Original Zhang Xiaohui Economic Observer

The Euler brand of Great Wall Motors was so popular that it was hard to find a car. After the "Chip Gate" incident, the sales situation turned sharply. In September 2022, the monthly sales volume of Great Wall Motors' Euler series will be 7605 units, a year-on-year decrease of 40%. After learning from the bitter experience, Wei Jianjun made an important decision: make chips by himself!

"The company that we invest in Smart Semiconductor is mainly for the production of automobile chips. In addition to the epidemic situation and other factors, the chips really have some impact." In response to the Economic Observer's question about investing in the semiconductor industry, the staff of the Secretary's Office of Great Wall Motors Co., Ltd. (601633. SH, hereinafter referred to as "Great Wall Motors") said.

On October 22, 2022, Great Wall Motors, one of China's private auto giants, announced that it would subscribe a capital contribution of 10 million yuan, accounting for 20% of the total, to take a stake in Core Semiconductor Technology Co., Ltd. (tentatively named, hereinafter referred to as "Core Semiconductor") established by Wei Jianjun, the actual controller and chairman.

Great Wall Motors is one of the few domestic automobile enterprises that invest in chip semiconductor.

20% shares in Core Semiconductor

In the announcement, Great Wall Motors said that Core Semiconductor is an enterprise actually controlled by Wei Jianjun, in which Wei Jianjun directly subscribed 5 million yuan, accounting for 10% of the shares; Great Wall Motors holds 20% of the shares; Wensheng Technology (Tianjin) Co., Ltd. controlled by Wei Jianjun has subscribed 35 million yuan, accounting for 70%.

"We can't answer the questions about the future capacity scale of Core Semiconductor and the type of chips to be produced, because the company has just been established and everything is just beginning." A person from the Secretary's Office of Great Wall Motors told the Economic Observer.

According to the announcement of Great Wall Motors, Core Semiconductor was registered and established in Wuxi Xishan Economic and Technological Development Zone. Its legal representative is Zheng Lipeng, with a registered capital of 50 million yuan.

The business scope of Core Semiconductor is: integrated circuit design; Integrated circuit layout design agent service; Integrated circuit manufacturing; Manufacturing of discrete devices, electronic components and components; Power electronic technology services; Wholesale of electronic components; Retail of electronic components; Trade agency; Import and export of goods (except for goods exclusively operated and controlled).

Great Wall Motors also said that the joint investment in Microelectronics with Wei Jianjun, the actual controller of the company, constituted a related party transaction. This related party transaction is conducive to the smooth promotion of the Company's new energy development strategy and creates the maximum value for the Company and its shareholders. This joint investment with related persons (Wei Jianjun) is conducive to reducing the risk of equity investment business, strengthening the risk constraints of equity investment related personnel, in line with the long-term development of the company and the interests of all shareholders, and will not have a negative impact on the company's current and future financial status and operating results.

Chips are currently a major problem for China's automobile industry.

In the 2021 annual report, Great Wall Motors mentioned that the automobile industry was affected by the tight supply of chips, sporadic outbreaks, and adjustment of policies and regulations. In the first quarter of 2022, Euler Good Cat of Great Wall Motors briefly announced that it would stop accepting bookings, which was mainly due to the impact of chip supply.

Great Wall Motor said that the chip supply problem still had a prominent impact on enterprise production, and the sharp rise in raw material prices further increased the pressure on enterprise costs.

Against this background, Great Wall Motors and its real controller Wei Jianjun decided to invest in the chip semiconductor industry for a reason. Although the outside world cannot judge what kind of technology level the company has, what kind of chips it can produce, and what parts of the car the chips can be used in.

Automobile chip neck

At the end of 2021, Oula Haomao, a new energy brand of Great Wall Motors, was once involved in the "Chip Gate" incident.

In November 2021, an owner of an Apple mobile phone found that there was no CarPlay function when he used the Euler Hello Kitty Internet. Later, he found that the chip used by Great Wall Motors Euler Hello Kitty was not the Qualcomm eight core chip he had always claimed, but the very old Intel four core chip of 2016.

In response, Great Wall Motors said that Oula Haomao's parameter configuration table shows the "intelligent service processing platform", which includes Qualcomm, Intel, Rexa and other chips, and uses a decentralized independent control architecture. Among them, the Qualcomm chip in the parameter configuration table is used in the remote control module. However, Euler Good Cat only wrote Qualcomm in the configuration table, which led users to mistakenly believe that Qualcomm 8155 chip was carried by Good Cat. After the "Chip Gate" incident was reported by the media, it kept fermenting.

Some car owners found that Oula Good Cat has been listed in Thailand and will soon be launched in the UK. As far as we know, the Thai version supports the CarPlay function, and the local promotion in the UK is also based on Qualcomm 8155 chip. The car owners asked Great Wall to release the specific model of the car machine chip of the overseas version of Euler Good Cat. At the same time, it also requested Great Wall Motors to replace the car machine chip, specify the replacement time, and provide compensation and lifelong warranty; Or return the car plus cash compensation.

On December 9, 2021, Great Wall Motors made the third response to the "Chip Gate" incident. In addition to giving the owner a 7200 yuan equity package, it also upgraded the first owner's "three electricity" warranty to a life-long vehicle warranty, and the first owner enjoyed a 10000 yuan charging interest.

So far, the "Chip Gate" incident of Great Wall Motors has gradually subsided.

On the Shanghai Stock Exchange e-interactive product platform, there are still dozens of investors asking Great Wall Motors about the "chip gate", such as: "Your good cat was found to use low-end chips to replace Qualcomm's chips in the promotion. Do you have chips of other models of vehicles replaced?" "Recently, a large number of car owners reported that Euler Good Cat, your popular electric vehicle, was falsely advertised. Both before listing and in daily sales, they said that Good Cat used Qualcomm's 8-core ARM architecture chips, but the actual chips used were Intel's 4-core x86 architecture chips. The performance difference was huge, causing the car to jam, and the software could not be downloaded or upgraded. Your company issued a statement acknowledging that... Do you have a recall plan?"

"Recall vehicles for consumers who have collected their cars, replace their cars, disable Intel quad core processors, and restore Qualcomm's eight core processors. Let Euler's business get out of the woods." Under the ferment of the "Chip Gate" incident, the share price of Great Wall Motors fell from 69 yuan in early November 2021 to 21.28 yuan at the end of April 2022. The share price fell by two-thirds and the market value evaporated by about 400 billion yuan.

The Euler brand of Great Wall Motors was so popular that it was hard to find a car. After the "Chip Gate" incident, the sales situation turned sharply. In September 2022, the monthly sales volume of Great Wall Motors' Euler series will be 7605 units, a year-on-year decrease of 40%.

After learning from the bitter experience, Wei Jianjun made an important decision: make chips by himself!

After the news that Great Wall Motors decided to invest in the semiconductor industry came out, the stock price rose for four consecutive trading days, from 26.6 yuan on October 24 to 30.09 yuan on October 27, up more than 13%.