The Relationship Between Efficiency, Cost, and Competitiveness - By Slkor and Kinghelm CEO, Mr. Song Shiqiang

The history of human social development is a continuous progression of advancing productivity, enhancing management capabilities, improving labor efficiency, and steadily raising living standards. Each epoch has been marked by groundbreaking new technologies and corresponding management methods that rapidly disseminate and enhance productivity and societal efficiency.

Agricultural societies evolved from the domestication of wild animals and plants, transitioning from gathering fruits and hunting to cultivating crops and raising livestock, thereby ensuring a stable and predictable food supply. Enhanced varieties such as improved rice, with 3-5 times more tillers and grains per plant compared to wild strains, have boosted efficiency by at least tenfold.

The Industrial Revolution was catalyzed by inventions like the steam engine, followed by innovations in electricity, railways, petrochemicals, and automobiles. Steam engines revolutionized industries such as textiles, while railways and automobiles facilitated unprecedented mobility of goods and people.

In the Internet age, rapid information dissemination and seamless logistics have synergistically driven efficiency to new heights. The integration of advanced communication technologies with robust transportation infrastructure has further accelerated societal and economic efficiencies.

For millennia, humans have applied natural laws and social management experiences in production and life, ultimately enhancing productivity. Examples such as China's agricultural culture with its "24 Solar Terms" and Western industrialization's "organizational behavior" provide theoretical foundations. Adam Smith, in "The Wealth of Nations," highlighted how specialization and cooperative workflows among British pin makers increased efficiency by over a hundredfold. Similarly, Ford Motor Company integrated Smith's division of labor principles with Marx Weber's theory of motion optimization, vastly improving assembly line operations and drastically reducing costs, enabling workers to afford the cars they produced. This symbiosis of efficiency surge and cost reduction underscores the impact of advanced management.

From this, it's evident that the combination of technological and managerial advancements drives efficiency gains, cost reductions, and price declines, boosting competitiveness for enterprises and economies alike. Below, I will analyze and compare representative cases from Shenzhen, China, leading enterprises, and industrial developments between China and the United States.

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Shenzhen Leads by Efficiency

"Efficiency" stands as the core competitive edge of Shenzhen, China. From the three-day construction cycle of the International Trade Center to the billboard in Shekou proclaiming "Time is money, efficiency is life," and the bustling night scenes at Huawei and Tencent offices in illuminated skyscrapers, and the hurried footsteps in Huaqiangbei, all reflect the high-speed and high-efficiency spirit of Shenzhen's culture.

Efficiency in land use, measured by per square meter effectiveness (per unit area), is the key to enhancing enterprise and economic efficiency. Within the Guangdong-Hong Kong-Macao Greater Bay Area, which contributes 0.6% of the national GDP, Shenzhen's 1997 square kilometers generate a staggering 34.6 trillion RMB, surpassing that of Beijing, Shanghai, and Guangzhou combined. Huaqiangbei, covering 1.46 square kilometers, records sales figures in the tens of millions, while the Nanshan Science and Technology Park spans approximately 11.5 square kilometers, facilitating transactions close to 300 billion RMB annually. It's reported that the Liuxian Dong area in Nanshan district, planned with a GDP totaling 100 billion RMB, hosts DJI's headquarters known as the "Castle in the Sky" of drones.

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Capital efficiency, or the speed of capital turnover, is not only the core competitive advantage but also the lifeblood of enterprises. In the electronic information industry where Kinghelm and SLKOR [https://www.slkoric.com/] operate, companies achieve a turnover cycle from production to payment in just two times a year. Leaders in the industry chain like Huawei and Apple dominate with a turnover period as short as two months, achieving efficiency three times that of their counterparts. Large enterprises manage their own cash pools, bolstered by financial factoring and confirmation, creating substantial additional profits. As the former CEO of a real estate company, I know real estate projects require significant capital, with project cycles typically around 19 months. Companies like Evergrande and Country Garden have compressed this to 8-9 months, aiding their rapid growth over the past decade!

Commercializing innovation efficiently is crucial. Austrian scholar Joseph Schumpeter argued that innovation involves exploiting internal and external resources to develop new products. Integrating new technologies and products at Nanshan Science and Technology Park, dubbed "China's Silicon Valley," achieves exceptionally high conversion rates. In Futian's Huaqiangbei, new products face consumers directly, making monetization of new technologies straightforward. Shenzhen also fosters an environment that encourages innovation and tolerates failure. With numerous small and medium enterprises, Shenzhen leads the nation in patents per capita, driving rapid economic development while inspiring innovation and entrepreneurship. Shenzhen has nurtured excellent enterprises such as Huawei, DJI drones, Kinghelm Electronics, Anku Innovation, SLKOR [https://www.slkormicro.com/], and BYD automobiles. The high efficiency brought by innovation is the ace in the hole for market competition!

