Reasons for OPPO's Disbandment of ZEKU Chip Subsidiary


On May 12, 2023, ZEKU, a subsidiary of OPPO responsible for chip manufacturing, announced its disbandment . Duan Yongping, the founder of OPPO, stated, "Correcting mistakes should be done as quickly as possible, and the cost, no matter how significant, it is also the smallest cost."

OPPO has made the difficult decision to cease the chip business of ZEKU. In 2019, OPPO established a subsidiary called ShouPu Technology (Shanghai) Co., Ltd., which was later renamed ZEKU Technology (Shanghai) Co., Ltd. in July 2020. ZEKU played a key role in OPPO's chip manufacturing, producing various chips such as application processors, short-range communication, 5G modems, radio frequency, ISP, and power management chips.

The dissolution of ZEKU has affected over 3,000 employees, many of whom have yet to plan their future job prospects. ZEKU has provided a compensation plan, offering ordinary employees a compensation amount of N+3, while pregnant or breastfeeding employees will receive N+4.

There is curiosity surrounding OPPO's sudden disbandment of ZEKU. Some speculate that OPPO's chip manufacturing was influenced by Huawei. Chip research and development require significant investment, and relying solely on OPPO's smartphone profits may not be sufficient to support this demand.

Multiple factors contribute to OPPO's decision to disband ZEKU:

Declining OPPO smartphone sales:

OPPO's smartphone sales have been consistently increasing since 2013 until they reached their peak in 2021. However, starting from 2022, OPPO's smartphone sales have noticeably declined. Even in Q1 2023, OPPO experienced an 8.8% year-on-year decrease, despite still holding the top market share in China. The OPPO FIND X6 series also did not achieve significant sales breakthroughs. Given these circumstances, it is understandable for OPPO to discontinue its investment in smartphone chips. Additionally, OPPO has been delayed in launching its second business, lacking a diversified source of revenue like Xiaomi and Huawei. Without securing funding quickly or identifying a second business, OPPO risks decline.

High investment and low output in chip manufacturing:

Manufacturing chips involves significant investment in high-end equipment, materials, talent, and management, along with high risks. It is rumored that ZEKU has spent approximately 50 billion Chinese Yuan from 2019 until now. Particularly in 2023, ZEKU faced financial difficulties due to global economic uncertainties, a slowdown in the smartphone market, intense competition, technological lag, and disruptions in the funding chain. ZEKU's performance continuously declined, resulting in severe losses. ZEKU has become a non-performing asset for OPPO. In recent years, OPPO has expressed a strong intention to go public, making it reasonable to divest non-performing assets to expedite the IPO process.

Potential warning from the United States:

The claim that ZEKU's dissolution was a result of being warned by the United States due to encroaching on Qualcomm's core interests is currently unconfirmed. However, considering OPPO's discontinuation of MariSilicon X, it may be related to new rules introduced by ARM following Qualcomm's lawsuit in August 2022. These rules state that starting from 2024, the use of external GPUs, NPUs, or ISPs will no longer be allowed in SoCs based on the ARM architecture. If implemented, this rule would disallow the use of MariSilicon X, V1, and Pengpai C, which currently rely on external NPUs and ISPs, in domestically produced Chinese smartphones.