Foxconn, a massive tech company with over a million employees worldwide, has leapt into the electric vehicle (EV) industry. Foxconn, often known as Hon Hai Technology Group and headed by CEO Liu, assembles most of the world's iPhones. However, they're aiming for something new: designing and building electric cars.
This move is risky. With over 20 times as many parts as a smartphone, cars have far more regulatory requirements, which vary by market. Auto parts like suspension components or high-performance motors aren't even available in smartphones. But Liu's goal is clear: by 2025, Foxconn must capture 5% of the global EV market to make this ambitious plan a success.
With strong finances backing them, it's not just money at stake, but Liu and Foxconn's reputation as well. The company has faced challenges in its past, including worker unrest leading to clashes with police in China. But expanding its business was necessary, especially when it comes to EVs, which aren’t fundamentally unlike smartphones.
"Our revenue is as large as the GDP of some countries," Liu responded via email to CNN Business. "I need to consider which industries will drive future growth. The PC and smartphone business is quite mature."
When Foxconn first came onto the scene in the '80s, it was already a major player. Running operations in more than 24 countries, Foxconn is known for producing a wide range of tech gear, from touchpads to TVs, for a multitude of customers. The biggest client of all, however, is Apple.
Liu, no stranger to strategic moves, once played Mahjong to increase his income. In his own words, he'd win game after game. Furthering his education with a Masters in Computer Science from USC in 1986, Liu founded three tech companies in California before retiring in 2001. But retirement wasn't for him.
"All my friends are older than me," Liu said. "My youngest friend is in his sixties."
Now in his sixties, Liu's youthful appearance belies his age. With his friendly, nerdy grin, he seemed out of place on the CEO level, but FOXCONN's Triple Play plan required him to step up.
Foxconn enters the auto industry with a game plan similar to its Smartphone strategy. They're not planning to sell cars under Foxconn or even its joint venture with Yulon Motor, instead aiming to provide services to other automakers, such as design, construction, and manufacturing.
Their first EV model is already in production and set for release in early 2024 under the Yulon Luxgen brand in Asia. The N7 EV is priced around 999,000 NT$, which translates to about $31,000. Liu revealed that he's dumped Mercedes-Benz and is now driving an N7.
The N7 is derived from the Crossover SUV model introduced by Foxconn. They've announced several other vehicles as well, including the Crossover Model B, a smart Crossover. They've also unveiled a Luxury Limousine developed in conjunction with Pininfarina and a compact pickup called Model V, which they claim is the first pickup to be built in Taiwan. Their first electric bus, Model T, is already in service in Taiwan.
Foxconn, instead of relying on its existing technology know-how, recruited the former Chief Operating Officer of Nissan, Jun Seki, to head their electric vehicle strategy.
"His network is wide and deep," Liu said of Seki. "Thanks to him, we've recruited procurement and product experts, and we're constantly expanding our expertise."
Other tech companies have dreamed of the car market as well. Apple, FOXCONN's prominent client, has an untapped EV project in place, while Sony has partnered with Honda for EV development. Even the Chinese electronics giant, Xiaomi, known mostly for smartphones, intends to make a move into EV production in the coming years.
Foxconn distinguishes itself with its aggressive approach to the auto industry, making a big-time promise to carmakers and offering them a wide range of services, including development and manufacturing. With a strong grasp on the modern electronics that auto manufacturers increasingly demand, Foxconn is well positioned to meet this demand.
Foxconn's lifestyle production services to Monarch Tractor, a startup that focuses on self-driving farm tractors, is a testament to this. Monarch considered 16 potential partners but chose Foxconn for its globally-extensive electronics supply chain and strong position in the industry.
The Yulon–Foxconn partnership is getting a lot of attention in the startup world, with the likes of Ceer, a joint venture between Foxconn and Saudi's Public Investment Fund, planning to sell EVs in the Middle East starting in 2025. The vehicles will be based on Foxconn technology, but sold under the Cereal brand.
