Can the OEM empire that has completed its handover continue its glory?
article ｜Chinese Entrepreneur reporter Ren Yafei
edited ｜Ma Jiying
head image source ｜Visual China
Foxconn ’s car manufacturing business has gone further, and Terming Guo is a little excited.
On October 18, at Hon Hai Technology Day, 72-year-old Terry Gou appeared at the press conference as a mysterious guest. After getting off the car, he introduced the car with a little excitement, calling it "the best birthday gift."
On the same day last year, Hon Hai officially released its pure electric car brand Foxtron and brought three electric cars. Terry Gou also expressed his expectations for Foxconn's car manufacturing in the same way.
It is understood that Foxtron (Honghua Advanced) is a joint venture between Hon Hai Group and Yulon Auto , the largest car company in Taiwan. Foxtron is mainly responsible for vehicle design, and automobile production will be manufactured by Hon Hai. Compared with last year's press conference, the number of Foxconn's unveiled car products this year has not increased. There are three models: crossover SUV model Model B, all-terrain electric pickup truck Model V, and mass-produced version Model C. In addition to the Model E (positioned as a luxury sedan with a range of 750km and is scheduled to be launched in 2023) and Model T (electric bus, currently officially delivered to Kaohsiung passenger transport with a range of 300km), Foxconn has unveiled a total of 5 models, covering multiple markets of SUVs, sedans, buses and pickup trucks.
Compared with a year ago, Foxconn's car manufacturing mood seems to be more urgent - Foxconn hopes to replicate its successful experience in assembling consumer electronics products and expand its business to the automotive field. The goal is to start manufacturing and assemble its electric car for customers from the chassis.
Chairman Liu Yangwei once again emphasized that Foxconn does not sell its own brand cars, and their original intention will not change, that is, it is a commissioned design and manufacturing service company (CDMS) in the automotive industry, and hopes that one day Hon Hai can help Tesla build cars.
Source: Hon Hai Technology Day Live Screenshot
"After announcing the plan to produce electric vehicles in 2020, many people questioned whether Foxconn could build cars. Now, Foxconn has launched three models a year, and many people are wondering how they did it? This is our operating speed." Liu Yangwei said.
In June 2019, Terry Gou retired, and Liu Yangwei replaced Terry Gou as the new chairman of Hon Hai. But at present, Foxconn's car manufacturing business has not been greatly affected by the handover. With five new cars unveiled in two years, Foxconn seems to want to prove its car-making ability with speed.
According to the plan, Hon Hai will achieve the goal of 5% of the global electric vehicle market by 2025, with an annual shipment volume of 500,000 to 750,000 units, and plans to provide parts or services to 10% (about 3 million) of electric vehicles worldwide between 2025 and 2027.
, the OEM empire that has completed its handover, can continue its previous glory?
two-year acceleration
In 2015, Musk expressed this view in an interview with the German Business Daily: "Compared with mobile phones or smart watch , cars are very complicated. You can't find suppliers like Foxconn and say, 'Build a car for me'."
In the following years, this sentence was often used by everyone to tease Foxconn from time to time.
In fact, Foxconn's ambition for making cars is nothing new.
As early as 2005, Hon Hai began to enter the automotive parts business by acquiring Antai Electric, one of the four major automotive wiring harness manufacturers in Taiwan.In 2010, Hon Hai won Tesla's order and became a supplier of Tesla's central control touch screen panels, connectors, and covering parts. In 2013, Foxconn entered the supply chain of multinational automakers such as Mercedes-Benz , BMW , etc. The following year, Foxconn cooperated with BAIC to jointly invest in the research, development, production and manufacturing of new generation power batteries and their systems to obtain battery technology.
Hon Hai’s cooperative enterprises in the automotive field (incomplete statistics) Drawing: Ren Yafei
In the subsequent layout, in addition to cooperating with traditional car companies, Hon Hai began to establish cooperation with potential Internet car manufacturers through investment methods.
