Lu Rui: Find the MES of RISHUA Chuang

How to choose their own sustainable development path and model in the early stage of hard technology startups? As an overall solution provider of AR display, Ruisihuachuang cuts into the smart cockpit track from AR-HUD, and builds the advantages of core technology through the integration of software and hardware, so as to realize the landing of emerging technologies.

Source | Manager Magazine under Manager Media

■ Our reporter / Jiang Qiuxia

In the MBA course, there is an important knowledge point about organizational management: the minimum effective scale, the English full name is minimum efficient scale, or MES for short, which means the smallest scale whose average cost is at or close to its minimum value in the long run.

For any organization, it has its smallest and most suitable development scale, which can keep its internal friction to a minimum and absorb the most external energy. This is especially important for early stage startups. According to the induction of industrial organization scientist FMScherer, the methods to determine MES include profit rate analysis method, survival of the fittest test method, statistical cost analysis method, engineering method and so on. So, how do startups make decisions in the actual exploration?

Lu Rui, founder & CEO of Shenzhen Raythink Technology Co., Ltd. (Raythink; hereinafter referred to as “Raythink”), shared his entrepreneurial journey and management experience with The Manager.

clear positioning

Lu Rui graduated from Northwestern Polytechnical University and started working for Hisense Kelon Group in 2005, and later worked for two Fortune 500 companies including BYD and Huawei. From 2015 to 2019, Lu Rui was mainly engaged in the global strategic cooperation in the innovative technology of the Internet of Vehicles intelligent cockpit, and the technical planning and construction of the intelligent cockpit system of the Internet of Vehicles in Huawei. This work experience has given him a certain strategic judgment on the development and direction of the entire automobile industry, especially the fundamental understanding of the development of the intelligent cockpit of the automobile.

On May 28, 2019, Rui Lu, Johnny Chang and Dr. Kannan NR co-founded Rise Huachuang. The company is an overall solution provider for smart transportation, assisted driving and AR display. It is committed to creating an AR-HUD① with a large field of view and a small volume oriented by innovative light sources and equipped with an AI vision engine. The core technologies include optics, PGU, AR Generator® SDK, algorithms and hardware, etc.

Since Resilience Huachuang has successfully developed a series of products such as AR-HUD, the outside world also divides it into the field of “smart car, subdivided components in the smart cockpit industry chain”. However, Lu Rui emphasized that Raythink did not specifically choose automobiles or other fields, because Raythink is essentially a module supplier of AR solutions. “The core of our technology is the optical light source module and some software platforms and algorithms of AI, but it is applied to the HUD in the car. The key to group future sales or generate profit center points.”

In order to understand the essence of Ruisi Huachuang, we must first understand its original intention of starting a business. According to Lu Rui, “Our three core founders are from mainland China, Taiwan, and India. At first, we were researching software and the corresponding algorithms of the underlying AR. After we have the algorithm, we will integrate it into a tool. , and then slowly build the platform, which is our early development process.”

The three founders finally built the prototype of RISHUA Chuang according to their respective areas of expertise: the company headquarters and production base are located in Shenzhen, an optical innovation R&D center is established in Taipei, and an algorithm and software development center is established in Bangalore, India. The establishment of the Optical Innovation R&D Center is to find a field for initial software products – display platform.

Based on the previous understanding of the prospects of the smart car market, Lu Rui and his team finally chose to enter the HUD field that is synergistic with the development of smart cockpit technology. This requires first clarifying the logical relationship between smart cars, smart cockpits and AR-HUD.

As the development direction of future technological life, smart cars are already at the forefront of investment. But what kind of car can be called a “smart car”? “I can only say that I borrow the definition of smart car from the smart cockpit mentioned by the previous analyst or consultant, because every innovation in the automobile industry has been updated in terms of execution or driving force for a century, but This innovation is an electronic innovation, which is indeed a big subversion for traditional cars, so many new forces or new energy brands will appear. This is the only way for cars to be fully electronic and communicative. In fact, its underlying logic is a demand driven by a business model based on the global communication and network construction reaching a certain height.” Lu Rui said.

For users, the most common feeling of this demand is the sense of technology. The emergence of smart cockpits is a carrier that satisfies users’ fantasies about the technology of vehicles such as cars. As one of the representative functions of the smart cockpit, HUD is the key medium for human-car interaction. Lu Rui believes that AR is a technical application environment point or a business opportunity point proposed many years ago, but it is evolving, or in the concept of naked-eye AR, the landing point is very narrow. From the perspective of TOC, not all All people are willing to wear AR glasses to see the world, but everyone in the car will face the windshield, whether it is autonomous driving or non-autonomous driving, the display logic of HUD carrying AR exists.

Target pain points

So, for Ruisi Huachuang, how to choose HUD as the landing of its own AR products and solutions, how to build its own moat?

