With Alibaba shrinking and OPPO cutting its arms, are big companies no longer able to compete in cutting-edge technologies?

Midsummer is approaching, but big factories are feeling a little chilly, and many companies are entering a period of contraction.

OPPO reluctantly terminated its ZEKU business, and Alibaba DAMO Academy's autonomous driving business was transferred to Cainiao Group. The direct consequence is that thousands of people are facing unemployment. ZEKU, with about 3,000 employees, offered N+3 times compensation to all full-time employees; Alibaba has transferred some employees to Cainiao, and some others will enter Alibaba's other businesses.

As Shen Yiren, former vice president of OPPO, once said, "Anything that can be solved with money is not a problem. The real problem is things that money can't solve." Major manufacturers have entered the "contraction" mode one after another. Is it because money can't solve the problem or is it that even with money, it can't solve the problem?

Large companies frequently shrink cutting-edge technologies

On May 15, it was reported online that “Alibaba DAMO Academy’s autonomous driving business laid off 70% of its employees.”

In response to this news, Alibaba said that due to business adjustments, the autonomous driving business of DAMO Academy was transferred to Cainiao Group, and some personnel were transferred to Cainiao, while other personnel will enter other businesses of Alibaba. Personnel optimization accompanying business adjustments does exist, but "layoffs of 70%" are not true.

According to Jiemian News, "There are two specific compensation plans. One is that if you leave on Friday of the same week, you can get 'N+1+1' (the two '1's are the average salary of the past 12 months and the monthly base) and holiday compensation; the other is that if you leave next month, the compensation plan is 'N+1'. Apart from social security, the general difference between the two is that employees who leave next month have a buffer period to transfer or find a new job. In addition, DAMO Academy provides internal transfer opportunities for fresh graduates in the team."

Three days before Alibaba scaled back its autonomous driving business, on May 12, OPPO also announced that in the face of uncertainties in the global economy and mobile phone market, it decided to terminate its ZEKU business after careful consideration.

On May 14, four senior executives including Zheku CEO Liu Jun and Zheku COO Zhu Shangzu attended the layoff meeting. The layoff compensation was calculated as N+3, where the base of N was the total of the employee's monthly salary, bonus and other payable income for the past year divided by 12. There was no upper limit of three times as in other places.

From the perspective of employee compensation, the compensation offered by the two large companies is within a reasonable range. Working overtime yesterday and being laid off today may be too sudden for employees, but from the perspective of corporate development, there are signs of shrinking cutting-edge technology.

Alibaba is not the first company to shrink its autonomous driving business. At the end of 2022, Apple gave up launching "Level L5" fully autonomous driving vehicles. At the beginning of this year, Baidu's intelligent driving business group was reported to have laid off staff, mainly concentrated in the vehicle-road collaboration, intelligent networking and intelligent transportation business departments under the Intelligent Transportation Business Department.

Liu Jun recalled the development process of Zheku and attributed the background reasons for the dissolution of the company to the global economic environment and the pessimistic mobile phone industry. The company's revenue did not meet expectations, and the investment in self-developed chips was so huge that the company could no longer afford it. Behind the sobs and tears, this is not the first time OPPO has shrunk its business.

On May 16, BBK founder and OPPO investor Duan Yongping responded on Xueqiu: "We have shut down many businesses in similar ways over the years. This is not the first business we have shut down, and it will definitely not be the last. The best way to deal with something that is not suitable in the long run is to stop it now! The sooner you correct the mistake, the better. No matter how high the cost is, it is the smallest cost."

From the earliest electronic pets to dance mats, and later small electrical appliances, home audio systems, color TVs, DVDs, and Xiaotiancai mobile phones, Duan Yongping emphasized, "We can become who we are not only because of the things we have done, but also because of the things we don't do or stop doing."

High investment and low returns make it difficult for even large companies to withdraw

While Duan Yongping affirmed OPPO's closure of its chip business, his words also contained some helplessness. For OPPO and Alibaba, the shining days are long gone. With the global economy in a downturn, it is wiser to turn back as soon as possible.

According to statistics from Haokan Business on 14 listed autonomous driving-related companies, as of mid-May this year, their total market value has shrunk by 96.85% compared to the IPO. The sharp decline in market value has led to a slowdown in investment. According to incomplete statistics, there were 136 investment events related to autonomous driving in China in 2022, which is almost the same as 144 in 2021. However, in terms of the amount, the total financing in the field of autonomous driving in 2022 exceeded 20 billion yuan, a year-on-year decrease of about 80%.

Behind the cooling of investment is the reality of high investment and low returns in autonomous driving. Even Baidu Apollo, which has developed well, is still in the stage of burning money in research and development and has not yet made real money.

In 2021, Robin Li told the media that the outside world had underestimated the research and development investment in autonomous driving. Baidu invested 20 billion last year (2020) alone, and this may require a long-term investment of 10 or even 20 years.

After the 20 billion investment, how is Baidu's autonomous driving development? As of the end of January 2023, the cumulative order volume of Turnip Run exceeded 2 million. Looking through Baidu's past financial reports, it is not difficult to find that it has never mentioned the revenue from autonomous driving, and it is not difficult to imagine that it has not yet entered the profit period.

The cold snap in the mobile phone industry is more obvious, with weak downstream consumer demand, weakened innovation margins and serious product homogeneity, and the smartphone industry has entered a stage of stock replacement. According to the latest report from market research firm Counterpoint Research, the global smartphone market shipments in the first quarter of 2023 were 280.2 million units, down 14% year-on-year and 7% month-on-month. This is the weakest holiday quarter since 2013.

