Liu is repurposing Foxconn into an electric vehicle powerhouse. — Reuters
HONG KONG: Foxconn’s most important project in 2023 will be to remake itself.
The Taiwanese company is best known for churning out Apple iPhones in China and shipping them around the world, but chairman Liu Young-way is looking elsewhere for the next phase of growth. It’s a well-timed pivot.
Liu is repurposing the top electronics contract manufacturer into an electric vehicle powerhouse.
Foxconn, formally known as Hon Hai Precision Industry, is gearing up to supply cars, and the chips and batteries that go into them, to global marques.
It sees automakers entrusting the company with production in Indonesia, Thailand, Saudi Arabia, the United States and beyond.
By 2025, Liu wants to take 5% of the global electric-vehicle market and generate annual revenue of T$1 trillion (US$32.6 billion) – roughly 15% of Foxconn’s forecast 2022 top line, per analyst estimates from Refinitiv.
Getting there requires Foxconn ditching a tried and tested business model.
To make smartphones, the company relies on a few factories it owns in China and it has little say over the underlying supply chains and which components to use.
Cars, on the other hand, are bigger and harder to move, so Foxconn is setting up regional production hubs in partnership with potential customers.
Its 40%-owned joint venture with Thailand’s PTT aspires to manufacture for automakers in South-East Asia.
Foxconn has also tied up with Ohio-based Lordstown Motors in the United States; its factory is already making electric pickup trucks and could start supplying to other American brands within a year.
The Apple-like prize would be to convince a big established carmaker, like Tesla, to outsource production.
Vertical integration is rare in the auto industry for a good reason: despite the allure of greater efficiencies and higher margins, upfront costs are huge, and it requires scale to take on chipmakers and battery giants like NXP Semiconductors and China’s Contemporary Amperex Technology.
Recent chaos at Foxconn’s major factory in China, and the Taiwanese company’s falling gross margins, suggest its two-decade-long relationship with Apple is past its prime.
That’s a good reason for Foxconn to shift gear in the year ahead.
