BYD's human resource advantage
Recently, revealed the news that it just recruited another 10k from recent graduating class. Of which, 70% were those who have master or doctor degree. 80% of those ended up working R&D.
As I reported back in March, BYD had already ramped up its research team from 69,697 to 102,844 over 2023. Of which, number of PHDs increased by 169% and number of masters increased by 203% from 2022 to 2023. With this huge increase in more experienced researchers, BYD’s R&D expenditure increased from 20B to 40B RMB in just one year. It accounted for 6.63% of BYD’s revenue. That is a huge ratio for an industry where margins are not that high. The ramp up in R&D expenditures and headcount has continued to accelerate this year as BYD’s new found status as a national champion allowed it to continue to capture more of the elite talent. While it still does not approach Huawei level of R&D, maybe it will get closer over the next few years as it is now able to keep many of the top tier talents and poach from other countries.
At end of last year, I saw a report that just outlined productivity of BYD’s research team. It was being awarded 15 patents/day on avg for a total of 28k patents worldwide. This was the breakdown of research team as of January:
Electrification - 25k, Semiconductor - 5k, Smart car/others - 15k, SkyRail - 2k, Auto integration - 10k, New material/Basic science - 3k, Motor integration - 7k, Electronics - 11k, Battery - 10k and Commercial vehicle - 3k
As you can see, it really has huge teams for many areas dealing with energy transition. The level of R&D can be seen in some of the output. As I tweeted recently, it just filed patents for microcrystalline glass process for the mobile devices as well as ceramic component protection layers for cars. It’s conducting serious R&D for the basic science and materials in order to continue to keep cost down and establish competitive advantage. It is also working extra hard at developing all the NEV components in house so that it can keep cost down and pressure Tier-1 suppliers to give it the best possible deal. It is so vertically integrated that it even makes its own brakes.
The best is still to come. Recently, one of BYD heads announced that BYD is building by far world’s largest fab for SiC (10x the second largest). This level of capex would not be possible if BYD did not intend to also develop the world’s leading SiC power modules as well as be best at every step of production from raw material to packaging and testing. Indeed, most of the great tech we have seen recently like Disus-Z & carbon fiber brakes on YangWang U7, E3.0 Evo for Sea Lion 07 and DM 5.0 on Qin L were likely developed before the most recent hiring surge. Since it takes probably 2 years for new subsystems to mature and complete system testing in cars, what we are seeing most likely were just finishing lab testing in 2021 and early 2022. In fact, people are already leaking details about DM 6.0. DM 7.0 is apparently already in labs.
As we know, it takes a couple of years for new grads to really get acquainted with company culture and be productive in their teams. It could be another 3 to 4 years before we see the hiring surges of 2022 until now to really be reflected in production systems. Of course, the lags would be different for different teams. Additions to smart car software team is likely to contribute positively to end product much quicker than someone working at developing brakes and hybrid motor.
All this is to say that while BYD has been extremely fast at pumping out new products this year, it will be even faster in the future. In all likelihood, it’s additional headcount will allow exploration into new areas. We will have to wait to see what those are.