sjar Chapter 405 Spark M1 Post-mortem Meeting
Chapter 405 Spark M1 Post-mortem Meeting
June 25, 2002, 1 PM.
The lights in the Xinghuo Group's conference room were all on, glaringly bright. Several Xinghuo M1 players, a few Samsung and Apple MP3 players, and several printed sales reports were laid out on the long table.
Ling Yun sat in the main seat, with several reports spread out in front of him. Li Mo, Ma Baoguo, Zhao Weiguo, and Chen Zhongming sat on either side of him.
Ling Yun spoke first. He said, "In one week, we sold 150,000 units. Another 10,000 units were added through online pre-orders, and they were sold out before they even hit the shelves. This result is good. But it's not the best. What is the best? It's when demand exceeds supply. We are currently experiencing a shortage, but it's still not enough. It's not enough because our production capacity is insufficient, and our production capacity is insufficient because we didn't expect it to sell this well."
He picked up a report and read out a few figures. "Online channels account for 40%; offline channels account for 60%. Beijing, Shanghai, Guangzhou, and Shenzhen account for 50% each, while Chengdu, Chongqing, Wuhan, Nanjing, Hangzhou, Shenyang, Xi'an, and Jinan account for 50% each. Demand is high in first-tier cities, but it's also considerable in second- and third-tier cities."
"Next, we need to expand our distribution channels. We're not just opening twelve stores, but thirty, fifty, even one hundred. We're not just opening stores in first-tier cities, but also in second- and third-tier cities. Wherever the users are, that's where the stores will be. If we can't open stores, we'll find distributors."
Zhao Weiguo jotted down a few notes in his notebook. He looked up and asked, "President Ling, expanding into lower-tier markets requires money. Where will the money come from?"
Ling Yun said, "The initial investment was funded by the group, while the subsequent investment will come from the profits from product sales."
Zhao Weiguo nodded.
Ling Yun looked at Li Mo and asked, "What's the next step regarding the product?"
Li Mo opened the folder in front of him and began to read. "The market feedback on the M1 mainly includes the following points. First, the casing scratches easily. The white metallic paint isn't hard enough; even rubbing against keys in a pocket results in scratches after just a few days. We suggest changing it to a matte metal finish, without paint, or with a clear varnish. Second, the buttons feel too stiff, causing finger pain after prolonged use. We suggest replacing them with tactile switches with a shorter travel distance and less force. Third, the battery life is advertised as twelve hours, but in actual use it's less than ten hours. Users tend to listen to music at high volumes, causing rapid battery drain. We suggest increasing the battery capacity or optimizing power management. Fourth, the headphone cable is too thin and easily tangles. We suggest replacing it with a flat cable or including a storage case."
Lingyun asked him, "How long will it take to fix these problems?"
Li Mo said, "The casing will last two weeks. The buttons will last two weeks. The battery will last three months. The headphone cable can be replaced anytime. It's not a big problem."
Lingyun said, "Then let's change it. The M2 will be released in March. The M1 will continue to be sold, and the M2 will be a high-end model with a higher price. The M1 will sell for 1499, and the M2 for 1999. It's not that users can't afford it, it's that we need to have a product tiered distribution."
Li Mo nodded.
Ling Yun looked at Ma Baoguo and asked, "What about production capacity? How much can we expect by the end of the month?"
Ma Baoguo said, "We're producing 6000 units a day now. By the end of the month, we can reach 8000 units. Next month, we can reach 10000 units. We have enough workers, enough equipment, and enough raw materials. It's just that the supply of flash memory is a bit tight. Samsung has raised prices and said that their production capacity is insufficient. The yield rate of our own flash memory production is not yet up, so the cost is high. We'll use it for now, and once the yield rate improves, the cost will come down."
Lingyun asked him, "What's the yield rate of our self-produced flash memory?"
Ma Baoguo said, "Eighty-five percent. Samsung's is ninety-five percent. The difference is ten points. It's not a technical problem, it's an equipment problem. The equipment is old and the precision is insufficient. The new equipment will arrive next month, and the yield will improve after the replacement."
Ling Yun said, "Okay."
