IoT chip manufacturers are probably the most extensive “circle of friends” among all chip factories.
Different from the high concentration of the mobile phone and computer markets, the Internet of Things market has countless fragmented areas. When ordinary items in the past want to “evolve” into smart terminals, the demand for embedded chips varies greatly, which makes the Internet of Things chips. It is difficult for a company to design a general-purpose chip, and it is easy to be out of touch with the market when designing it. At this time, cooperation with downstream customers has become an inevitable choice.
Recently, Rockchip and China Mobile jointly released two video IoT chips; Rockchip also cooperated with well-known domestic mobile phone customers to develop fast charging protocol chips. In addition to chips, Rockchip will also go deep into the terminal manufacturing process, such as launching an intelligent network hard disk video recorder (NVR) with Dahua.
For chip design manufacturers, whose circle of friends is wider, whose products are richer, the ceiling will be higher, and the explosive potential of future performance will be greater. Rockchip’s strategy of establishing cooperative relationships and digging deep into the moat is worth paying attention to.
Competitive advantages
High-end first, diversified application fields
In the ordinary development of the original tablet chip business, Rockchip began to shift its research and development focus to the field of Internet of Things and artificial intelligence, and launched smart application processor chips that can be used in robotics, smart home appliances, cash registers, smart access control and other fields. Realize the transformation from a single chip single application to a single chip multiple applications.
This change has allowed Rockchip to gain a firm foothold in the highly competitive market and its performance has soared. In 2020, the explosive growth of AIoT products, Rockchip achieved a revenue of 1.863 billion yuan, a record high; at the same time, gross profit margin and net profit margin reached historical highs, which were 40.78% and 17.17%, respectively, higher than The industry average is 38.32% and 11.99%. In the first three quarters of 2021, Rockchip achieved revenue of 2.057 billion yuan and net profit of 408 million yuan, both higher than the total of the previous year and once again exceeded market expectations.
Rockchip's intelligent application processor chips are all system-level ultra-large-scale digital integrated circuits, or SoCs. Speaking of domestic SoC, the first thing that comes to mind is HiSilicon's Kirin series, but the Kirin chip is a type of mobile phone chip, which is different from Rockchip's field. Rockchip microchips are mainly used in tablet computers, set-top boxes, Internet of Things, automobiles and other fields, and overlap with domestic Allwinner Technology, Jingchen shares, Fullhan Micro and other companies in the field of chips.
From the perspective of application field, Rockchip's application field is the widest. Allwinner's chips have not been used for PC and AI; Jingchen shares also does not involve PC, AI, and does not involve tablet computers; Fullhan Micro is mainly engaged in security, Internet of Things.
In terms of process technology, Rockchip’s process is leading, and the current advanced process has reached 8nm, while the chips of Allwinner Technology and Fullhan are at 22nm, and Jingchen shares are at 12nm.
At present, the 8nm RK3588 that Rockchip has developed and has completed tapeout can be applied to PC products, edge computing, cloud services, large-screen equipment, vision processing, 8K video processing and other fields, further expanding the company's business areas, and The peers widen the gap; its built-in NPU2.0 supports up to 6.0T floating-point computing capability, which greatly exceeds the performance of other domestic AI chips; it adopts the most advanced manufacturing process of the current domestic general SOC, which will make its power consumption lower than other chips in the same period .
The wider application of chips has a great impact. On the one hand, RK3588 can be applied to PC and cloud services. The domestic market in these downstream fields exceeds 100 billion yuan. In the past, foreign companies were monopolized. Domestic companies have few competitors. Behind this is a huge domestic substitute space.
On the other hand, RK3588 is currently the only competitive alternative on the market for Huawei HiSilicon's high-end security AI chip Hi3559AV100; at the same time, this is not a small issue for Fullhan, which is developing security AI chips and wants to make breakthroughs in high-end products. Threat.
Expand the circle of friends
Cooperation brings more funds, R&D strength, and a deeper understanding of the market
Just when people think that a single chip with multiple applications is the “ultimate home” of this type of chip company, Rockchip said that when the single product is large enough, the company will also consider custom chips. To make a flagship chip requires a very complete technology, and the company’s advantage lies in this, so it is not difficult to customize a chip for a single field, it is purely based on market demand.
The launch of the video IoT chip with China Mobile this time is the landing of the above viewpoint.
For China Mobile, Rockchip is not the only partner. The former teamed up with partners such as Fullhan Micro, Beijing Junzheng, and Guoke Micro to launch a total of 11 video IoT chips. These chips can give the carrier video calls, video intercom, video surveillance, smart speakers, video conferencing, home control, smart identification and other functions. It solves the end-side problems of cross-platform interaction of video IoT terminals, high cost, slow business iteration, and high energy consumption. In addition, it meets the requirements of telecommunication level in terms of communication.
The video IoT chip alone has brought in a bunch of partners, with a wide variety of functions. It is foreseeable that with the development of the Internet of Things, this situation will become more common. Because in the emerging and treasured land of the Internet of Things, countless players have poured in. They all hope to show their differentiated advantages to gain the favor of customers, and differentiated advantages need to be achieved through differentiated chips. Realization, which brings a variety of customization requirements.
But for chip companies like Rockchip, it is risky to meet customized needs, especially the “input-output ratio” may not be ideal.
Still taking these 11 chips of China Mobile as an example, we can see that the video IoT chip China Mobile wants is not simple and low-end, and can be perfunctory with existing chips. It proposes more functions and performance. Such customization often means higher R&D investment, IP and tape-out costs.
However, while investing in R&D personnel and funds, the scope of application of customized products is narrower, and the market space may also be narrowed to 1/10 or less of general-purpose chips, resulting in reduced shipments and lower total profits. Custom chips do not seem economical.
With the smartness of IoT chip companies, it is obvious that they do not have the motivation to make custom chips by themselves. At present, the more popular is the cooperative development model, that is, joint research and development with terminal companies. The latter also needs to pay for it. And this model is also an important means to break the bottleneck of the popularization of IoT chips.
Therefore, the size of the “friend circle” has become one of the optional indicators for investors to observe IoT chip companies. On the one hand, cooperating to develop chips means that the company's R&D capabilities are recognized, partners are willing to invest more funds and R&D efforts, and they also have high expectations for product creation. It can be said that new partners represent new revenue. Growth points; on the other hand, for IoT chip companies, more cooperation means cutting into more downstream areas and gaining more opportunities to be close to the market. This accumulated deep understanding of the market will become The core competitiveness of chip companies.
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