novelraw Chapter 106 Undercurrents
Chapter 106 Undercurrents
Mid-January 2020.
The shockwaves caused by Su Chen's interview within the industry have yet to subside.
In drone industry forums, WeChat groups, and Moments, almost everyone is discussing the same topic—whether Hongyuan Intelligent's three major plans are reliable or not.
Those who are optimistic believe that the Feiniao platform has proven Su Chen's strategic vision. Signing 320 companies in a month wasn't luck, but rather the result of two years of accumulated technological barriers and supply chain advantages. Once someone like that says they're going to do something, it's best not to gamble on whether they can deliver.
Those who were skeptical believed that Su Chen was just bragging.
"Hongyuan is a company that makes consumer drones and agricultural drones. The F4 sold well because there wasn't much competition in its price range of around 3,000 yuan. Now they're going to acquire an industrial integrator? Make high-end consumer drones priced over 5,000 yuan to compete with DJI? And what's with their low-altitude communication modules?"
A blogger in the drone industry wrote an article that garnered over 10,000 views, titled "Su Chen's Ambition and Hongyuan's Boundaries."
The article's core argument is that a company that has been established for four years and has annual revenue of less than 300 million yuan is pursuing three strategic lines simultaneously. This is not ambition; it's suicidal.
"Doing well in the consumer market doesn't mean you can do it in the industrial market. Brands have their limits. Hongyuan is known in the industry as 'that company from the F4' and the 'Plant Protection SDK Alliance.' If you ask a power grid company or logistics enterprise to purchase Hongyuan's industrial drones, what's their first reaction? It's, 'This company that makes consumer drones also makes industrial drones?'"
"As for comparing the F5 to DJI, that's wishful thinking. DJI's dominance in the consumer market wasn't built on a single technology, but on a decade of accumulated brand, channels, user ecosystem, and continuous product iteration capabilities. What does Hongyuan have to compare itself to? The F4?"
This article has been widely circulated in the industry, and many people added their own comments when forwarding it: "That makes sense," "Su Chen really took too big a step," "Feiniao platform is doing well, but that doesn't mean it can do everything well."
Of course, some people disagreed.
A former employee who worked at Hongyuan for two years wrote a long article on Zhihu titled "You Don't Understand Su Chen".
"Two years ago, everyone thought Hongyuan's self-developed flight controller was a waste of money, but the Flying Bird platform was developed. A year ago, everyone thought Hongyuan's cooperation with Microsensor Semiconductor was risky, but a domestically produced IMU was developed. Every time Su Chen did something, it seemed like he was 'taking too big a step' at the time, but in hindsight, every step was perfectly timed."
"You don't understand this person. He's not the kind of boss who makes decisions on a whim. Before he does anything, he thinks at least three steps ahead."
The article has garnered over 50,000 views, but the comments section remains polarized.
Regardless of what others say, Hongyuan Intelligent's progress has not stopped.
……
May 19, 2020, Futian District, Shenzhen.
In a private tea room facing the street, Xia Kanghao sat by the window with a pot of Tieguanyin tea in front of him that had not yet been poured.
Across from me sat a man in his fifties, thin with gray hair, wearing a gray polo shirt, who looked more like a university professor than a vice president of a multi-billion dollar company.
Shen Pingchuan, Vice President of DJI Innovations.
"Mr. Shen, I'll be frank."
Xia Kanghao picked up his teacup but didn't drink. "You've seen what happened with the Flying Bird platform. Su Chen made this move very quickly. If we don't respond soon, the entire small and medium-sized drone flight control market will belong to him."
Shen Pingchuan didn't speak, but gently twirled the teacup with his fingers.
"My idea is that Tianying and DJI could collaborate in the field of flight control. DJI's flight control technology is top-notch in the industry, while Tianying has channels and a customer base. If we join forces to launch an open flight control platform, it would be enough to compete head-on with Feibiao."
Shen Pingchuan finally spoke, his voice calm.
"Mr. Xia, I understand what you're saying. But you might not be familiar with the internal workings of DJI."
"How so?"
"DJI's flight controllers have never been open to external parties; this has been a core strategy for the company since its founding fourteen years ago. Flight controllers are DJI's lifeblood; it's not something that can be easily shared with external partners. Such a decision requires Mr. Wang's personal approval, and as far as I know, Mr. Wang's attitude towards this matter is..."
Shen Pingchuan paused.
He felt it was unnecessary.
"no need?"
Xia Kanghao's fingers stopped.
DJI's consumer market share exceeds 70% in China and 60% globally. The Flybird platform currently impacts flight controller procurement for small and medium-sized manufacturers; this market segment is significant for DJI...
Shen Pingchuan carefully considered his words, "Not within the core scope of concern."
"But if Hongyuan acquires Zhongyi and gains access to complete industrial aircraft manufacturing capabilities, coupled with Feiniao Ecosystem—"
"President Xia."
Shen Pingchuan interrupted him, his tone still calm but firm.
"DJI focuses on its own products and its own users. What others are doing is not of much concern to DJI. These are Mr. Wang's exact words."
The tea room was quiet for a few seconds.
Xia Kanghao slowly put down his teacup, a bitter smile appearing on his lips.
"I see."
He got it.
DJI will not join forces. Not because DJI can't, but because DJI disdains it. In DJI's eyes, the small and medium-sized manufacturers affected by the Flybird platform are not worth their time.