Shenzhen residents, known for their direct and highly efficient approach to "making money," have created a paradise for young people and entrepreneurs. With a labor force participation rate among women as high as 76%, Shenzhen sets an example for efficiency improvement across Chinese society. The brightly lit skyscrapers of technology parks at night and the bustling streets of Huaqiangbei, where bosses and business owners rush to deliver goods, all embody the high efficiency of this city.

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Two, the significance of efficiency to enterprises

Firstly, technological advancements and their applications have led to efficiency improvements. The Iron Age marked by iron agricultural tools and the Industrial Age with electrification are prime examples. In the current stage, Artificial Intelligence (AI) represents the most effective new technology. Innovations such as CHATGPT, Pandemic Large Model, and ByteDance's Skylark Large Model are pioneering tools that herald a new era of productivity and efficiency. This is a tidal wave of the times, and we are unavoidably caught up in it. Our country's manufacturing and information industries are pivotal. How to empower AI and pursue a path of high-quality, high-efficiency development is a practical issue that demands collective contemplation. For us small and medium-sized enterprises, harnessing these tools effectively in our practical work is crucial for a revolution in efficiency enhancement. At Kinghelm and SLKOR [https://tr.slkoric.com/], we are beginning to use AI large model robots developed by a team of prodigies from Tsinghua University. The knowledge graph is continuously optimized and supplemented. How to unleash the potential of AI to significantly boost work efficiency is a matter of life and death for our enterprise.

Secondly, efficient management contributes to efficiency improvements. Ren Zhengfei of Huawei once said that management is sometimes more critical than technology. At the ground floor fast food restaurants in our office building, low foot traffic and low unit prices outside peak hours lead to no profit and a pattern of closure and transfer. Conversely, enterprises like "Tai'er Pickled Fish", "Luckin Coffee", and "Jiawei Yuan Cuisine" have taken cues from KFC, McDonald's, and Taiwan's "Blue and White" by scientifically planning refined operations. They implement standardization to reduce costs, streamline processes to minimize error probabilities, optimize seating to increase turnover rates, and enhance customer spending through environmental designs combined with consumer psychology. These incremental improvements serve as effective strategies for efficiency enhancement. These establishments are profitable and expanding, with "Luckin Coffee" opening over ten thousand stores post-crisis, creating industry miracles.

Thirdly, new business models and accompanying innovations contribute to efficiency gains. Elon Musk's SpaceX developed the Falcon 9 rocket, which is reusable, drastically reducing the cost of sending one kilogram of cargo into space from $20,000 to approximately $2,000. Ji Qi's chain of standardized modular hotels has multiplied efficiency several times over. In just over a decade, Ji Qi has helped companies like Ctrip, Home Inn, Hanting, and Huazhu Group go public.

In early July this year, I led the Kinghelm [httsp:/www.kinghelm.com.cn] and SLKOR [https://ja.slkoric.com/] teams to participate in the Shanghai Munich Electronics Fair. We deliberately stayed at the Ji Hotel again to allow them to experience standardization and streamlined processes firsthand, understand and apply them in their work. Ji Hotel's decoration style emphasizes simplicity in lines, and the materials and furniture are highly interchangeable and versatile. Wardrobes, tissue boxes, small countertops, tables, doors, and door frames are all made of carbonized bamboo fiber, which is eco-friendly, fireproof, waterproof, and economically practical. It also offers excellent control from the perspective of the supply chain. The room's light switch panels are simple and practical, and single beds are widened to 1.3 meters, ten centimeters wider than ordinary hotels. Every detail and experience are well thought out!

Three, the importance of efficiency to countries and economies

Currently, the trade disputes between the two major powers, China and the United States, ultimately stem from the comparison of their economic strengths and the competition in high-tech innovation capabilities. Specifically, it involves the comparison of social efficiency and per capita labor productivity on one hand, and the competition in ecosystem led by leading high-tech enterprises on the other. Efficiency plays a crucial role.

China has a high labor force participation rate with a population of 1.4 billion, yet its GDP is about two-thirds of that of the United States. Excluding factors such as natural endowments, monetary hegemony, technological advantages, social and corporate governance, and wealth accumulation, China's per capita efficiency is approximately one-tenth that of the United States. Investment in education can promote human efficiency, catalyzing the economy. For companies, the quantity and quality of professional talent in the field are also core competitive strengths. In previous years, Huawei's campus recruitment monopolized graduates in the domestic communication field and recruited top engineers internationally. Based on international standards, education increases annual salaries by 5%-10% per additional year of education. With 24% of its graduates holding advanced degrees, Israel's per capita GDP exceeds $53,200. By strengthening education, increasing work hours, and focusing resources on key industries, South Korea and Japan have built efficient national systems that lead by a significant margin in international competition. This indicates that both individual efficiency (education, skills, professional attitudes) and national overall efficiency (quantity of professional talent, technological innovation, social governance) are key factors in improving efficiency and competitiveness.

