Chip Procurement

Let's return to the topic of chip procurement.

"So, regarding the current procurement of MC68000 and Z80, what are your specific thoughts, Takuya- kun?"

The Terauchi's director asked.

Nakayama Takuya began his analysis with confidence.

There are several authorized manufacturers of the Z80.

"NEC, they're collaborating with Hudson on the joint development of the PC Engine console, making them direct competitors to us. Although NEC was previously the supplier of the Z80 chip for the SG-1000, not to mention that NEC suddenly placed large orders for Z80 chips and even the MC68000 despite knowing that Sega's SG-1000 sales hadn't increased significantly."

Could chip manufacturers anticipate Sega's new console plans and then restrict Sega's production capacity? Even if they don't restrict it, simply leaking their speculations could affect Sega's new console launch strategy. To prevent the leakage of core business information, this can be ruled out first.

"Hitachi also has Z80 compatible products, but their enhanced versions usually integrate a memory management unit (MMU). In our new console, the game software directly manages memory, so this MMU is not very useful."

This would actually increase the cost of chip procurement, making it less cost-effective.

"Sharp's business focus isn't on general-purpose processors like the Z80; their production capacity and pricing might not meet our requirements."

His finger pressed heavily on the Toshiba company's name on the document.

"Therefore, at present, the best breakthrough point is Toshiba."

There are two reasons.

"First, as we just discussed, Toshiba is having a very difficult time under the current sanctions. Although its electronics division is not subject to the sanctions, the sanctions and the public smashing of Toshiba radios by United States lawmakers have severely damaged its reputation in North America, inevitably leading to a decline in sales. Therefore, its electronics production lines are bound to operate at insufficient capacity, and it urgently needs large orders to offset fixed costs and maintain cash flow and operations. Furthermore, compared to other semiconductor companies that invested in R&D several years earlier, Toshiba's large-scale R&D investment was concentrated in the first three or four years, making the pressure to recover costs far greater than other companies. Therefore, they will inevitably have more room for negotiation on prices than before."

"Secondly, and most importantly, Toshiba happens to hold licenses to produce both the Motorola MC68000 and Zilog Z80 core chips."

This means we can make a "package" purchase, negotiating orders for both chips together.

This will give them greater bargaining power.

The two directors' eyes lit up.

"Package procurement-"

Director Hatano murmured, clearly drawn to this idea.

Taking advantage of the momentum, Nakayama Takuya put forward his specific action plan.

"My suggestion is that Sega use our massive order of 600,000 units of the MC68000 and Z80 chipsets as leverage in negotiations."

Director Terauchi and Director Hatano twitched almost imperceptibly. Six hundred thousand units—that meant an initial shipment of three hundred thousand units for the new console. For Sega, which had experienced the setbacks of the SG-1000, this was a considerable sum.

"This is equivalent to our initial stock of 300,000 new PCs, because each PC requires one MC68000 and one Z80 chip," Nakayama Takuya added. "With this order, we can negotiate a very competitive package price with Toshiba. I think, faced with such sincerity, it will be hard for them not to seriously consider it."

If Toshiba remains stubborn on price and refuses to concede enough profit, then----

Nakayama Takuya paused slightly, and the air in the conference room seemed to freeze for a moment. A barely perceptible smile curved his lips, but his eyes were like polished obsidian, calm and sharp.

"We'll increase our order volume to 1 million units! That's 500,000 units each of the MC68000 and Z80!"

"We must push the unit price of these two core chips down to our acceptable bottom line, or even lower!"

"One million chips?!" Director Hatano's voice was slightly off-key. He subconsciously sat up straight, his fingers tapping unconsciously on the smooth conference table before stopping, as if calculating the risks and opportunities behind that number. One million chips, half a million consoles—this was practically betting Sega's entire future for the next year or two.

Director Terauchi seemed to have been choked, speechless for a moment. His thick eyebrows furrowed, his mouth slightly open, and his eyes held undisguised horror and caution. This was no longer audacious; it was an almost insane gamble. If the market reaction was not as expected, the mountains of chips and finished products could drag Sega into an abyss of no return. He could even imagine the mountains of chips piled up in the warehouse and the accounting department's report filled with deficits.

Silence filled the conference room, broken only by the faint hum of the air conditioning vents.

After a moment, Director Terauchi finally spoke, his Adam's apple bobbing, his voice somewhat hoarse. "Takuya- kun, one million pieces—" Can you guarantee you can handle that quantity? This is no joke." His gaze was sharp, fixed on Nakayama Takuya the slightest hint of wavering or unease on his face.

Nakayama Takuya met his gaze calmly, his tone steady yet carrying an undeniable authority. "Please rest assured, both directors."

He didn't boast; he let the facts speak for themselves, "Our launch lineup for the new console..."

Whether in terms of creativity, technology, or playability, it will be revolutionary. The subsequent game development team is also complete, ensuring a continuous supply of software and forming a strong content barrier. I have absolute confidence that with these resources, we can not only absorb the hundreds of chip orders, but also firmly establish Sega's leading position in the next-generation console market. If you two and the board members are still concerned, before we go to Toshiba to place the order, I will have the Development Department arrange a demonstration of the initial lineup. At that time, whether we are confident or not will be self-evident."

"This is not only to minimize current hardware costs," Nakayama Takuya continued, his voice brimming with strategic composure, "But also to establish a price benchmark that is absolutely favorable to us for future chip procurement. Once Toshiba accepts the unit price of this 100-unit order, neither they nor other potential suppliers will have a chance to raise prices later. We are paving the way for our long-term interests."

The atmosphere in the conference room became subtly tense because of Nakayama Takuya's words.

That composure and confidence far beyond his years, that insight into market trends, and that boldness to take big risks—even the two seasoned business veterans couldn't help but admire him secretly, and even feel a little ashamed. They seemed to see the shadow of Nakayama Hayao from back then, who dared to challenge all authority and led Sega to create miracles.

Director Terauchi and Director Hatano exchanged glances again. This time, they both saw a ignited flame and a resolute determination in each other's eyes. The risk was high, but if successful, the reward would be unprecedented. Moreover,

Nakayama Takuya's extraordinary abilities made them feel it was worth the risk. Furthermore, Nakayama Takuya had promised to arrange a game demonstration before the procurement to reassure the board members. There would definitely be a board vote afterward, which would greatly reduce the responsibility on their shoulders.

"Alright!" Director Terauchi's voice regained its usual composure, even carrying a hint of barely perceptible excitement. He lightly pressed his palm on the table, as if everything had been settled. "Let's proceed according to Takuya- kun's plan!"

Director Hatano nodded emphatically, his tone resolute. "We will mobilize all available resources in the company to fully cooperate with your negotiations with Toshiba, as well as any subsequent supply chain adjustments! If you need any support, just ask! Don't hesitate!"