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Of course, the most confidential business intelligence is indispensable.

Ningxin Semiconductor has a dedicated intelligence team in Japan, headed by a Singaporean named Li Wen who speaks fluent Japanese and previously worked as a business intelligence analyst at a consulting firm.

Although Li Wen doesn't do illegal work, he's good at piecing together a complete picture from publicly available information.

“The technology roadmap of Japanese companies can actually be found in many places,” Li Wen reported to Suning. “Academic papers, patent documents, industry association reports, and even employees’ social media posts. By piecing these pieces together, you can see what they are going to do next.”

"How to do it exactly?"

"For example, we know that Toshiba is developing a new generation of flash memory technology. Their engineers published a paper in IEEE (Institute of Electrical and Electronics Engineers), although key parameters were omitted, the research direction was very clear. Based on this direction, we made advance arrangements for relevant personnel and patents."

"Is it effective?"

“It’s very effective.” Li Wen gave an example: “Last year, NEC planned to develop a new chip packaging technology, and we knew about it six months in advance. By the time their product came out, our similar technology had also come out, only three months later, but at a cost 30% lower.”

In addition to publicly available intelligence, there is also personal network intelligence.

Ningxin Semiconductor has established a vast information network through headhunting firms, industry associations, and university laboratories.

They quickly learn about any developments in Japan's semiconductor industry.

On one occasion, the Japan Semiconductor Industry Association held an internal meeting to discuss how to deal with the competition from Ningxin Semiconductor.

The meeting was supposed to be confidential, but a week later, a summary of the meeting minutes appeared on Suning's desk.

It wasn't purchased; it was a Japanese company executive who attended the meeting. His son works at Ningxin Semiconductor, and the father and son let it slip during their conversation.

However, to everyone's surprise, the first to perish were semiconductor companies from South Korea and Taiwan, since their semiconductor technology and talent had been poached by Ningxin Semiconductor.

By 1992, Ningxin Semiconductor had built a complete semiconductor industry chain in China.

Upstream: We invested in a silicon material plant in Shanghai and a rare earth processing plant in Gansu to ensure the supply of raw materials.

Midstream: Four wafer fabs have been built in Shanghai, Beijing, and Shenzhen, covering processes from 3 micrometers to 1.2 micrometers.

Downstream: A packaging and testing base was built in Suzhou, and a chip module factory was built in Dongguan.

More importantly, they have supported a large number of local Chinese suppliers.

"We can't rely on just one company," Suning said at an internal meeting. "We need to develop the entire semiconductor industry chain in China. Why are Japanese companies strong? Because they have a complete industry chain. We need to have that too."

Ningxin Semiconductor has established a "Supplier Development Fund" to invest in promising Chinese domestic companies.

A small chemical plant in Shanghai, which originally produced general chemicals, was transformed into a semiconductor-grade high-purity chemical plant with an investment of five million US dollars from Ningxin Semiconductor.

A mold factory in Shenzhen, which originally made plastic casings, was helped to transform into a chip packaging mold manufacturer by Ningxin Semiconductor with technical guidance.

In three years, Ningxin Semiconductor has invested in more than 30 local Chinese companies, covering various fields such as materials, equipment, components, and software.

As these companies grew, they not only supplied Ningxin Semiconductor, but also began supplying other Chinese chip companies.

By 1993, Chinese domestic companies accounted for 60% of Ningxin Semiconductor's supply chain, compared to less than 10% in 1990.

……

Japanese companies watched helplessly as all of this happened, powerless to stop it.

In late 1992, the Japan Semiconductor Industry Association held an emergency closed-door meeting.

Chairman Sato began by saying, "Ladies and gentlemen, according to our research, Ningxin Semiconductor now has the complete capability to produce 1.2-micron chips, with a yield rate close to ours. Their costs are 40% lower than ours because labor and land are cheaper in China, and the supply chain is highly localized."

“More importantly,” he said gravely, “their market share in China has reached 35%, and it’s growing rapidly. Our share has dropped from 60% three years ago to 30% now.”

President Miyamoto slammed his fist on the table: "This is theft! Blatant technology theft! Where did they get their technology from? They poached people from us, acquired them, and formed joint ventures with us!"

"But it's no use talking about this now." President Yamada was more pragmatic. "The question is, what should we do? We complained to the Japanese government, but they said it was business competition and they couldn't do anything about it. We complained to the Chinese government, but they said Ningxin Semiconductor was operating legally."

President Watanabe asked, "What about the United States? Ningxin Semiconductor is an American company. Doesn't the US government care?"

