Therefore, it is natural for the Japanese government to set up obstacles everywhere. Foxconn's mergers and acquisitions in Japan were blocked by Japanese government agencies, and local governments in Taiwan, China, also set up obstacles to the implementation of Foxconn's panel industry strategy due to political sentiments.
For example, in order to prevent Taiwanese panel companies from investing in mainland China, they set up barriers to prevent investment. In view of the behavior of the Taiwan authorities, Foxconn chose Sharp and its subsidiary SDP as the target of merger and acquisition. Because of this, it is difficult to invest in Taiwan's local government laws.
At the same time, because it is a cross-border merger, Gou Taiming's approach is not only strongly supported by the people on both sides of the Taiwan Strait, but also by the Chinese government, because for the Chinese government, once successfully acquires Sharp, Foxconn can use its panel arm Sharp, Innolux and Shenzhen Super to spread manufacturing bases across Japan, China and Taiwan.
And use the group's integration capabilities to connect the manufacturing advantages of these three places to expand panel production capacity . While creating performance for Foxconn, will also inevitably create tens of thousands of job opportunities , thus contributing to alleviating employment pressure in China.
The economic factors of mergers and acquisitions, on the one hand, refer to whether the acquiring party has strong economic strength to bear the economic burden and debt burden of the target enterprise. On the other hand, the acquiring party must also consider whether the merger and acquisition can bring economic benefits to both parties. As a Fortune 500 company with a turnover exceeding US$130 billion, Foxconn is fully equipped with the economic strength to implement its M&A strategy.
In return for the merger and acquisition, after Foxconn settled in Sharp, it not only controlled the cost of key components and strived for more OEM profits, but also used the internationally renowned brand "Sharp" to create more sources of profit for the company.
Social and cultural factors are also one of the factors that must be considered in mergers and acquisitions. Because different national cultures, different corporate cultures, and management methods are different, failure to comprehensively consider corporate culture and the cultural background of the location, and not conduct targeted guidance and management will bring a fatal blow to the development of the enterprise.
Sharp is a Japanese company, and has more than 100 years of deep-rooted Japanese corporate culture . It must not be easy for a Chinese company to acquire it and manage it. To this end, Foxconn appointed Vice President Dai Zhengwu, known as the "Japan Master", to participate in the merger and acquisition. After the merger, he was put in charge of Sharp, the panel kingdom that was already in danger.
If politics, economy, and culture are external factors that must be considered in mergers and acquisitions, then technical value is the internal factor that must be evaluated. For this reason, before a merger or acquisition, it is necessary to understand the patented technology, core technology, innovative technology and other aspects of the target company, such as understanding what technologies the target company has and the ownership of these technologies, so as to be well-informed during the merger and acquisition negotiation process.
Otherwise, after the merger, both the acquiring company and the target company may suffer huge economic losses due to technology and patent reasons. . In order to have a clearer understanding of such issues, Foxconn sent the group's intellectual property legal professionals to Sharp in Japan to understand and verify Sharp's patents, core technologies, etc. before the merger.
2. Motives for mergers and acquisitions
1. Competitive pressure from peer companies drives
In the past, the layout of the home appliance industry was a four-legged situation of the United States, Europe, South Korea, and Japan. However, with the decline of Japanese home appliances and the rise of the Chinese home appliance industry, the entire home appliance pattern has quietly changed. has gradually become a multi-polar structure of the United States, Europe, South Korea, China, and Japan. For example, South Korea and China account for half of the global market shipments of TV panels.
In the context of a multi-level structure, on the one hand, Foxconn has to face external competition from powerful international first-line brand electronics manufacturers such as Samsung Electronics and LG, which also have vertically integrated models. Internally, it has to face the spurs of emerging manufacturing industries such as Huawei, TSMC, Pegatron, and ZTE.
Internally, it has to face the difficulties of its subsidiary Innolux's insufficient panel production capacity, lack of technology, lack of innovation, and declining market share and competitiveness. On the other hand, since 2012, Apple has divided tablet PCs into individual OEMs and supported other OEM manufacturers. As a result, Foxconn has lost its exclusive OEM qualifications for tablet PCs, and has also lost the exclusive OEM rights for other Apple products in China.
In order to survive in the fiercely competitive environment, Foxconn must expand outward and take the road of "international resource plundering". can enhance its influence and competitiveness in the international environment by integrating upstream and downstream resources in the layout of the industry chain, and combining it with its most competitive manufacturing capabilities.
2. The urgent need to obtain strategic resources and control cost dominance
For a global foundry company with increasing performance, is it worth spending US$3.4 billion to acquire a foreign company that is riddled with debt and has suffered losses for many years?? In the eyes of outsiders, it may be worthless and more like a loss-making deal, but for Foxconn, the investment risk of and is worth trying, because once Foxconn’s huge investment is completed, the most direct benefit is to gain more active bargaining power in business negotiations with Apple, thereby increasing OEM profits.
Foxconn has more than 1 million employees, and two-thirds of such a huge number of employees serve Apple products. For example, the Zhengzhou factory of the iDPBG business group, which only produces and assembles Apple mobile phones, has more than 300,000 people, and there are also many other product manufacturers in Shenzhen, Taiyuan, Chengdu and other places.
Apple is Foxconn’s largest customer. More than half of Foxconn’s performance comes from Apple products, and Foxconn is Apple’s largest processing and assembly base in the world. Although Foxconn invests so much manpower, material and financial resources in Apple products, the profit of OEM products is only a meager 2-3%.
