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[Text/Guacha.com columnist Pan Gongyu]

"Opening the Xiaomi 12T Pro, Xiaomi's flagship smartphone, we discovered it could very well be an American product."

Last June, Minami-so Kashiwao, CEO of Fomalhaut Techno Solutions (FTS), a leading Japanese dismantling organization, made slightly sarcastic comments in his report after dismantling the Xiaomi 12T Pro.

FTS performed a detailed disassembly of the Xiaomi 12T Pro, not only carefully identifying the main components of the smartphone such as processor, screen, RF front-end, storage devices, etc., but also based on material analysis, using the cost calculation model built by the agency, it concluded that Xiaomi's material costs from US suppliers accounted for 30% of its total cost, but as much as 85% of the core material costs came from the United States, so it came to the conclusion that "it is simply an American product."

If you log in to the FTS official website and purchase their disassembly report, you can also get a more detailed bill of materials, which even includes the origin identification of the screws and adhesives used for fixing.

Xiaomi 12T Pro motherboard

From ToC to ToB, the world of "disassembly masters"

Since 2020, the world of smartphone disassembly has become extremely lively. The ToB reverse engineering business, which used to be "hidden" under the surface, is also following the trend of the times and moving towards the ToC direction.

Smartphone disassembly in China was originally divided into the "guerrillas" of electronics enthusiasts and the "regular army" of ODM manufacturers. The former mainly open the box for evaluation (of course, they also charge some public relations fees), while the latter is undoubtedly more professional, often commissioned by OEMs, taking over some targeted tasks such as competitiveness analysis, patent infringement identification, product quality certification, etc.

It is not uncommon for mobile phone, home appliance and automobile manufacturers to use reverse engineering to commission a third party to list the competitor's BOM (bill of materials) in order to position their own coordinate system in the competitive ecological niche, as well as to review the competitor's compliance and seek product design "inspiration" from peers.

But if disassembly companies move from ToB to ToC, and if they are originally commissioned by manufacturers to disassemble and analyze BOMs, and evolve into independent reverse engineering teams that actively provide consulting services to B-end users, and cooperate with the media to release disassembly information to C-end users from time to time, then the old rules of the game in this arena will change drastically.

At the same time, as consumer electronics brands are increasingly concentrated in the top, product forms are becoming more and more homogeneous, and the design inspiration brought by reverse engineering is becoming increasingly diluted. Therefore, how to effectively match and stack materials while ensuring cost optimization has become the winning magic weapon for players in the track under the rule of "survival of the fittest".

Therefore, the times call for reverse engineering "mages" to make more detailed material analysis and more accurate cost calculations.

Yole, Europe's largest semiconductor consulting firm, has recently established a disassembly team, which shows that this industry is very profitable.

Fomalhaut Techno Solutions has seized the trend of the times.

Since 2020, this organization headquartered in Chuo-ku, Tokyo, Japan has completed an average of 450-500 disassembly reports each year. The disassembled items include but are not limited to mobile phones, drones, home appliances, automotive MCUs, 5G base stations, etc. At the same time, FTS has also built a powerful and rich disassembly database, which is open to B/C users for registration on a subscription basis.

From a global perspective, TechInsights is the undisputed leader in the consumer electronics disassembly industry.

Since 2017, pan-European private equity firms CVC Capital Partners and Oakley Capital have become the main shareholders of reverse engineering company TechInsights after multiple rounds of equity structure adjustments. Since 2020, TechInsights' expansion speed can be described as astonishing.

Media people who have been paying close attention to reports from overseas semiconductor consulting firms in Europe and the United States may suddenly discover one day that the "small and beautiful" report sources that were originally circulating in a certain segment of the market have gradually disappeared, and the chart data with very high impact factors in the IC circle have all stopped in 2020-2022 and have not been updated since then. The initiator is often TechInsights.

Over the past four years, the agency has launched multiple rounds of mergers and acquisitions, successively annexing Chipworks, a very influential patent disassembly agency in the United States (acquired in 2016), microprocessor architecture analysis agency The Linley Group (acquired in 2021), the prestigious semiconductor research agency VLSIresearch (acquired in 2021), cost data analysis agency IC Knowledge LLC (acquired in 2016), data service and market research agency Strategy Analytics (acquired in 2022), and IC Insights, a list data agency widely praised by media and experts (acquired in 2022), etc.

After the acquisition, major semiconductor media sang a swan song for IC Insights

Through this series of mergers and acquisitions, TechInsights has continuously recruited talents from the engineering teams of large American semiconductor companies. At present, it has become a "giant battleship" in the reverse engineering industry, capable of disassembling the entire industry chain of devices, materials, equipment and material analysis in the semiconductor industry, and has the world's exclusive disassembly advantages in special categories such as CIS and storage.