“We can’t control it.” Sato shook his head. “Although Ningxin Semiconductor is a subsidiary of Lemon Technology, it’s registered in China and its main business is in China. The US government can’t interfere that far. Besides…”

He paused for a moment, then said, "I've heard that American semiconductor companies are actually happy about this. Because Ningxin Semiconductor is targeting us, not them. American companies even have technological cooperation with Ningxin Semiconductor."

The conference room was silent.

Finally, Sato said, "The only way now is to accelerate technological upgrades. We need to mass-produce our 1-micron process as soon as possible, and speed up the research and development of 0.8-micron. Only by maintaining technological leadership can we survive."

"What about funding?" Miyamoto asked. "Profits are declining, and R&D investment is limited."

“We’re applying for government subsidies and trying to get loans from banks,” Sato said. “This is a matter of life and death.”

……

While Japanese companies were in a state of utter confusion, Suning was in his office in Santa Monica, looking at Ningxin Semiconductor's financial report.

Chen Weiming called from Shanghai: "Boss, our latest 1.2-micron production line is going smoothly, with a stable yield of 87%. At this rate, we can achieve 1-micron mass production in 1995."

“Very good,” Suning said. “But remember, don’t exceed this pace.”

"Why? Our technological reserves can actually be developed faster."

"Because we need to maintain a balance," Su Ning explained clearly. "Ningxin Semiconductor's current capabilities are approaching those of Japan and Europe, but we are still some distance behind the United States. This gap must be maintained."

"Afraid of US suppression?"

“Yes,” Su Ning said. “If Ningxin Semiconductor catches up with or even surpasses American companies in technology, Washington will definitely take action. Antitrust investigations, technology blockades, and even forced breakups are all possible. We can’t take that risk.”

"So you deliberately lagged behind?"

“It’s not about falling behind, it’s about maintaining a ‘reasonable gap’,” Su Ning explained. “For example, the US can currently mass-produce 0.8 micrometers, while we are at 1 micrometer. If the US can mass-produce 0.6 micrometers next year, we will achieve 0.8 micrometers. We will always be half a generation behind, but the gap is not large.”

"So that American companies won't see us as a threat?"

“At least the threat isn’t that great,” Suning said. “Moreover, we’re mainly targeting Japanese companies. For American companies, we’re helping them fight their competitors, and they’re happy to see that happen.”

Chen Weiming immediately understood: "So our main target now is still Japanese companies?"

“Yes,” Suning said. “Japanese companies hate us now, but hatred is useless. Our strategy has been very successful: poaching their people, stealing their technology, and seizing their market. They can only passively defend themselves now.”

"What's next?"

"Next, we will continue to expand our industrial chain in China and increase our localization rate. At the same time, we will begin to lay out our plans in Southeast Asia, preparing to compete with Japanese companies in third markets," said Su Ning. "Japanese companies have now ceded the North American market to the United States and the European market to European companies. If we also take over the Asian market, they will really have nowhere to go."

"They will retaliate."

"Then let them fight back," Suning said. "We now have a complete industrial chain, cost advantages, and the backing of the Chinese market. If they fight back, we'll fight them. Let's see who can outlast whom."

After hanging up the phone, Suning walked to the window.

The night in Los Angeles is ablaze with lights.

But he didn't think there was anything wrong with it.

Business competition is inherently a matter of life and death.

In the 1980s, Japanese companies used cheap and high-quality semiconductor products to crush the American memory industry, leaving Silicon Valley in despair.

Now it's the Japanese companies' turn to taste the sweetness.

Moreover, he did this with an even bigger goal: to develop China's semiconductor industry.

Ningxin Semiconductor is not just a company, but also a platform and an engine that drives the upgrading of the entire Chinese semiconductor industry chain.

As for the resentment of Japanese companies? Let them hate.

In the business world, while greed can be a staple food, real ability is what matters.

……

Ultimately, it was the Japanese companies that couldn't sit still any longer; they simply couldn't stop Pacific Capital.

In August 1995, a delegation from the Japan Business Federation arrived in Hong Kong.

The group leader was Yasuo Watanabe, vice president of Toyota, and the members included vice presidents and senior executives from twelve major companies such as Panasonic, Sony, Toshiba, and Hitachi.

This is a rare high-level joint delegation from the Japanese industry.

Of course, they initially wanted to meet with Suning, but Suning didn't want to invite them. Instead, they pushed them to Mark Thompson, since Mark Thompson was the head of Pacific Capital.

In the conference room at Pacific Capital's headquarters, the two sides sat on opposite sides of a long table.