Without the immeasurable advantage of labor cost advantages, 2-3% profit makes it impossible for enterprises to survive.
One of the fundamental reasons for the meager profits is that the small and medium-sized panel resources, which are key core components of Apple products, are not controlled by Foxconn, but are supplied by Sharp subsidiary SDP and South Korea's Samsung Electronics, which have the world's only 10th generation panel line. Therefore, has no room for bargaining on the cost of the panels and can only sacrifice profits in exchange for orders.
Therefore, in order to compete with competitors and gain a voice in the resource chain, Foxconn undoubtedly chose Sharp as the acquisition target , because by joining forces with Sharp, Foxconn can gain the initiative in bargaining for key components, thereby controlling the production costs of products, and ultimately maximizing product profits.
3. Improve technological innovation, product development, and innovative capabilities
Although Foxconn has strong design, R&D, innovation and manufacturing capabilities, various innovations and invention patents are increasing year by year. However, most of them are designed and developed for existing OEM customer products, while technological innovation and technical strength in aspects such as liquid crystal are quite lacking.
For example, in the production and manufacturing of LCD panels, although Foxconn owns its panel manufacturer Innolux, Innolux has not brought enough profits to Foxconn since its acquisition in 2009. Instead, it has fallen into operating difficulties experiencing consecutive losses.
Although the loss is due to the market downturn, more importantly, the Innolux panel lacks cutting-edge technology. Without technology, product development will stall, 's innovation capabilities cannot be improved, which ultimately leads to a small number of product types and no market competitiveness.
Due to such pressure, Foxconn had to choose to cooperate with Sharp. Only by cooperating with Sharp can we use Sharp's world's only 10th generation line technology, IGZO display technology and four-sided frameless mobile phone panel technology to carry out innovative design, research and development and production of related electronic products, thereby improving the technical content and innovation capabilities of the products produced by Foxconn.
4. Build your own brand, increase product market share, and achieve strategic transformation
As a global OEM giant, Foxconn, Although its R&D, design, and manufacturing capabilities are unrivaled and its performance is increasing day by day, the lack of its own brand has always been Foxconn's biggest pain point. In recent years, on the one hand, with the mushrooming of various OEM companies, it has had a big impact on the OEM environment, especially on OEM profits. On the other hand, due to the increase in labor costs, material costs, etc., the already meager OEM profits have become even more miniscule.
Therefore Foxconn has always hoped to produce its own brand products through its own integration of resources without affecting the existing customer market, and then realize its own value. Therefore, in terms of manufacturing layout and expansion in the field of core components, Foxconn chooses to cooperate closely with Sharp. With Sharp's core high-end technology and the world-famous "Sharp" brand, Foxconn can fully create its own brand products, and use the group's existing R&D, technology, and manufacturing capabilities to create more branded products to increase its market share.
5. Develop a broad market and get rid of absolute dependence on a single product.
As a popular global electronics brand, Apple, although the software of its products is unique and dwarfs other peers, the hardware resources have to be outsourced. Although Apple regards Samsung as a strong rival, its dependence on Samsung is very serious.
For example, when TSMC was unable to supply mobile phone processors, Apple had to choose Samsung's processors. At the same time, when Sharp was unable to provide high-resolution displays for tablet computers as scheduled, it also had to choose Samsung as a core customer that accounts for more than half of Foxconn's performance.
The relationship between Apple and Foxconn is not just a customer, but an important partnership. On the one hand, Apple uses Foxconn’s strong assembly and manufacturing capabilities to develop and produce its own products. On the other hand, Apple supports low-cost, fast-response Foxconn to cooperate with high-tech Sharp to restrain Samsung.
is undoubtedly Apple’s favorite strategy, and Foxconn, as an important partner of Apple, must also choose the path to help Apple get rid of its dependence on its archrival Samsung. Of course, while Foxconn is helping Apple, it is also paving the way for itself to get rid of its absolute dependence on Apple, a single product.
Because once Foxconn cooperates with Apple supplier Sharp to control the upstream resources of LCD panels for electronic products and become a component supplier for Apple products, can not only control cost pricing and increase its profit margins, but also use this resource to produce other consumer electronics products. will not only break the absolute dependence on Apple brand products, but also create a broader space for the company's long-term development.
6. Required for corporate transformation strategy
Foxconn, as a leading manufacturing company, has been committed to Motorola , Nokia , Apple, Meizu ht since its establishment. ml4, ZTE, Xiaomi , Huawei and other brand mobile phone production, HP , Dell , Lenovo , Apple and other brand computer manufacturing, Nintendo game OEM, Cisco , Huawei machine parts processing, but they have never had their own independent brands.
Therefore, no matter when, where or under what circumstances, the company name is always preceded by "OEM", that is, "OEM enterprise". Of course, it’s not that Foxconn doesn’t want to have its own brand and doesn’t want to take off its “OEM” hat, but it does not have the conditions to own a brand. If Foxconn rashly gives up nearly 40 years of “OEM” experience, it means losing customers, losing the source of performance, and companies without orders will inevitably die.
Conclusion
So I dare not give up OEM. At most, OEM and brand exist at the same time. Under such circumstances, Foxconn chose to cooperate with Sharp, which can use Sharp's globally unique display technology to create its own unique products.
At the same time, relying on the "Sharp" brand, we will design and develop more "Sharp" brand products, so that Foxconn can get rid of the permanent "OEM" routine, let the OEM go with the brand, and let the "OEM" hat gradually go away, thereby realizing the transformation of Foxconn's development strategy.
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