Moreover, its M&A activities often adopt "decapitation-style" acquisitions, destroying its brand and also incorporating the sample reports that were originally public into the paid subscription model. Therefore, in recent years, there are fewer and fewer free public reports on the market. Moreover, its disassembly efficiency and material and cost analysis models have been continuously iterated, and have also become the object of imitation and pursuit by industry peers.

The eyes of these "teardown masters" are like radars that never stop scanning all kinds of new products and making reports. Their connections are spread across the upstream and downstream of the ICT industry chain, and they are also active in the political, business and research investment circles.

At the Shanghai Auto Show last April, I had the honor of meeting Mr. Vachaparampil, CEO of Caresoft Global, one of the largest automotive reverse engineering companies in the United States. During the conversation, I learned more about the survival rules of dismantling organizations.

Vachaparampil pointed out to me three characteristics of the industry’s approach.

First of all, material cost analysis is a kind of engineering, but cost analysis is highly related to economics, especially the construction of labor cost models, which is one of the main focuses of differentiation for players in the field. For example, every year after the release of Apple's new models, FTS and TechInsights also have internal competition to see who can disassemble faster and more accurately, but there are still significant differences in cost calculation.

Secondly, all reverse engineers, including Caresoft Global, are active participants in large global exhibitions. The annual Nvidia, Qualcomm, Apple developer conferences, as well as MWC and CES in the United States are important channels for them to receive first-hand information.

Furthermore, almost all large reverse engineering organizations are deeply tied to one or two leading media, forming a one-stop service of disassembly report generation + publicity and distribution. FTS's partner chose Nikkei Newspaper (Japan Economic News), and TechInsights chose Bloomberg Intelligence as its exclusive information release platform.

At present, the management and communication rules of major media in Europe and the United States are also facing profound changes. Think tankization and platformization are their two main transformation directions. In a sense, the cooperation between dismantling institutions and media can be regarded as a "two-way rush" that fits the development of both industries.

From ToB to ToG, an unbalanced intelligence war

If we only understand the turbulence of the disassembly industry from a commercial perspective, "there is still a gap that has not been reached." Otherwise, how can we understand why major disassembly organizations have frequently released regional changes in BOM in recent years?

The most typical example is Honor, which was just separated from the Huawei brand that year.

In 2021, the Honor X30 disassembled by Japan's FTS showed that US components accounted for 39% of the total cost. This is a sharp increase of 29 percentage points from the 30S launched by Huawei under the Honor brand in the spring of 2020, which means that US components have replaced Chinese components in most core areas, including the main processor and 5G chipset; the share of Chinese components has dropped by 27 percentage points to around 10%. In the same year, a report from the agency showed that the US component share of Xiaomi's foldable phone Mi X Hold launched in 2021 was 26%. Oppo's Reno6 Pro+ has a US share of 31%.

The most original, cutting-edge and fresh bill of materials provided by the dismantling agency intuitively shows the changes in the supply chain of Chinese smartphones and the fluctuations in the localization rate. Every detail inside the body of the phone touches the nerves of the chip regulatory authorities in China on the other side of the ocean.

Last September, during the visit of US Commerce Secretary Raymondo to China, Huawei's Mate60 series achieved a "surprise attack". The model was equipped with the self-developed Kirin 9000S 5G chip, announcing the failure of the US blockade of Huawei's 5G chips. In the public opinion field that ridiculed Raymondo for endorsing Huawei, the role played by TechInsights should not be absent. It was they who delivered the Mate60 to the Ottawa headquarters for rapid disassembly at the first time, and provided "assists" for Huawei's successful breakthrough at the first time.

In order to further track the sources of suppliers for Huawei's new mobile phones, in May this year, TechInsights could not wait to hold an online disassembly conference of Huawei's Pura70 series. At the conference, TechInsights admitted that more than 50% of the components of the Pura70 Pro model were actually still in an "unidentified state."

The disassembly list shows that the localization rate of Huawei Pura70 is as high as over 90%. Although the localization rate of Pura70 Pro is slightly lower, it has achieved major breakthroughs in two major materials: LPDDR5 running memory and image sensors: the former has realized the dual supply mode of SK Hynix and domestic manufacturers, and the latter, except for the rear wide-angle and ultra-wide-angle cameras, uses Sony CIS sensors (the ultra-wide-angle is Sony IMX989), the rest have been replaced by OmniVision (as shown in the figure below).