Watanabe Yasuo spoke first, his tone restrained but tinged with dissatisfaction: "Mr. Thompson, your company's competitive strategy in the Chinese market over the past few years has seriously affected the normal operation of Japanese companies. We are here today hoping that both sides can find a way to coexist peacefully."

Mark Thompson leaned back in his chair, tapping his fingers lightly on the table. "Mr. Watanabe, the business world is like a battlefield. When you entered the American market in the 1980s, you didn't show any mercy to American companies. Now that it's your turn to be challenged, you're not used to it?" Panasonic Vice President Nakamura interjected, "But your company's practices have gone beyond the scope of normal competition. You're specifically targeting Japanese companies; whatever projects we discuss, you snatch them up. This is no longer market competition, but targeted attacks."

“Where’s the evidence?” Mark Thompson asked.

"Do we need more evidence?" Sony's managing director, Kobayashi, produced documents. "We were negotiating a CD production line in Shenzhen, and you snatched it away. We were negotiating a cathode ray tube project in Wuhan, and you snatched that too. In 1994..."

“Wait a minute.” Mark Thompson raised his hand to interrupt, “Have we offered better terms for all these projects?”

"Yes, but..."

“No buts.” Mark Thompson sat up straight. “In business negotiations, the highest bidder wins, and the one with the best technology prevails. These are the most basic market rules. If any company here today can offer a better deal than mine, I will walk away without hesitation.”

The conference room was quiet.

Watanabe Yasuo took a deep breath: "Mr. Thompson, we're not here today to argue about right and wrong. We're here to seek solutions. Continuing to compete like this will only lead to mutual destruction."

"So how do you plan to resolve this?" Mark Thompson asked.

“We propose a ‘non-aggression pact’,” Watanabe said. “In the Chinese market, we will divide our focus areas. Japanese companies will concentrate on high-end manufacturing and precision components, while your company will focus on consumer electronics and system integration. Neither of us will enter the other’s core areas.”

Mark Thompson laughed, a direct laugh: "Mr. Watanabe, are you joking?"

"What do you mean?"

"What you're saying is that this proposal doesn't benefit me at all," Mark Thompson said, shrugging. "I'm already leading in consumer electronics, why should I give up the opportunity to enter high-end manufacturing? And you, you already have an advantage in precision components, what kind of concession is this?"

Hitachi Vice President Yamaguchi couldn't hold back any longer: "So what does Mr. Thompson want?"

That's exactly what Mark Thompson was waiting for.

He had his secretary send a document to everyone.

“This is our suggestion,” Mark Thompson said. “First, Pacific Capital would like to acquire a stake in each of your companies. Not much, just 5% to 10% of each one.”

"What?!" The conference room erupted in chaos.

“Second,” Mark Thompson continued, seemingly oblivious to the other’s reaction, “I hope to obtain licenses from Japanese companies for some core technologies. For example, Panasonic’s battery technology, Sony’s image sensors, Toshiba’s memory chips, Toyota’s hybrid technology…”

"Impossible!" Watanabe Yasuo stood up abruptly. "Mr. Thompson, this isn't negotiation, this is extortion!"

“Sit down, Mr. Watanabe,” Mark Thompson said calmly. “This isn’t extortion; this is the basis for cooperation. You want the Chinese market, and I want technology and shares. It’s fair.”

"Where is the fairness?" Matsushita Nakamura's face turned ashen. "Our core technology is the result of decades of accumulation. Why should we give it to you?"

“I can help you make more money in the Chinese market,” Mark Thompson said practically. “Without my cooperation, it will become increasingly difficult for you in China. With my shares and technology sharing, we can make money together. It’s very simple.”

Sony's Kobayashi calmed down a bit: "Mr. Thompson, we can discuss the investment. But core technologies are the lifeblood of Japanese companies and cannot be transferred."

“What about licensing?” Mark Thompson backed down. “I don’t want ownership, just the right to use it in the Chinese market. I’ll still pay the patent fees.”

The Toshiba representative shook his head: "Technology licensing won't work either. Once these technologies enter China, given your learning capabilities, you can replicate them in three years."

"So there's no room for negotiation?" Mark Thompson raised an eyebrow.

Watanabe Yasuo sat down again, trying to control his emotions: "Mr. Thompson, we can consider the investment. But the core technology, really, is not an option. That's the bottom line."

“So what can you give me?” Mark Thompson asked.

“Market segmentation. And…” Watanabe hesitated for a moment, “We can promise not to engage in a price war with your company in the Southeast Asian market.”