And Skyhawk is probably not worth it in DJI's eyes.
"In that case, let's treat this as a friendly tea gathering between old friends."
Xia Kanghao raised his teacup.
"good."
Shen Pingchuan also raised his glass.
The two clinked glasses and each took a sip.
No one mentioned the flight control system again.
……
After leaving the teahouse, Xia Kanghao sat in his car, staring blankly at the traffic outside the window for a long time.
We can't hold onto the domestic market.
The penetration rate of the Flybird platform among small and medium-sized manufacturers has far exceeded expectations, with an airworthiness certification gap of at least a year, and the core technology team has already disbanded. Even if DJI were willing to cooperate, it would be too late, let alone the fact that DJI is simply unwilling.
Let's change the battlefield then.
Xia Kanghao took out his phone and dialed a number.
"Lin Wei, could you help me make an appointment with distributors in Southeast Asia and the Middle East? Do you have any potential customers for Tianying's flight control modules there?"
"Mr. Xia, regarding Southeast Asia, several agricultural drone companies in Thailand and Indonesia inquired about our flight control solutions, but we haven't followed up since. I need to check on the Middle East situation."
"Check. I need a detailed list."
"Okay. Mr. Xia, what are you planning to do...?"
"While Tianying's domestic flight controller market is currently no match for Hongyuan, it hasn't yet been covered by Feibiao in Southeast Asia and the Middle East. The drone market there is still in its early stages, and the entry barriers aren't as high as in China. Although Tianying's flight controllers are currently outmatched by Feibiao domestically, they are still competitive in Southeast Asia."
"Understood. I'll start organizing today."
After hanging up the phone, Xia Kanghao leaned back in his car seat and closed his eyes.
Let Su Chen have the domestic market.
However, Skyhawk will not give up on overseas markets.
The Flying Bird platform hasn't entered Southeast Asia yet, presenting a window of opportunity. If Tianying can establish customer relationships in Southeast Asia before Hongyuan, it can at least retain a foothold in the market.
Although this idea carries a hint of self-comfort—after all, if they can't beat Hongyuan domestically, how can they definitely beat them overseas?
But at least, this is the only path we can still take right now.
……
Meanwhile, things were also progressing rapidly at Hongyuan.
Construction of the new factory in Songshan Lake, Dongguan, is two weeks ahead of schedule. The main building has been completed, and interior decoration and equipment installation are proceeding simultaneously. Trial production is expected to begin in mid-July.
This new factory, covering 150 acres, represents a total investment of over 200 million yuan. For Hongyuan, whose annual revenue is less than 300 million yuan, this is a huge gamble.
But Su Chen had done the math—the monthly module sales revenue of the Feiniao platform had stabilized at over 15 million, and with the addition of F4's consumer-grade product line and the plant protection SDK service fees, Hongyuan's monthly net profit was close to 20 million.
At this rate, the investment in the new factory can be recouped within a year.
More importantly, there are the acquisition negotiations for Zhongyi Aviation Technology.
In mid-May, Su Chen flew to Chengdu for the second time and held a six-hour closed-door negotiation with Zhou Zhenguo, the founder of Zhongyi.
Zhou Zhenguo is a pragmatic person. Having worked as a drone integrator for seven years, he knows every corner of the industry like the back of his hand. He is well aware that if Zhongyi continues to develop independently under the impact of the Feiniao platform, its future prospects will become increasingly narrow—because the Feiniao ecosystem is reshaping the upstream and downstream relationships of the entire industry chain, and those who do not join will be marginalized.
But he also has his own bottom line.
"President Su, the Zhongyi team has been with me for seven years, growing from five people to four hundred and sixty. If you're going to do massive layoffs and restructuring after the acquisition, then this deal is off."
"Mr. Zhou, Hongyuan's acquisition of Zhongyi isn't about layoffs, but about adding to our capabilities. Hongyuan has flight control platforms, and Zhongyi has experience in aircraft integration. Together, they form a complete industry chain. None of Zhongyi's team will be affected; what I need are your experience and your customer relationships."
"What about the valuation?"
"Five hundred million five hundred million. Cash plus stock, 70/30 split."
Zhou Zhenguo remained silent for a long time.
"Six hundred million. Cash plus stock, 60/40 split."
Su Chen stared at him for ten seconds.
"Five hundred million eight hundred million. Cash plus stock, 6535. That's my bottom line."
Zhou Zhenguo extended his hand.
"make a deal."
The two shook hands.
Of course, there is still a long way to go from shaking hands to actually signing the contract—due diligence, legal review, shareholders' meeting, closing arrangements, each step takes time.
But the direction has already been determined.
If all goes well, Hongyuan will officially complete the acquisition of Zhongyi Aviation Technology in the second half of this year, becoming the first domestic UAV company to possess both flight control platform and industrial whole machine integration capabilities.
……
May 25, 2020, Hongyuan Intelligent Headquarters.
Su Chen had just returned from Chengdu and hadn't even had time to adjust to the time difference when Xu Lang pulled him into the conference room.
"President Su, something's happened."
Xu Lang's expression was very serious. He pushed a tablet computer in front of Su Chen.
The screen displays DJI's official website homepage, with a huge poster prominently displayed.
DJI FlightCore Open Flight Control Program.
Su Chen's pupils contracted slightly.