China Electronics News” reporter: “The global economy is gradually integrating, but for the country and the industry, it still needs to have a sense of crisis. Policy formulation and implementation should be more pragmatic, beware of speculative thinking Diversification of resources in the physical sector has impacted the development of the industry. For home appliance companies or cross-border companies, it is not necessary to focus on the core of integrated circuits, avoid heavy assets, and guard against low-end excess capacity."

In addition, the 2017 KONKA earnings report also showed that color TV business achieved revenue of 11.995 billion yuan for the whole year, gross margin reached 16.11%, contributed 1.932 billion yuan profit for the group, is still Konka's survival of the pillar industries. Gree's dependence on its main business was more pronounced. In 2017, Gree's air-conditioning business accounted for more than 80% of the company’s revenue, with annual revenue of 123.4 billion yuan, up 40% year-on-year. In the future, Gree and Konka need to be vigilant. While trying to expand new businesses, how to prevent the main business from being dragged down and ensure the financial data is healthy. This is also a practical issue left for Gree and Konka.

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