The conversation returned to the immediate topic of chip procurement.
"So, Takuya-kun, what are your specific thoughts on the current procurement of MC68000 and Z80 chips?" Director Terauchi asked.
Takuya Nakayama analyzed with confidence.
"There are several authorized manufacturers for the Z80."
"NEC, they are collaborating with Hudson to jointly develop the PC Engine console, which puts them in direct competition with us. Although NEC was previously the supplier of Z80 chips for the SG-1000, it's uncertain whether NEC, knowing that Sega's SG-1000 sales haven't significantly increased, would guess Sega's new console move if we suddenly order a large quantity of Z80 chips, or even MC68000 chips. They might manipulate production capacity to limit Sega. Even if they don't limit us, merely leaking their suspicions would affect Sega's new console launch strategy. To prevent the leakage of core business information, NEC is excluded first."
"Hitachi also has Z80 compatible products, but their enhanced versions usually integrate a Memory Management Unit (MMU). For our new console, game software directly manages memory, so this MMU is not only of little use but also increases the procurement cost of the chips, making it less cost-effective."
"Sharp's business focus is not on general-purpose processors like the Z80, so their production capacity and pricing may not meet our requirements."
His finger heavily tapped on the name of Toshiba in 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 sanction storm. Although the electronics division is not within the scope of the sanctions, the sanctions and the public act of American congressmen smashing Toshiba radios have severely damaged their electronics products' reputation in North America, and sales are bound to decline. Therefore, the operating rate of their electronics production lines will certainly be insufficient, and they urgently need large orders to spread fixed costs, maintain cash flow, and operations. Furthermore, compared to other semiconductor companies whose R&D investments were concentrated earlier, Toshiba's large-scale R&D investments were concentrated in the last three or four years, so the pressure to recover costs is much greater than that of other companies. Therefore, in price negotiations, they will inevitably have more room for flexibility than before."
"Second, and most crucially, Toshiba Corporation happens to simultaneously hold authorized production licenses for both Motorola MC68000 and Z80, these two core chips."
"This means we can conduct a 'package' procurement, bundling the orders for both chips in negotiations, thereby gaining greater bargaining power."
The eyes of the two directors lit up.
"Package procurement—" Director Hatano murmured, clearly attracted by this idea.
Takuya Nakayama struck while the iron was hot, proposing his concrete action plan.
"My suggestion is that Sega will use a massive order of 600,000 chips, combining MC68000 and Z80, as a bargaining chip."
The eyebrows of Director Terauchi and Director Hatano moved almost imperceptibly. Six hundred thousand chips meant that the initial stock for the new console would be as high as 300,000 units. This number, for Sega, which had experienced market setbacks with the SG-1000, was already a considerable undertaking.
"This is equivalent to our new console's initial stock of 300,000 units, because each console requires one MC68000 and one Z80," Takuya Nakayama added. "We will use this order to negotiate a highly competitive package price with Toshiba. I believe, facing such sincerity, it will be difficult for them not to seriously consider it."
"If Toshiba remains stubborn on pricing and refuses to yield enough profit, then—"
Takuya Nakayama paused slightly, and the air in the conference room seemed to halt for a moment. The corner of his mouth curved into an almost imperceptible arc, but his eyes were like polished obsidian, calm and sharp.
"We will directly increase the order quantity to 1 million chips! That is, 500,000 each of MC68000 and Z80!"
"We must press the unit price of these two core chips down to our acceptable psychological bottom line, or even lower!"
"One million chips?!" Director Hatano's voice was slightly off-key. He instinctively straightened his body, his fingers unconsciously tapping on the smooth conference table surface, then stopping, as if calculating the immense risks and opportunities behind that number. One million chips, five hundred thousand consoles—this was almost putting Sega's future for the next one or two years on the line.
Director Terauchi, meanwhile, seemed to have his throat choked, unable to speak for a moment. His thick eyebrows furrowed tightly, his mouth slightly open, his eyes filled with undisguised shock and caution. This was no longer just bold; this was an almost insane gamble. If the market reaction was not as expected, the mountains of accumulated chips and finished products would be enough to 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 spread through the conference room, broken only by the faint hum of the air conditioning.
After a moment, Director Terauchi finally spoke, his Adam's apple bobbing, his voice a little hoarse: "Takuya-kun, one million chips—can you guarantee we can absorb that quantity? This is not a game." His gaze was sharp, fixed on Takuya Nakayama, trying to catch the slightest hint of hesitation or unease on his face.
Takuya Nakayama met his gaze calmly, his tone steady yet carrying an undeniable force: "Please rest assured, both Directors."
He didn't boast, but simply spoke with facts: "The launch game lineup we've prepared for the new console, whether in terms of creativity, technology, or playability, will be revolutionary. The subsequent game development team has also been assembled to ensure a continuous supply of software, forming a strong content barrier. I have absolute confidence that with these, we can not only absorb a million-level chip order but also establish Sega's leading position in the next-generation console market in one fell swoop. If the two of you and the other directors are still uneasy, before placing the order with Toshiba, I will arrange a demonstration of the launch lineup by the development department. At that time, whether there is confidence will not need to be said by me."
"This is not only to minimize the current hardware costs," Takuya Nakayama continued, his voice exuding the composure of someone in control, "but also to set an absolutely favorable price benchmark for our future chip procurement. Once Toshiba accepts the unit price for this million-chip order, in the future, whether it's them or other potential suppliers, if they want to inflate prices, they'll have to seriously weigh their own worth. We are also paving the way for long-term future interests."
The atmosphere in the conference room became subtly heated due to Takuya Nakayama's words.
That calmness and confidence far beyond his age, that insight into market trends, and that boldness to make a heavy bet, made the two seasoned veterans of the business world secretly admire him, and even feel a little ashamed. They seemed to see the shadow of Hayao Nakayama from back then, who dared to challenge all authority and led Sega to create miracles.
Director Terauchi and Director Hatano exchanged glances again, and this time, they both saw a certain ignited fire and resolve in each other's eyes. The risk was high, but if successful, the returns would also be unprecedented. Moreover, Takuya Nakayama's extraordinary ability made them feel it was worth taking a chance, and Takuya Nakayama had already promised to arrange a game demonstration before procurement to reassure the directors. There would certainly be a director's vote process after the meeting, which would significantly reduce the responsibility on their shoulders.
"Good!" Director Terauchi's voice returned to its usual steady tone, even with a hint of subtle excitement. He lightly pressed his palm on the table, as if the dust had settled. "We will follow Takuya-kun's plan!"
Director Hatano also nodded heavily, his tone decisive: "We will mobilize all available company resources to fully cooperate with your negotiations with Toshiba, and any subsequent industry chain adjustments! Just ask for any support you need! Don't have any concerns!"