Why did TechInsights hold an online briefing so urgently when more than half of the materials had not yet been identified? In addition to the internal pressure from its peers, the main purpose may be to give an explanation to the "relevant departments".

Beneath the hidden clues, by looking up the intersection of "dismantling" and the interests of the US Department of Commerce, it can be found that as early as 2020, many members of Congress intended to link the entity list control with the material list of "dangerous enterprises" in order to implement strong supervision.

Take Michael McCaul, Chairman of the U.S. House Homeland Security Committee, for example. For many years, he has intensively pressured the executive team, especially Commerce Secretary Raimondo, to present to him on a quarterly basis the total number of license applications from Huawei and SMIC (as shown below), as well as the relevant approval rates and rejection rates. His purpose is to further review the total number of license applications and conduct a secondary review of the approval numbers, compare the list of suppliers on the bill of materials, and implement targeted strikes.

From November 2020 to April 2021, information from the U.S. Department of Commerce shows that Huawei applied for 169 licenses in total, 113 of which were approved, with a pass rate of nearly 70%.

Furthermore, by logging into usaspending, a website that allows users to view the use of government funds by the U.S. federal government since 2000, we found that the U.S. State Department (DOS) and the Department of Commerce (DOC) have long been important sponsors of TechInsights. In 2023 and 2024 (so far), TechInsights has received multiple grants from DOS and DOC with a total value of more than US$500,000.

As a reverse engineering agency headquartered in Ottawa, TechInsights' government funding comes 100% from the United States, which is more than suspicious.

Coincidentally, Japan's FTS also has a strong government background. Its CEO, Minami-so Kashiwao, worked in the Japanese Ministry of Finance for four years and in the Canadian federal government's Japan-related manufacturing department for many years. He is currently still a lifetime member of the US Naval Institute.

The world of reverse engineering has gradually transformed from a "conspiracy" in the ToB business world to an "open conspiracy" in cooperation with media think tanks, and then into a frontier battle for information and intelligence collection by government departments. In the turbulent and uncertain geopolitical situation, this trend cannot be ignored.

What is our countermeasure?

Since most of the items used for dismantling are daily electronic consumables, and even commercial and passenger cars can be considered consumer consumables, it is impossible to cut off the outside world's access to dismantling targets through import and export controls.

However, it must be pointed out that when many overseas disassembly organizations began to trace the source of material logistics through chip silk screen printing, and achieved in-depth insights into chip technology principles, design ideas, process manufacturing, structural mechanisms, etc. by extracting, analyzing and organizing the internal circuits of the chips, their purpose often went beyond commercial use in the general sense. It can be said that this is a naked information war and data war in the sense of national high-tech competition.

At the first offline salon event held by the Mind Observation Institute, Han Lijie, partner of the Shanghai office of Kettle Law Firm, said that the U.S. Department of Commerce and other relevant departments will further collect product information of so-called sensitive controlled companies through "backdoor connections", and their intentions are obvious.

However, it is very regrettable that although my country has long been the world's number one consumer of mobile phones and computers with a huge market, it has never been able to incubate a public reverse engineering platform with global influence. One of the main reasons is that dismantling organizations that provide news and information services find it difficult to have sustainable buyers. Even if a dismantling methodology with certain characteristics has been formed, it is basically limited to material analysis and is unable to build a three-dimensional reverse engineering team including data, media platforms, and channel control.

Data security and information sovereignty require us to make effective countermeasures. The "guerrillas" of enthusiasts who start up and evaluate the system cannot resist the powerful regular army overseas. We need to form a national team to study the new survival patterns and business models of overseas reverse engineering and take anti-reconnaissance measures on key materials, such as strengthening the research and development and implementation of physical unclonable function (PUF) IP used in system-on-chip (SoC) design.

Secondly, we can consider strengthening the reverse engineering team training with "trade-in" as the anchor point. The recycling and gradient utilization of new energy batteries have suddenly made the domestic battery disassembly market hot. In terms of how to effectively disassemble batteries and analyze battery life, my country has become the first echelon in the world. We can go overseas in a timely manner, take the initiative, and participate in the formulation of reverse engineering standards.

Rapidly climb mountains and cross the sea, but never forget the hidden reefs under your feet. The growth of BYD and Geely Automobile brands is inseparable from the long-term support of the reverse engineering team within the company. Some of the experience I have used can also be used as a weapon to defend against the enemy. The disassembly world under the background of information warfare needs us to disassemble it together.

This article is an exclusive article of Guancha.com. The content of the article is purely the author's personal opinion and does not represent the platform's opinion. It cannot be reproduced without authorization, otherwise legal liability will be pursued. Follow Guancha.com WeChat guanchacn to read interesting articles every day.