As it navigates a new era of icy relations between Washington and Beijing, iphone manufacturer Foxconn is betting heavily on electric cars and redrawing some of its supply chains.
The Taiwanese company’s potential future was discussed by chairman and boss Young Liu in an exclusive interview with the BBC.
He stated that Foxconn’s expansion in the coming decades will be driven by electric vehicles (EVs) even as it moves some supply chains away from China.
Mr. Liu stated that Foxconn must prepare for the worst as tensions between the US and China rise.
In his offices in Taipei, Taiwan’s capital, 67-year-old Mr. Liu told us, “We hope peace and stability will be something the leaders of these two countries will keep in mind.”
“However, as CEO of a company, I have to consider what would happen in the worst case scenario?”
Beijing might try to blockade Taiwan, which it claims is part of China, or, worse, invade the island that runs itself.
Mr Liu said “business congruity arranging” was at that point under way, and brought up that some creation lines, especially those connected to “public safety items” were at that point being moved from China to Mexico and Vietnam.
He probably meant the servers that Foxconn makes, which are used in data centers and can hold sensitive data.
In 1974, Foxconn, or Hon Hai Technology Group as it is officially known, began producing TV knobs. With a revenue of $200 billion (£158.2 billion) annually, it is now one of the most powerful technology companies in the world.
Although it is best known for producing more than half of Apple’s products, including iPhones and iMacs, it also serves Microsoft, Sony, Dell, and Amazon.
It has thrived for decades on a strategy that multinational corporations have perfected: they design products in the United States, make them in China, and then sell them to the world. That’s how it got from being a small company that made parts to the huge manufacturer of consumer electronics it is today.
Foxconn, on the other hand, finds itself in an unenviable position as global supply chains adjust to deteriorating ties between Washington and Beijing. It is wedged in between the two largest economies in the world, the very nations that have fueled its growth up until this point.
From trade to the war in Ukraine, China and the United States are at odds. However, Taiwan, where Foxconn’s headquarters are located, is one of the most significant potential flashpoints.
Caught in the middle
For a long time, Taiwan has been a contentious issue, but Chinese leader Xi Jinping’s repeated promises of “reunification” have upset the uneasy status quo. In the meantime, under President Joe Biden, the United States has voiced its support for Taiwan in the event of an attack.
Even though the White House has reaffirmed its position that it maintains diplomatic relations with Beijing rather than Taipei, some US voices have crossed China’s line and called for independence.
With US Secretary of State Antony Blinken visiting China this weekend, there are hopes for a thaw. However, there are also concerns about a conflict, which, according to one general from the United States, could occur within a few years.
“The US and China are participated in what we see as essential rivalry,” said Shihoko Goto, the delegate chief for the Asia program at the Wilson Place in Washington DC.
“There can only be one winner, even though Foxconn wants to do business with both.”
But Mr. Liu doesn’t think it’s that easy. First, he stated, Foxconn’s business model, which relies on American designs and Chinese production, is far from finished.
Mr. Liu stated, “We hire a lot of workers, and most countries, including China, want to support their workers,” adding that the Chinese government wants Foxconn to continue operating due to the large number of jobs it creates.
Is the model being put under pressure by rising tensions? So far? He informed us that he had not seen it.
However, the West and its allies have urged nations and businesses to “de-risk” from China, a long-term strategy to lessen global reliance on China that has not yet been implemented.
Mr. Liu gave a cautious response when asked if that was having an effect on business.
He stated that while some overseas customers had pushed for production to be moved out of China, Foxconn had not made this decision.
“They will inform us after their government gives them the go-ahead to de-risk.”
The Covid challenge
Covid-19 is yet another reason why businesses might think about “de-risking” from China.
At Foxconn’s Zhengzhou factory, the world’s largest iPhone plant, in late 2022, protests and riots were the result of a combination of harsh Covid policies, a lack of quarantine space, and the infectious nature of the Omicron variant. Fearing the virus would spread, hundreds of workers fled the campus on foot.
Mr Liu said the scenes that worked out so that the world could see were made by an absence of transportation due Beijing’s steadfast zero-Coronavirus strategy.
He admitted, however, that he should have handled things differently when pressed further.
He went on to say, “If the same situation occurs again, I would stop production altogether,” reiterating that he would have made that choice even if it meant offending Apple customers.
Foxconn is just as important to the company’s clients as its impressive clientele is to the company’s success.
Just look at how much of the iPhone is made by Foxconn—roughly 60%, according to some estimates—to get a sense of how important it is to Apple. The device’s camera modules, connectors, and even the back of the phone casing are all manufactured in China by factories.
IPhone on wheels
Mr. Liu also hopes that this knowledge will fuel Foxconn’s next big bet: electric vehicles
“Take a gander at this – this is a major iPhone, so we’re exceptionally acquainted with this,” he expressed, highlighting a board that controlled the vehicle he had taken us for a drive in.
The shiny white SUV is one of several models produced by Foxconn. It is designed for families and priced to appeal to an aspiring global middle class.
“The fact that you have engines that are mostly mechanical with the traditional gas engine is the reason why we think this is a great opportunity for us.” But with electric vehicles, it’s batteries and motors,” he says.
That is a natural language for an innovation organization like Foxconn, he added.
Given that the company has only produced a few models thus far, Foxconn hopes to acquire approximately 5% of the global market for electric vehicles within the next few years. This is an extremely lofty goal. However, it is a risk that Mr. Liu is certain will pay off.
He continued, “It doesn’t make sense for you to make [EVs] in a single location, so regionalized car production is very natural.” He stated that Foxconn’s automobile factories will be located in Thailand, Indonesia, Ohio, the United States, and possibly even India.
For the time being, the business will continue to concentrate on what it does best: making electronic products for customers. However, Foxconn may do the same for electric car customers in the not too distant future.
In any case, Foxconn is diversifying not only its production but also its supply lines with its move into electric vehicles. Mr. Liu is of the opinion that these two areas hold the key to the company’s future.