- Foxconn’s Shift towards Electric Vehicles
- The Challenges of US-China Tensions
- Foxconn’s Focus on Electric Vehicle Market
As it navigates a new era of icy Washington-Beijing relations, iPhone manufacturer Foxconn is betting heavily on electric vehicles and redrawing some of its supply chains.
Even as Foxconn shifts some supply chains away from China, he stated that electric vehicles (EVs) will drive its development over the next several decades.
Mr. Liu stated that as US-China tensions escalate, Foxconn must prepare for the worst.
“We hope that the leaders of these two countries will keep peace and stability in mind,” Mr. Liu, 67, told us in his offices in Taipei, the capital of Taiwan.
“However, as a business owner and chief executive officer, I must consider the worst-case scenario.”
Beijing could attempt to blockade Taiwan, which it asserts is a part of China, or even invade the self-governing island.
Mr. Liu stated that “business continuity planning” was already in progress and that certain production lines, particularly those related to “national security products,” had already been relocated from China to Mexico and Vietnam.
He was probably referring to workstations manufactured by Foxconn that are utilized in data centers and can contain sensitive information.
Foxconn, or Hon Hai Technology Group as it is formally known, began producing TV controls in 1974. With an annual revenue of $200bn (£158.2bn), it is now one of the world’s most profitable technology companies.
More than half of Apple’s products, from iPhones to iMacs, are manufactured by Foxconn, but it also serves Microsoft, Sony, Dell, and Amazon.
It has prospered for decades on a playbook perfected by multinational corporations: they design products in the United States, manufacture them in China, and then sell them worldwide. This is how it evolved from a small component manufacturing company to the consumer electronics industry titan it is today.
However, as global supply chains adjust to deteriorating relations between Washington and Beijing, Foxconn finds itself in an unenviable position – ensnared between the world’s two largest economies, the very nations that have driven its growth to date.
The United States and China disagree on a variety of issues, from trade to the conflict in Ukraine. However, one of the greatest potential flashpoints is Taiwan, where Foxconn’s headquarters are located.
Caught in the crossfire
Taiwan has long been a contentious issue, but Chinese leader Xi Jinping’s repeated promises of “reunification” have upended the precarious status quo. Under President Joe Biden, the United States has been more vocal in its support for Taiwan in the event of an attack.
Some American voices have crossed China’s red line by calling for Taiwan’s independence, despite the White House’s reaffirmation that it maintains diplomatic relations with Beijing, not Taipei.
With US Secretary of State Antony Blinken visiting China this weekend, there is optimism for a thaw. However, there are also concerns about a conflict, which one US general believes could occur within the next few years.
The United States and China are engaged in what we see as a strategic competition,” said Shihoko Goto, the deputy director of the Asia program at the Wilson Centre in Washington, D.C.
Foxconn desires to do business with both parties, but there can be only one victor.
But Mr. Liu disagrees with this assessment. Foxconn’s business model, which hinges on US designs and Chinese manufacturing, is far from over, he stated.
“We hire a lot of workers, and most countries, including China, want to support their workers,” Mr. Liu said, adding that the Chinese government wants companies like Foxconn to continue operating due to the large number of jobs they create.
Are escalating tensions pressuring the model? “So far? We haven’t seen it,” he told us.
However, the West and its allies have urged nations and businesses to “de-risk” from China, a long-term strategy to reduce global reliance on China that has yet to materialize.
When asked if this affected commerce, Mr. Liu responded with caution.
Some international clients had pressed Foxconn to move production outside of China, he said, but this was their choice, not Foxconn’s.
They will inform us once they receive encouragement from their government to reduce risks.
The Covid obstacle
Covid-19 is another reason companies may contemplate “de-risking” from China, aside from geopolitics.
In late 2022, a combination of harsh Covid policies, a dearth of quarantine space, and the infectiousness of the Omicron variant led to protests and riots at Foxconn’s largest iPhone plant in Zhengzhou, China. Fearing the spread of the virus, hundreds of employees evacuated the campus on foot.
Mr. Liu said Beijing’s zero-Covid policy triggered the world’s scenes.
However, when further questioned, he confessed that he should have handled the situation differently.
“If the same situation were to occur again, I would cease all production,” he said, reiterating that he would have made this decision even if it meant upsetting Apple customers.
Foxconn is just as indispensable to the company’s remarkable client base as those clients are to Foxconn.
Approximately 60% of the iPhone, according to some estimates, is manufactured by Foxconn, which demonstrates the company’s importance to Apple. China’s factories produce some of the device’s most vital components, including camera modules, connectors, and even the rear of the phone casing.
iPhone on rims
Mr. Liu hopes that this expertise will fuel Foxconn’s next major bet: electric cars.
“Look at this – it’s a big iPhone, so we’re very familiar with this,” he said, pointing to a panel that controlled the vehicle he had driven us in.
Foxconn’s white SUV is aimed at families and the global middle class.
“We believe this to be a wonderful opportunity for our company because traditional petrol engines are predominantly mechanical. But with electric vehicles, it’s batteries and actuators,” he says.
He added that this is a familiar vernacular for a technology company such as Foxconn.
Foxconn aims to capture approximately 5% of the global electric vehicle market within the next few years. Which is an ambitious goal given that the company has only produced a few models to date. But Mr. Liu is confident that the risk will pay off.
“It makes no sense to manufacture [EVs] in a single location, so regionalized car production is quite natural,” he added. Foxconn automobile factories will be located in Ohio, Thailand, Indonesia, and possibly India, he said.
For the time being, the company will continue to focus on what it does best: manufacturing electronic products for customers. However, shortly, Foxconn will likely do the same for clients with electric vehicles.
Mr. Liu believes diversifying production and supply lines is crucial to Foxconn’s future.
