From the earliest days of the company's business establishment, to the difficult financing of the start-up, and then to the cost advantage, BYD's business has grown by leaps and bounds. The first seven years of BYD's existence were a period of rapid and unstoppable growth.
The company's revenue rose rapidly from tens of thousands of yuan to 2.3 billion yuan in 2002, making it one of the world's leading suppliers of mobile phone batteries.
In 1990, Wang Chuanfu graduated with a master's degree from the Beijing Nonferrous Metals Research Institute (BNMRI) and stayed on to work in the institute. Step by step, he served as deputy director, director, senior engineer and associate professor.
In 1993, the Institute set up Beagle Battery Co., Ltd. in Shenzhen, and because of the close relationship between the research area and Wang Chuanfu's, he was appointed as the company's general manager.
In 1995, the cellular phone craze began to catch his attention. After securing $2.5 million in start-up capital, he registered BYD Industries in Shenzhen.
In the second half of 1995, Wang Chuanfu sent BYD's products to Taiwan's largest cordless phone manufacturer, Daba, for a trial run, and was intrigued by the 40% price plus usable quality.
By the end of the year, Dabar did not hesitate to transfer the order to Sanyo to Wang Chuanfu.
In 1997, financial turmoil swept through Southeast Asia, the global price of battery products plummeted by 20% to 40%, Japanese manufacturers are on the verge of losses, but BYD's low-cost advantage is more and more at ease, and even reached 90% growth rate that year. In the nickel-cadmium battery market, grabbed nearly 40% of the global market share.
Entered the lithium-ion battery market in 1998, 2000 to get Motorola orders, 2002 to get Nokia orders, revenue exceeded 2.3 billion yuan.
Entering the industry for the first time, they can achieve such excellent performance, BYD's core competitiveness is its unsurpassed product performance-to-price ratio. In the performance can still be the premise, extremely low cost will become BYD's winning formula.
In order to obtain this advantage, BYD from manufacturing and technology from both ends of the common force. In the process, its technology-focused gene and vertically integrated industrial layout model also began to emerge.
With only 3 million start-up capital, Wang Chuanfu dismantled the entire production line, designed and built key equipment from scratch, and broke down each part of the production line into processes that could be completed manually, with his own technical capabilities.
Eventually spent more than 100 million yuan to build a daily output of 3-4 million nickel-chromium battery production line, product prices only 40% of competitors.
In many public exchanges since then, Wang Chuanfu repeatedly mentioned the reasons and thinking behind the "reverse automation": "A welding robot costs at least 1.2 million yuan, the robot according to the depreciation period of 5 years, so every month its depreciation loss is 20,000 yuan! , with the $20,000 you can hire 10 workers who can weld faster than the robot. What makes the robot better than the workers is that it can weld with high precision, but it can make a jig to determine the location of the weld, and the workers can achieve the same precision with a jig."
Wang Chuanfu's self-sufficient approach may seem counter-intuitive to the specialized division of labor that characterizes modern manufacturing. But there's no denying that this more pragmatic approach has worked for BYD, which is in the early stages of its corporate development, and is a powerful weapon in its quest to catch up with the forerunners.
By dismantling the production process, as well as the addition of jigs and fixtures indirectly to achieve the functions of the machine production, but at the same time significantly reduce equipment costs.
In the end BYD gained the biggest advantage - low investment in fixed assets and low depreciation. His depreciation ratio is about 3% to 4%, while the depreciation cost of fully automated production lines such as Sanyo to reach 30% to 40%, the profitability gap is obvious.
In their own research and development equipment to reduce costs, BYD also through the process, raw materials and quality control to reduce costs.
Engineers modified the chemical composition of the battery solution to make the nickel-plated sheet less susceptible to corrosion, an improvement that reduced the monthly cost of nickel raw materials from 5 to 6 million yuan to only a few hundred thousand yuan.
In terms of anode materials, the quality gap between domestic and foreign anode materials, the development of a detailed approach to improve the quality of domestic materials, so that domestic anode materials to meet international quality requirements, while 40% lower than the cost of foreign products. As a result, BYD saves tens of millions of dollars a year.
The BYD battery production process is relatively short, efficient and easy to operate. For example, the production of cathode, BYD has the nickel foam process can be made on the same day, put into use on the same day. This is equivalent to 1/3~1/4 of the time taken by foreign manufacturers to manufacture the cathode by sintering process, which greatly improves the production efficiency.
2.3 Seize the lithium-ion battery windfall, the position of a battery industry leader in one fell swoop
In 1998, BYD seized the trend of lithium-ion battery development and began to develop lithium-ion batteries. Still using the way of manufacturing battery production equipment, lithium-ion batteries will start to ship in bulk that year.
After 2002, lithium-ion battery shipments increased significantly, significantly improving BYD's revenue and profitability. As the lithium-ion battery additional volume higher, BYD benefit an overall improvement in 2002, gross profit margin, net profit margin reached 41.7% and 28.7% respectively.
Because the mobile phone battery market has shown a trend of supply over demand, limited growth. The mobile phone battery and mobile phone parts customers and basic overlap, so BYD "horizontal development" is logical.
Since 2003, BYD began to recruit, successively launched the screen, lens module, keyboard case mold, soft circuit board products, almost covering all of the phone components, and then the "water into the stream" to carry out mobile phone assembly business.
In 2007, mobile phone parts and assembly business revenue reached 9.19 billion yuan, accounting for 43.3% of the revenue, almost recreated a BYD. October 2007, BYD will be separated out of this part of the business in Hong Kong main board listed separately, namely "BYD electronic", to raise funds of 7 billion Hong Kong dollars.
From the earliest nickel-cadmium batteries, to lithium batteries, and then to mobile phone components, Wang Chuanfu successfully grasped the three opportunities for rapid growth, the three S-curves smoothed the rise and fall of the industry's fluctuations, helping BYD to show a sustained rapid growth in the past eight years.
Summarizing this journey, we can identify the following core elements.
Foresight and keen insight into the realisation potential of technology
Accurate knowledge of the state of the art, and pragmatic choice of options
Continuous mastery of horizontal and vertical integration technologies
And all of this will help us to follow up with further insight into BYD's various business arrangements and what the likely outcomes will be.