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The U.S. Fortune magazine announced the 2023 Global 500 companies, with 135 from mainland China and 136 from the United States, nearly equal in number. Chinese enterprises reported a total profit of $561.86 billion, while American firms totaled $1,088.27 billion, just half of the latter. Recently, I checked the market value of listed companies. The top three Chinese companies-Tencent, Moutai, and ICBC-have a combined value of around $950 billion, whereas the top three U.S. companies-Microsoft, Apple, and NVIDIA-are valued at approximately $3,050 billion, less than one-third. Additionally, China has several state-owned enterprises monopolizing administrative resources. This reflects the current state of competition between large enterprises in China and the United States, with American companies leading significantly in technological content and efficiency, as Huawei's Yu Chengdong has pointed out.

Apart from factors such as technological innovation, product strength, and brand management, efficiency is of utmost importance. Huawei, a source of pride for Chinese people, compared to Apple, works overtime extensively, yet their productivity gap is 2.7 times. Nevertheless, Chinese enterprises are catching up: Huawei competes with Apple in the smartphone industry, while Tesla and BYD compete in the new energy vehicle market internationally. We are witnessing the unlimited potential of efficiency improvement.

The application of technological innovation and new concepts can enhance efficiency and reduce costs. Peter Drucker argues that entrepreneurs play a decisive role in the "innovation" process of reorganizing resources, a view endorsed by Joseph Schumpeter. Innovations such as Apple's iPhone, Tesla's electric vehicles, Huawei, Xiaomi, and entrepreneurs such as Dong Mingzhu of Gree and Lei Jun of Xiaomi, who impressed me, can effectively leverage Internet tools to revitalize the community and fan economy, optimizing efficiency. The recent surge in Xiaomi's air conditioner sales in China underscores how efficiency improvements translate into cost reductions, ultimately benefiting consumers and enhancing Xiaomi's competitive edge and market share.

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I believe that while Chinese enterprises have developed rapidly, they face challenges due to thin foundations and limited global perspective. There is significant room for growth in brand building, supply chain management, industrial ecosystem preservation, and business model innovation. The efficiency gap on the international stage indicates the direction for progress; only by refining ourselves in an open environment can we sustainably strengthen our position.

Currently, as technologies like blockchain, metaverse, and artificial intelligence (AI) continue to advance, entrepreneurs must effectively integrate these technologies with industrial products. Research and development efforts to produce quality products that serve society represent both a new challenge and a new opportunity.

Author Biography

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Song Shiqiang has been honored as a distinguished lecturer by the China Electronics Society.

Recently, Mr. Song Shiqiang has been appointed as a distinguished lecturer by the China Electronics Society, a position he will hold from June 2024 to June 2026. This appointment reflects national and societal recognition of Mr. Song Shiqiang, as well as his companies, SLKOR and Kinghelm, for their contributions to the semiconductor industry. Mr. Song Shiqiang serves as the founder and general manager of SLKOR, a national high-tech enterprise, and Kinghelm Electronics. He is also recognized as a cultural scholar who has extensively researched the "Huaqiangbei Spirit" and distilled the essence of "Huaqiangbei Culture." Additionally, Mr. Song Shiqiang holds positions as a research fellow at the State Council Economic Development Center focusing on private economic research, a member of the Chinese Academy of Sciences' Electronic Information Expert Database, a business research expert on Huaqiangbei, and an English-language popular science columnist.

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Appointment Letter for Distinguished Lecturer of the China Electronics Society

The China Electronics Society currently boasts a membership of over 173,000 individual members and more than 1,700 organizational members. It comprises 47 professional divisions, 18 expert committees, and 9 working committees, establishing a comprehensive development framework that combines academic exchanges with educational training, technological evaluation, policy research, scientific journals, standards development, and international cooperation. Mr. Song Shiqiang expressed his gratitude upon being appointed as a distinguished lecturer by the China Electronics Society, stating that this recognition from a national-level academic institution marks a significant milestone in his career transition across disciplines. He feels honored to collaborate with esteemed figures such as Professor Zhou Zucheng, Professor Hua Ruxing, and Teacher Zhu Yiwei from Tsinghua University. Mr. Song views this appointment as both encouragement and motivation, pledging to contribute his utmost to the high-quality development of the semiconductor industry and the advancement of "Chinese chips."

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Song Shiqiang from SLKOR alongside Tsinghua University professors Zhou Zucheng, Hua Ruxing, and Zhu Yiwei

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