In addition, in the first quarter of 2023, China's smartphone sales fell 5% year-on-year, the lowest first quarter sales since 2014, while OPPO, Xiaomi, and vivo saw double-digit year-on-year declines.

According to iResearch, 79.5% of Generation Z change their phones every 1 to 3 years, and 75.9% prefer phones priced between 2,000 and 6,000 yuan. According to a research report by Ping An Securities, the time it takes for users to change phones has been extended to 43 months.

If the mobile phones cannot be sold, the chips made at a high price will be useless and the business may become a pure money-burning business. OPPO has revealed that it will invest 50 billion yuan in technology research and development by 2023, and chips are the most concerned item. The chip-making plan was named "Mariana", which means the deepest trench in the world.

It is reported that the sales of Find X5 equipped with the self-developed NPU chip Mariana X are not ideal. On the JD platform, the sales of Find X5 are only in the thousands. Industry insiders said that the shipment volume of a chip must reach at least 20 million pieces to recover the cost.

In fact, it is not just mobile phone companies. New energy vehicle companies also face the same problem when investing in chip manufacturing. The chip R&D investment is high but the effect is slow. Huawei CEO Yu Chengdong once said that before he started making cars, he did not know that automotive chips were so expensive. A chip that cost only a dozen or twenty yuan was even sold for one or two thousand yuan. According to statistics, each traditional car requires 500-600 chips, and a better new energy car even requires 2,000 chips.

It can be seen that when the sales volume of the main business cannot offset the investment in technology research and development, the slow return cycle will not only make investors lose confidence, but also make the main business unsustainable. Even the "rich" big companies do not want to sink deeper and deeper into the quagmire. Contraction becomes an inevitable trend, and they invest funds in businesses that have the potential to make money.

Survival without an arm, making money is important

Last year, the Metaverse stole the limelight from autonomous driving, and this year, GPT-like technologies have become the new favorites. Unlike the Metaverse, the big model is more practical and more "profitable".

On April 11, Alibaba's version of GPT "Tongyi Qianwen" was launched, which can provide a variety of model access and calling methods, and can help enterprises realize large models based on their own capabilities. At that time, Zhang Yong declared that in the future, all Alibaba products will be connected to the Qianwen large model for comprehensive transformation.

Alibaba, which lags behind in autonomous driving, has now decided to scale back unprofitable businesses and instead catch up with this wave of big models, also benefiting from its brighter commercial prospects.

Alibaba Cloud Intelligence CTO Zhou Jingren revealed that Alibaba hopes to help each enterprise build its own exclusive large model through the capabilities of Tongyi Qianwen, and Alibaba Cloud will provide complete computing power and large model infrastructure. In his opinion, enterprises can add personalized demands to the model and truly participate in the development and customization of the model. Enterprises do not even need to do complex model training, and all models can be generated automatically. At present, 200,000 corporate users have applied to access Qianwen testing.

According to an IDC report, the overall market size of China's public cloud services (IaaS/PaaS/SaaS) will reach US$18.84 billion in the second half of 2022, with the IaaS market growing by 15.7% year-on-year and the PaaS market growing by 31.8% year-on-year. The emergence of large AI models has brought new application scenarios to the cloud computing industry, such as natural language processing, intelligent customer service and other fields.

Since 2023, in addition to Internet giants such as Baidu, Alibaba, and 360 stepping up their large-scale model layout, technology circle giants such as Innovation Works Chairman and CEO Kai-Fu Lee, former Meituan co-founder Wang Huiwen, and Sogou founder Wang Xiaochuan have also returned with huge capital, hoping to get a piece of the pie in this field.

Recently, Alibaba Cloud also announced that it will jointly build OPPO's large model infrastructure with OPPO Andes Intelligent Cloud, complete the continuous learning, fine-tuning and front-end prompt engineering of the large model based on Tongyi Qianwen, and build AI services to serve its massive terminal users in the future.

OPPO, which reluctantly gave up its chip business, did not develop its main business smoothly. While its shipments declined, its overseas business was hindered. In July 2022, the Indian Tax Intelligence Bureau investigated and determined that OPPO's local subsidiary evaded tariffs of nearly 43.9 billion rupees (about 551 million US dollars) and required the company to pay the "evaded taxes." This move is part of a series of actions launched by India against Chinese mobile phone manufacturers. In Europe, OPPO has been constantly embroiled in patent disputes and has had to withdraw from Germany.

After cutting off the chip business, OPPO can indeed save money and energy to focus on its main business. It is understood that in order to recruit talents, Zheku once spent a lot of money to offer annual salaries of up to hundreds of thousands to fresh graduates, which also put OPPO under financial pressure.

It is not easy to regain a dream that has been temporarily abandoned, because Alibaba is not the only company engaged in autonomous driving, and OPPO is not the only company that makes chips. Both Huawei and Xiaomi have put a lot of effort into self-developed chips. Zheku's exit can only end in regret.

In contrast, Alibaba's autonomous driving business has fully utilized its surplus value. Since 2015, Alibaba has explored the research and development and application of autonomous driving in the logistics field. Combining the advanced technology of the DAMO Academy with the logistics scenarios of Cainiao, it launched the autonomous driving product "Little Donkey" in 2020. Today, the integration of the autonomous driving business into the Cainiao Group can be regarded as a good start and a good end.

Cutting-edge technology has always required high investment, and as to when it will be transformed into commercial value, it is full of variables. In the new round of big model arms race, who will be the first to land and who will withdraw halfway is a new story worth paying attention to.

The pictures in this article are from the Internet

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.