“That’s it?” Mark Thompson laughed. “Mr. Watanabe, I already have an advantage in the Southeast Asian market. It’s only right that you don’t engage in a price war; it’s not a concession on my part.”

Negotiations have stalled.

After about three minutes of silence, Mark Thompson suddenly said, "How about this, we'll proceed in two steps. First, Pacific Capital will invest in your companies, with the percentage potentially reduced to 3% to 5%. Second, we'll discuss the technology cooperation gradually, starting with non-core areas."

"For example?" Watanabe asked.

“For example, car audio systems, home appliance design, and packaging materials,” Mark Thompson said. “These technologies aren’t critical, but they help improve a product’s competitiveness. You can’t possibly refuse even these, can you?”

The Japanese representatives exchanged glances.

Matsushita Nakamura said in a low voice, "These technologies are indeed not core technologies..."

“But why should we trust you?” Sony Kobayashi stared at Mark Thompson. “Today you give us non-core skills, tomorrow you want core skills. We know your appetite very well.”

“You can choose not to believe me,” Mark Thompson said nonchalantly. “But for the next five years, I will continue to compete with you in the Chinese market. And not only in manufacturing, but also in your traditional strengths in Japan—such as automobiles, high-end machine tools, and industrial robots.”

That's a very weighty statement.

Toyota Watanabe's expression changed.

If Pacific Capital does enter the automotive sector, its financial strength and experience in the Chinese market will pose a significant threat to Toyota.

“We need to discuss this internally,” Watanabe concluded.

“Go ahead.” Mark Thompson gestured. “I’ll wait in the next office. But we need preliminary results today; my time is precious.”

The Japanese delegation argued for forty minutes in the meeting room.

The sound of arguing could be faintly heard.

This is taking advantage of someone's misfortune!

"But if we don't agree, we might really lose the Chinese market..."

"We absolutely cannot give away the core technologies!"

"But the possibility of taking a stake is worth considering; a 5% stake won't affect control..."

……

An hour later, Yasuo Watanabe arrived at Mark Thompson's office.

“Mr. Thompson, we have tentatively agreed to Pacific Capital’s investment, with each company holding no more than 5%. But there are a few conditions.”

"explain."

"First, shares can only be purchased through the open market, not directly from the company. Second, after acquiring shares, one must not interfere in the company's operations. Third, a confidentiality agreement must be signed, and the shareholding information must not be disclosed to the public."

Mark Thompson nodded: "Sure. How about technical cooperation?"

“Licenses for non-core technologies can be discussed, but they must be negotiated on a case-by-case basis, with each project negotiated separately,” Watanabe said. “Moreover, the scope of the license is limited to the Chinese market, and the term shall not exceed five years.”

"The timeframe is too short; it should be at least ten years."

"Seven years, that's the bottom line."

Mark Thompson thought for a moment: "Okay. Let's start with specific projects. Next month, my team will go to Japan to discuss the technology licensing of automotive electronic systems."

"can."

As Watanabe prepared to leave, he turned back and asked, "Mr. Thompson, I have a personal question. Why are you so fixated on Japanese technology?"

Mark Thompson smiled. "Because everyone wants good things. And it's better to use what's readily available than to spend ten years developing it yourself. Business is that simple."

"But don't you think this is... a bit dishonorable?"

“Mr. Watanabe,” Mark Thompson looked at him, “when Japanese companies were stealing technology and poaching talent from the United States in the 1980s, did anyone say it was dishonorable? In the business world, it’s all about the winner and the loser. Today I’ve won, it’s that simple.”

Watanabe remained silent, then nodded and left.

After the door closed, Chen Weiming came in through the side door: "Mark, will they keep their promise?"

“In the short term, yes, but not in the long term.” Mark was very clear-headed. “The boss is absolutely right! These Japanese are stingy at heart and won’t genuinely share their technology. But that’s okay. As long as we get the ticket, we can slowly penetrate and develop our own.”

"Then what happens next..."

“Proceed according to the plan we made with the boss. First, buy shares and obtain licenses for non-core technologies. At the same time, continue poaching talent and acquiring small and medium-sized technology companies,” Mark Thompson said. “Like boiling a frog in lukewarm water, by the time they realize it, we won’t need their core technologies anymore.”

"What if they change their minds?"

“Then let’s keep competing.” Mark Thompson laughed. “We’re not losing either way.”

Outside the window, the sky over Hong Kong darkened, and a downpour was imminent.

But inside the conference room, Pacific Capital's global strategy was only in its mid-game.

...(End of chapter)