Chapter 140 – An Invitation Letter
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Hou Haitao agreed, but Li Shiyou still had some reservations. He would be doing the manufacturing, and if the product weren't sold, his factory would be suffering losses. Although the investor Feng Yu would also suffer losses, Feng Yu had the money to lose. Feng Yu had already earned so much from the humidifiers.
Li Shiyou hesitated, and this made Feng Yu happy. Feng Yu acted like he had made a big decision: “Director Li, I know what you are worrying. How about this, I will pay for the modification of your production line and this time, we will contract your factory to manufacture the fans for us. I will pay you 30 RMB for every unit produced. This way, you will not have any more worries.”
Li Shiyou heard Feng Yu, and this troubled him even more. Every time Feng Yu contracted his factory to manufacture something, Feng Yu would earn a lot from it. However, those products previously were either low cost or something that was new to the market. He could not see any potential in this bladeless fan.
It was just like that Tai Hua brand refrigerators where the last batch of fridges was only sold last week. But Li Shiyou does not know the profit margin and how much Feng Yu earned. He thought hard about this and noticed that Feng Yu does not succeed all the time. It should be safer for him to be conservative and choose to be a contractor.
Li Shiyou chose to be a contractor, and Feng Yu smilingly turned to Hou Haitao: “Director Hou, this bladeless fan project has a big risk, and as an investor, I might not get back my investments. Since Director Li chose to be a contractor to earn stable contractor fees, then I will be taking on all the risks. So, this time, the Aviation should not enjoy proportional dividends, but instead, fixed dividends. This means that every unit of bladeless fan sold, I will pay your factory 10 RMB. I will still be funding the R&D costs, and the patent will belong to me. Do you agree?”
In Feng Yu’s heart, he was shouting, please say yes, agree!
When the bladeless fans were launched in his previous life, it was priced at 500 USD, and the production cost was only about 20 USD. The profits were huge!
Although, someone leaked the production cost and the selling price fell from 500 USD to around 100 USD and finally, the selling price dropped to 30 USD. But during the initial stage, the company had made tens of millions of USD profits. The company made a total of a few hundred million USD when the demand rose.
As for R&D costs, the total was only a few million USD. It was mainly used to test the tilt angle of the fan head and the helix angle inside.
Feng Yu does not know about the helix angle, but he remembered the tilt angle to be 16 degrees apparently. He had a bet with one of his drinking buddies on the angle, and they had checked Baidu to get this answer.
Additionally, the Aviation Factory already had the technologies required to develop the bladeless fan, but it was current too big and needed to be minimized and reduced the efficiency. This was supposed to be a fan and not some jet engines for military purpose. There’s no need for it to be so powerful.
Hearing what Feng Yu said, Hou Haitao was unhappy: “Manager Feng, how can you say this? We had cooperated well the last time, and you had experienced our factory’s R&D capabilities. We developed the previous product in such a short period of time and why this time we have to change to fixed dividends?”
Feng Yu retorted: “Then why not I hire the Aviation Factory to develop this technology? I will pay you 1 million? Not enough? 2 million? You name me a price. You do not want to take on the risk, yet you want to get a share of the profits? Based on what? Although your factory has these technologies, but do not forget that in Bing City, there is still the Technical University and the Maritime University. They do have this technology as well!”
They had earned money the first time, and Feng Yu does not mind if both the factories want to cooperate with him again. But now, the problem was the prospect of this bladeless fan was still unsure and they do not want to take on the risk and even want to get money out of it. Why should Feng Yu agree to it?
“Then 10 RMB for a unit is too low. The Motor Factory is still getting 30 RMB!”
“Why not you provide the production facilities and the workers to do the production. I can also give you 30 RMB.” You do not want to do anything yet you want a more significant share? Beggars should not be choosy.
If it weren’t for the technologies the Aviation Factory owns, Feng Yu would have ditched them a long time ago.
Li Shiyou also said unhappily: “Director Hou, 10 RMB is not a small amount. My workers got to work hard, and we still need to provide the production line, machines wear and tear, and still does not include the workers’ salaries. All these for only 30 RMB.”
“15 RMB. I will make sure that the product will be developed in the shortest time possible. 15 RMB is not high. If you sell 10,000 units, I will only get 150,000 RMB. My factory still needs to assign many engineers and experts to develop this product. This would also affect our military orders. We were also paying a heavy price for it.”
Feng Yu despised Hou Haitao. Expert engineers? He speaks as if Feng Yu was not paying for R&D. The previous time, Feng Yu had already noticed the salaries of the engineers reported in the R&D cost, were 6 times more than the rest of the engineers in the factory! However, Feng Yu did not ask him where did this money go to.
“15 RMB? How about 12? The cost of the plastic materials from the plastic factory is also very high. You all think that the fan I wanted is so easily manufactured? My cost is also very high. I cannot forecast the sales and what if this project fails? How much will be my losses?”
In the end, they settled for 13 RMB. Feng Yu was jumping with joy in his heart. Although these bladeless fans will not have a significant market in China, it will be very popular in Europe and the US. There was a few hundred million populations in Europe and the US. Feng Yu estimated that there at least 1 million units will be sold. Based on 100 USD retail price per unit, and 50% profits, he would also get about 50 million USD profits.
Using 1 million USD to gamble for 50 million USD profits. Who would refuse it?
Furthermore, this technology for the bladeless fan would be used for a more popular and practical product that had taken the world by storm – the hand-dryer! The profit for this would be at least over 100 million USD!
After signing the contract with the Aviation Factory and the Motor Factory, Feng Yu transferred 500,000 RMB R&D funds to the Aviation Factory. He told Hou Haitao that if the Aviation Factory could develop the fan before the end of the year, he would still give him a bonus of not lesser than 200,000 RMB!
After finishing his business, Feng Yu returned to school. His exams were approaching, and he does not want to do poorly for the exams.
At the same time, Bing City’s Third High School received an invitation letter from the Soviet Union. The letter was signed off by one of the world's top university Lomonosov Moscow State University. This comprehensive university was ranked tenth in the world. Even if it was for student exchange, it should be sending the invitation to the Universities, like Bing City’s Industrial University or some other top universities in China. Why did it send the invitation to a high school in Bing City?
Author’s notes: The hand dryer was developed by the Japanese in 1993, and the first model was as big as a water dispenser. Inside, there’s a ring, similar to the bladeless fan and the idea for the bladeless fans came from the hand dryer.
Air condition was invented long time ago, but it was not popular in Europe and the US. It was troublesome to install, bulky, expensive, noisy and uses too much electricity. That’s why electric fans were still the most popular product for cooling the room temperature.
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