Chapter 109: President Lei, my apologies, but I still want to build a phone

"Morning, President Chen!" Seeing Chen Yansen come in, he smiled and went to greet him.

"President Li, sorry to keep you waiting. Should we discuss cooperation first, or take a tour first?" Chen Yansen stepped forward and asked in small talk.

"Let's settle the game joint-operation first. President Lei is in a meeting and will come over later," Li Wanqiang explained.

"Fine." Chen Yansen nodded in reply.

The group walked into the elevator and went straight to the floor where the marketing department was located.

They then entered Li Wanqiang's office. He had his assistant call over an employee in charge of channel liaison, and had the Xiaomi distribution data for third-party promotional channels handed to Song Yuncheng to look at.

Xiaomi acted as the publisher. The data sheet listed several hundred popular games, all negotiated one by one by the marketing department. For some games, the revenue share could reach 70%-80% of the top-up amount, and for every registered user brought in, the commission was 5-12 yuan.

Of course, Fox Tao couldn't get such a high rate, but Li Wanqiang offered a base of 40%-50%, showing how much he valued the Fox Tao channel.

The settlement cycle was once every half month—clearly sincere.

Chen Yansen didn't dwell too much on the share split. He gave Song Yuncheng a slight signal and sent the electronic contract to legal for review.

If there were no issues, they would sign that very day.

"The R&D center is upstairs. Shall I take President Chen for a look around?" Li Wanqiang suggested.

"Then I'll trouble President Li, then." Chen Yansen smiled and walked with Li Wanqiang toward the elevator.

Song Yuncheng stayed behind to handle the follow-up cooperation process.

'Ding'!

The elevator doors opened!

An office area of several hundred square meters appeared before them. Li Wanqiang pointed ahead and said: "This side is the MIUI development team. Every week, based on user feedback, we update the system."

Chen Yansen only knew the basics of development, but he understood that to develop a phone OS, he had to know what kind of talent to recruit.

He asked very detailed questions on this point. Whenever Li Wanqiang introduced a core R&D team member, Chen Yansen would pull him aside and ask what programming languages and system frameworks the job required.

He even found out what programming languages and development tools they used.

Li Wanqiang looked puzzled; he couldn't understand why Chen Yansen, an e-commerce guide entrepreneur, would ask such technical questions.

If Lei Yijun were there, he would surely have seen on Chen Yansen's face an expression similar to his own when he had visited Meizu back then.

Li Wanqiang mulled it over for a while, decided Chen Yansen was just curious about technology, and didn't probe further.

Then he showed him the industrial design sketches of the Xiaomi phone, though the information available was limited to the exterior, materials, and color.

At this stage, Xiaomi was still integrating its supply chain. Core components like the screen, processor, and battery were mostly still undecided, so there was very little information Chen Yansen could dig up.

Still, after this round of investigation, Chen Yansen had a clear picture of making a phone: from industrial design, structural design, hardware design, software development, to supply chain management, and finally building sales channels—there were many links.

Sales was Chen Yansen's strongest suit—no need to worry about that.

But on the technical side, Li Wanqiang knew the trade better. From software to hardware, Chen Yansen listened carefully and jotted down the gist.

He reached a conclusion: if he wanted to make a phone himself, he really would need to poach an experienced insider from the industry to have any chance of success.

Both the product and procurement ends needed reliable people in charge for the project to move forward smoothly.

Otherwise, if the supply chain ran into problems, the project would fall apart too.

It wasn't until eleven o'clock that Lei Yijun finally arrived, accompanied by a thin, bespectacled middle-aged man. After introductions, they learned he was Xiaomi's co-founder—Lin Bing.

The group found a meeting room and sat down for a detailed talk.

Midway through, Lei Yijun specifically mentioned that once the Xiaomi phone launched, he wanted to hold a brand special event on Fox Tao.

"Looks like Jun'er isn't confident enough in himself."

Chen Yansen thought to himself, finding it rather amusing.

One had to know that after the Xiaomi phone launched, pre-orders reached 300,000 units within 34 hours, far exceeding Xiaomi's production capacity at the time.

"President Lei, how about we sign the contract first?" Chen Yansen suggested with a smile.

Selling phones had limited profit, but it could boost Fox Tao's revenue and help a lot with the next round of valuation increase.

"But the Xiaomi phone doesn't even have an engineering prototype yet." Lei Yijun gave an awkward laugh, feeling warmed by Chen Yansen's enthusiasm.

"No worries, I trust President Lei." Chen Yansen waved his hand, giving Lei Yijun no chance to hesitate.

When Chen Yansen left Xiaomi, he took with him a brand-promotion contract worth 10 million yuan—4 million for hard advertising, and 6 million as phone commissions. The contract stipulated that Xiaomi had to provide 100,000 units of inventory within half a year.

Lei Yijun calculated: the return on investment would be at least 20.

This made him feel a bit guilty, as if he had taken advantage of Chen Yansen. When seeing Chen Yansen off, he kept calling him "little brother" at every turn.

"If the time comes and Jun'er can't deliver the goods, I'll use the contract to talk—wonder if he'll turn on me."

Chen Yansen squinted and waved goodbye to Lei Yijun.

After the two left, Li Wanqiang suddenly caught on and reminded him in a low voice: "President Lei, this morning when I took Chen Yansen to tour the R&D center, he asked very detailed questions."

"Do you think he'll make phones?" Lei Yijun asked back, not taking the matter to heart at all.

The phone industry and e-commerce guide sectors were vastly different; the phone industry was asset-intensive and technology-intensive, while e-commerce guide operated as a lightweight model.

Just the two links of industrial design and supply chain integration for a phone alone usually took a year.

An outsider like Chen Yansen, lacking technical expertise and supply chain resources, would struggle immensely—not to mention building a smartphone, even creating a branded Shanzhai phone would be no easy task.

In 2011, the domestic phone market was an era where Shanzhai phones and brand-name phones coexisted.

Chen Yansen recalled that at this time there were brands like Tianyu, Bird, Newman, Big Cola, Big Pineapple, and Doov, and even the "Song God" Jacky Cheung had endorsed a domestic phone called GaoXinQi.

But in the end, only a handful emerged victorious; most fell into the ditches of time, until no one paid them any attention.

Sitting in the car, Chen Yansen mulled over Xiaomi's path to success. Unlike other phone makers, Lei Yijun had never intended to profit from hardware from the start.

He focused his profits on three areas: pre-installed apps on new phones, the app store, and game joint operations—making money from the software layer.

Take pre-installed apps, for example: each app cost 0.5-2 yuan to pre-install. With dozens of apps on one phone, that was 20-50 yuan earned.

The ad revenue and share income from the app store were likewise not to be underestimated.

Game joint operations went without saying—some games had a commission rate of 70%-80%.

A smartphone priced at 2,000 yuan, calculated over a three-year lifespan, could earn over 200 yuan from software alone—far easier than hardware profits.

After all, if the phone is priced too high, users will notice the moment they buy it.

"Too bad, I don't have the money!"

After thinking for a long time, Chen Yansen sighed and muttered self-deprecatingly.

(End of chapter)