First of all, you should understand what the market needs and where the pain points of the industry are. According to the position of the HUD image, the types of HUD are mainly divided into: combined head-up display system C-HUD (Combiner-HUD), windshield head-up display system W-HUD and AR-HUD. HUD mainly has three development stages. One is the function of traditional instrument panel, which displays basic information such as the speed of the car; the other is to display some AI navigation and AR real scene fit, so as to provide safe information feedback to the driver; the third is the complete AR The imaging state may be the time when autonomous driving is fully realized.

In the interaction between people and cars through the HUD, there is always an information difference, that is, the information difference between the real environment and the environmental content that reaches the field of view through the HUD. At present, the rise of AR-HUD is actually exactly what car manufacturers hope to eliminate this information gap by loading AR. As an emerging solution, Lu Rui believes that its difficulties are mainly concentrated in software and hardware.

In terms of software, if you want to run AR on the HUD, there must be a complete set of software running architecture to ensure the integration of the real environment and the AR display environment. “There is no company that has done such a software architecture before, so many HUD companies buy their software from outside and develop it through a third party. In the third-party development, we also see that most of them have not been able to Really develop AR software.”

In terms of hardware, it mainly includes two parts: optics and modules. “Optics needs to present the HUD’s imaging in front of the driver in a larger size. Our picture should be larger, the imaging distance should be longer, and the field of view should be wider.” Lu Rui introduced that when the picture is large, the optical The exit gate will also be larger, which causes more reflected light to enter the HUD. He analogized the logic of burning paper with a magnifying glass when he was a child. When sunlight is poured into the HUD, this energy will be further concentrated, which will further increase the temperature of the module and even burn the screen.

At present, the TFT display or DLP display commonly used in C-HUD and W-HUD on the market is facing this problem. “The two modules of TFT and DLP are surface light sources, which have their own physical defects. There is no way to avoid this.” Lu Rui said that if AR is to be installed on the HUD, the TFT module will soon be eliminated because AR The imaging area and width of the SUV have the most basic requirements. For example, the angular size of the SUV should exceed 9° and reach 10° or even larger. However, once the FOV (Field of View; field of view) is satisfied, the TFT module will definitely burn the screen. Although the display manufacturers have also carried out various technical protections, they still cannot escape bad luck.

It can be seen that many AR-HUDs on the market have errors in the concept of publicity and actual products. For example, they are called “FOV10°, VID50m”, but the actual “FOV10°, VID10m”, and the mass production specifications are only FOV5°~ 6°. Lu Rui revealed, “We can almost achieve 23° on the car, but the FOV angle that the car factory needs now is generally 10° to 15°, and this is exactly the range where we are more comfortable or dimensionally reduced.”

Based on the above pain points and the technical advantages of Ruisi Huachuang’s own team, it finally made the following layout: starting from both software and hardware.

Taking hardware as an example, Ruisi Huachuang started to establish a production base in Guangming District, Shenzhen in July 2021, and the construction was completed in April this year. And obtained the German IATF16949 system certification. The factory production line is divided into two parts: one is the module production line, and the other is the complete HUD production line. Among them, the initial production capacity of a single complete HUD is planned to be 200,000 units per year. Lu Rui has never forgotten the positioning of Ruisi Huachuang. He wants to be engaged in the upstream of the industry chain and become a TOB-type company with core technologies. “The production of complete HUD machines is not our main business in the future. As an upstream manufacturer of the core technology of modules, the reason why we need to produce our own in the early stage is that we need to have enough volume to reduce the cost of modules.”

He calculated an account. From the early days when Mercedes proposed AR-HUD, the unit purchase price was about 80 million to 100 million yuan, and the configuration price on the consumer side reached more than 500 million yuan, even close to 1000 million yuan. Now the purchase price has dropped to 2,000 to 3,000 yuan. Looking at the overall cost of the entire HUD, the housing, hardware motherboard, galvanometer, etc., due to the increase in the market, the unit cost has decreased, and the cost ratio has become smaller. Although the price of the module is also decreasing, the rate is not high, and in a round After the overall price reduction, its cost ratio has increased from more than ten percent at the beginning to more than 50%. “The module itself is a very barrier component, and it involves the composition of software. If it is to be equipped with AR, it is more complicated.”

Therefore, Ruisi Huachuang will not greatly expand the capacity planning of the HUD production line, but focus on the research and development and control of the module production line.

At present, each major automaker has its own Tier 1 that is deeply bound, but the current production situation is that there are many domestic listed and unlisted HUD manufacturers. screw”. “Screwing is not a pejorative term. In itself, it is a difficult operation factor for the optical industry, because it is necessary to meet the requirements of the vehicle regulation level and the industry production requirements such as product accuracy are relatively high.”