He looked around, then Ling Yun stood up, walked to the whiteboard, and picked up a marker. He wrote a few words on the whiteboard: "Spark M1 Retrospective Meeting." After writing that, he turned around and looked at everyone.
"Today's meeting is not just about reviewing the past. It's about the next step. The next step is M2. M2 is not an upgraded version of M1, but an open-source version of M1."
The meeting room fell silent. Ma Baoguo put down his water glass, Li Mo looked up, Zhao Weiguo put down his phone, and Chen Zhongming snapped out of his daze. Everyone looked at Ling Yun.
Ling Yun said, "The M1's hardware and software solutions are all open source. Hardware design drawings, PCB layouts, BOM lists, casing mold drawings, software source code, drivers, and application software are all publicly available. They are on the Spark Open Source Community, where anyone can view, download, modify, and use them. There are no fees, no licenses, and no restrictions. Use them freely."
Ma Baoguo paused, then opened his mouth, then closed it again. After a few seconds, he said, "President Ling, if it's open source, how will we sell it if others take it and use it?"
Ling Yun looked at him and said, "Once others use it, our chips, flash memory, screens, and batteries are sold. We're in the upstream supply chain. Upstream earns more money than downstream. Chips, flash memory, screens, batteries, and casings are the core components. The finished MP3 player isn't the core; it's the terminal. Terminals become obsolete, but the core components don't. When they become obsolete, they can be upgraded. After upgrading, they continue to sell. It's a positive cycle."
He paused and looked around.
"Anyone can use the reference design of the Spark M1 to manufacture it. Small factories, workshops, and even counterfeit factories can all do it. They can make it, put their own brand on it, and sell it at their own price. The more they sell, the more chips we sell. The more chips we sell, the lower our costs become. The lower our costs become, the lower our prices become. The lower our prices become, the more users we have. The more users we have, the bigger our market becomes. The bigger our market becomes, the bigger our demand becomes. The bigger our demand becomes, the stronger our upstream supply chain becomes."
Li Mo raised his hand. "President Ling, which open-source license should we use?"
Lingyun said, "GPL. If they use our code, their code must also be made public; otherwise, it's copyright infringement."
Li Mo nodded and made a note in his notebook.
Zhao Weiguo raised his hand. "President Ling, they're using our generic design, putting their own brand on it, and selling it for less than us. What should we do?"
Lingyun said, "We also sell them. We sell them for 1499, they sell them for 800. Users buy theirs, not ours. Users aren't stupid; they'll buy whoever is cheaper. But users will know that their MP3 players use Spark's chips, Spark's solutions, and Spark's open-source technology. Knowing this, they'll know Spark. Knowing Spark, they'll pay attention to Spark. Paying attention to Spark, they'll buy other Spark products. Other products—computers, laptops, USB drives, keyboards, mice—these are our profit sources. MP3 players aren't a profit source; they're an entry point. The entry point doesn't make money; what's behind the entry point makes money. This is internet thinking, not hardware thinking. Hardware thinking is outdated; internet thinking is the future."
Zhao Weiguo thought for a moment and nodded.
Chen Zhongming raised his hand. "President Ling, after we open-source it, what about technical support? If small factories use our solution and run into problems, who do they contact? Us? If we don't support them, they'll criticize us. If we do offer support, we don't have enough manpower."
Lingyun said, "The community. The Spark Open Source Community. They ask questions in the community, and people in the community answer them. It's not us who answer, it's the community that answers. There are engineers, developers, and enthusiasts in the community who are willing to answer. They get points for answering. More points mean more rewards. More rewards mean more motivation. More motivation means answering more questions. It's a positive cycle. We don't need to send anyone specifically."
Chen Zhongming made a few notes in his notebook.
Ling Yun walked back to the table and sat down. He picked up the water glass on the table, took a sip, and put it down. He looked around and said, "Any more questions?"
No one spoke.
He nodded and said, "That's settled then. Li Mo will be in charge of organizing the open-source solution and uploading it to the community by the end of the month. Zhao Weiguo will be in charge of M2 sales, launching it in March. Ma Baoguo will be in charge of ramping up production, aiming for 8000 units per day by the end of the month. Chen Zhongming will be in charge of overall coordination. Each person will manage their own area and report progress weekly."