Foxconn has announced deals with prominent automakers, including Stellantis and auto parts supplier ZF Chassis Systems. Not all partnerships have gone smoothly, though, such as when Foxconn purchased a factory in Lordstown, Ohio from Lordstown Motors, a startup manufacturing electric pickup trucks.
Lordstown went bankrupt in June 2023, shortly after the vehicles started being produced. They sued Foxconn, but several factors contributed; Lordstown itself bought the factory in 2019 from General Motors.
Foxconn deflected the allegations, calling them "false speculations" and "malicious attacks." They claimed they were working cooperatively with Lordstown to find a solution for their financial struggles.
Foxconn is currently in negotiations with Fisker Automotive to manufacture their PEAR (Personal Electric Automotive Revolution) SUV in Lordstown, where tractors are also made. Fisker's CEO, Henrik Fisker, has identified outsourced manufacturing as a crucial element of his business plan. Fisker's Ocean SUV is already being produced in Austria by Magna.
Foxconn is building new EV production lines in Taiwan and plans to manufacture EVs in other countries as well. Unlike high-value electronics like smartphones that can be easily shipped worldwide, cars are often produced near their sales locations. As a result, large automakers, including Toyota, BMW, and Mercedes, have huge factories in the US.
Sam Fiorani, an automotive analyst at Auto Forecast Solutions, believes Foxconn's acquisition of the Lordstown factory places it in an advantageous position on the North American EV market.
"Companies like Magna thought about building factories specifically for this purpose," Fiorani said, "but Foxconn stumbled upon an existing factory with enough space."
Despite facing challenges with worker unrest and misconduct allegations in the past, Liu reminds us that Foxconn isn't standing still. From offering improved working conditions to implementing external audits, Foxconn is making efforts to enhance its image and reputation in the auto industry.
As Liu leads Foxconn into this new chapter, we might be listening to music while driving in a few years, all while using a smartphone made by Foxconn – an accomplishment you might not even realize.
Enrichment data
Foxconn's transition into the electric vehicle sector calls for several significant changes, according to market analysis and sources:
Market Expansion:
- New Opportunities: By entering the EV sector, Foxconn has the potential to tap into a rapidly growing market, creating new opportunities for both it and its partners. This expansion can increase its market share and create new revenue streams in the automotive and technology sectors[1][4].
- Strategic Partnerships: Foxconn has formed strategic partnerships with prominent automakers and tech companies such as ZF Chassis Systems, Stellantis, and Fisker Automotive. These collaborations can improve its brand image and position Foxconn as a reliable manufacturing partner in the EV sector[1][4].
- Technology Transfer: The automotive industry could benefit from Foxconn's advanced manufacturing technology, thereby enhancing its competitiveness in the development, construction, and production of EVs[2].
Profitability Enhancement:
- Economic Growth: Foxconn's entry into the EV market can lead to economic growth and opportunities, resulting in new job opportunities and technological advancements[1][4].
- Cost Efficiency: Leveraging its existing manufacturing expertise, Foxconn can operate efficiently at scale while maintaining high-quality standards. This efficiency can help reduce production costs and increase profitability[2][4].
- Diversification: Foxconn's foray into EVs can further diversify its revenue streams, mitigating financial risks due to market volatility or dependence on single segments[3].
- Environmentally-Friendly Solutions: By focusing on EV manufacturing, Foxconn aligns itself with global sustainable development efforts and trends. This alignments can lead to image enhancement and attract eco-conscious investors and customers, thereby increasing its profitability[1][4].
- Innovation and Investment: Foxconn's investments in EV and AI manufacturing solutions have potential to increase its profitability, gaining a foothold in the lucrative electric vehicle market and innovation-driven industry[2][4].
In conclusion, Foxconn's venture into electric vehicles features major opportunities for market expansion and profitability enhancements. Through strategic partnerships, technology transfer, cost efficiency, economic growth, and environmental alignment, Foxconn can diversify its revenue streams, attract new clients, and enhance its market share in the automotive and technology sectors.