As more and more car manufacturers choose to replace the instrument panel with HUD, the increase in market demand and the increase of HUD manufacturers will inevitably lead to a decrease in cost. Lu Rui’s research and judgment is that the market volume of HUD will not be concentrated on one or two suppliers in the future, whether it is a domestic listed company or a new start-up company, including the German Continental Group, etc., and even in the future, there will be many formations around Shenzhen or Shanghai. This kind of assembly factory, but the core technology has not changed. “The module manufacturers have not changed. The TFT modules are still Kyocera, BOE, and Samsung, and the DLP DMD chips are still supplied by Texas Instruments, which are basically these.” Lu Rui said that AR-HUD is a new The birth of the module solution will impact the other two fundamental technical solutions that cannot bring AR display. RISHUAC chose to be a full-stack solution provider in order to finally become a leader in this industry. upstream.

Therefore, focusing on its own team advantages and taking software and modules as an important part of technical research is the main strategy of Ruisi Huachuang in the early stage of its business.

“Economic Man Hypothesis”

From the perspective of market application, AR-HUDs are mostly installed in top or sub-top models. According to data from Yiou Think Tank, the penetration rate of my country’s automotive front-mounted HUD market will reach 5.7% in 2021, of which AR-HUD/W-HUD/C-HUD penetration rates will be 0.3%, 5.1%, and 0.4% respectively. With the gradual maturity of HUD technology and the continuous mass production of HUD models, the Huajing Industry Research Institute predicts that the HUD installation rate of domestic passenger vehicles is expected to expand to about 38% in 2025, and AR-HUD is expected to reach 8%.

This means that Ruisi Huachuang was in the stage of burning money for a long time in the early stage of the business. It is only for emerging startups such as Ruisi Huachuang, how to use R&D investment, production construction, etc. to establish the advantage of late market explosion during the window period, and to build a stable cash flow for subsequent market expansion.

“How much is the proportion of the loss in the early stage, when does it enter the transformation, and what is the share of the market volume? This is based on each company’s strategy, market, technology, etc. There will be a numerical curve for development.” Lu Rui believes that any Every company has this in common from the start. Then, what kind of scale and proportion are most in line with the development model of RISHUA? “I’m actually looking for it, or doing a comparison and judgment with some successful companies.”

Lu Rui took the sales in recent years as an example. The company has grown from less than 10 million yuan at the beginning of its establishment in 2020 to a more than 6-fold increase this year. “There are certain rules and reasons for this data to occur. We will find that when the number of people or the pace of research and development reaches a certain level, the company’s turnover will be related to it and achieve proportional growth. If you need more growth, it may It will bring another result in the opposite direction – lack of management process.” For example, too many employees, too many projects and orders in hand, there may be problems in management, and then internal friction will occur, which will eventually lead to a decline in the company’s gross profit margin.

In these three years of exploration, maintaining a gross profit margin of 30% to 40% is a balance point for Ruisi Huachuang to maintain the safety of business development. Since the IATF16949 certification was obtained in April this year, the business of Reis Huachuang has grown rapidly. “From May to now, I have almost got 7 to 8 pre-installation projects. The business volume should start mass production in Q1 next year, and there will be a small amount of mass production this year. There may be more than a dozen pre-installation points by the end of the year. The project falls on the company, which is basically a Top 3 company in the HUD industry.”

Under the premise that AR-HUD has not yet started on a large scale, this is actually a very good result. This was also confirmed by Lu Rui. Regarding the “victory” of Ruisi Huachuang, Lu Rui maintained a clear understanding, “Many start-up companies or companies that have been established for five or six years that I know have only one or two fixed projects in hand so far. And it’s just received, which is a normal state. In fact, we belong to an abnormal state.”

Why has Rex Huachuang been recognized by so many customers? “I am also analyzing whether it is luck, pure price, or other reasons. I don’t think we are really strong.” Aside from the luck of business, return to the normal track of the market economy, in conclusion , The staged success of Ruisi Huachuang can be attributed to two points:

On the demand side, AR-HUD has begun to increase in volume with the growth of the smart car and smart cockpit markets. However, it is difficult for car manufacturers to find suppliers in the market that meet their vehicle-level requirements, and have self-developed technologies for both software and hardware and provide integrated services. If a car recall occurs, if the optical, software, hardware and other suppliers blame each other according to the assembly mode, who will the car factory ultimately look for? The emergence of integrated suppliers can at least solve the worries of car manufacturers to a large extent.

On the supply side, Ruisi Huachuang has both its own optical R&D patents and software development technology, and the completion of the Shenzhen factory has enabled it to truly have the service capability of integrating software and hardware.

“The solution itself is not about inventing the process from 0 to 1, but iterating. The characteristic of engineering technology companies is to keep experimenting. After getting the results of the test, choose the next direction to do the test, and the cycle goes on and on.” Lu Rui Modestly said, “In the two years before its establishment in 2019, the company began to experiment, test, and verify, so we have done 5 years of testing and experiments, and made 5 generations of models. To this day, we will review the 5 years before mass production. In the past, all test paths were correct for every choice to get today’s results.”