For example, in 2016, it invested US$119.9 million in Didi Chuxing through its subsidiary Hongzhun, and obtained 70.355% of the shares of Didi HTML; in 2017, it invested 1 billion yuan in CATL through its subsidiary Futaihua , and obtained about 1.19% of the other party's equity; in 2018, it jointly led the Xiaopeng Motors round of financing with Alibaba and IDG Capital .
In 2020, Foxconn suddenly announced car manufacturing. At the Technology Day event that year, Liu Yangwei introduced the first detailed ideas of Foxconn's entry into the car manufacturing industry: Foxconn will not build its own electric car brand, Tesla is the iPhone among electric cars, and Foxconn hopes to become Android in the electric car industry, open source and open.
In the next two years, Foxconn's layout in the automotive field has become more frequent.
In early 2021, Foxconn reached a cooperation with Geely . The two parties established a joint venture called Fujikang, whose main business is to manufacture complete vehicles or produce automotive parts.
On May 14 last year, Foxconn reached a cooperation with US electric vehicle manufacturer Fisker on car assembly and will launch a new car in 2023. This is also the first time Foxconn has taken a big order for car assembly.
In November of the same year, Foxconn acquired the former General Motors factory in , Ohio, from the US electric vehicle startup Lordstown Motors for $230 million, and plans to produce electric vehicles there. This is also the first automobile factory owned by Foxconn. Foxconn will also conduct OEM for Lordstown Motors. Earlier this month, Lordstown Motors announced that Foxconn had manufactured its first pure electric pickup truck, Endurance. The model is priced at US$52,500 (equivalent to approximately RMB373,600), and is scheduled to be launched by the end of the year.
In August this year, Foxconn signed a contract with Monarch Tractor, a company located in , California, to produce electric tractors with autonomous driving capabilities. In October, Foxconn reached an agreement with Los Angeles-based electric vehicle startup INDIEV to produce the first mass-produced prototype for the latter.
"soft" Foxconn
In addition to its extensive layout, Foxconn is also constantly upgrading and updating its own car OEM model. And the key is the MIH platform.
In Liu Yangwei's words, "Our only weakness is that we don't understand cars very well. This weakness can be solved through the platform." Wei Guozhang, head of the software of
MIH open electric vehicle platform, once said that the traditional automobile industry has three pain points: the first is the hardware definition, and as long as the car is implemented, it will depreciate; the second is the complex architecture, which leads to increased difficulty in supply chain management; and the last is the closed system, which makes it difficult for new manufacturers to participate and develop. He said that he hopes to allow the outside world to see a "soft Hon Hai" on MIH.
The biggest feature of the MIH platform is modularity and customization. Foxconn plans to open the platform to the outside world and invite electric car players in need to join the MIH alliance, and use this platform to achieve rapid car manufacturing. If you compare a smartphone, it is equivalent to the operating systems of major manufacturers being basically the same, and the difference lies in the brand and parameter configuration. This is also as Foxconn proposed, hoping to become "Android in the electric vehicle industry."
According to Liu Yangwei, As of now, there are nearly 2,500 members of the MIH platform.These include Qualcomm , Microsoft , Bosch , CATL , BYD Electronics, etc. In the future, Foxtron's models will also give priority to products from MIH alliance members. We hope that Model B, Model V and Model C electric vehicles can use more than 50% of the MIH members.
However, industry insiders have different opinions on how attractive the MIH platform is for car companies. The supportive view believes that within the platform, all members can share their experience in electric vehicle manufacturing with each other, which will facilitate shortening development time and reducing development costs. The point of view is that as Foxconn's most important partner, Yulon does not have a successful car brand. , Nazhijie, has even reported delisting news many times. The MIH platform jointly created by both parties is difficult to make car companies feel confident. , and the MIH platform's voice is in the hands of Foxconn, car companies will not take risks.
In addition, Foxconn is currently opening up the electric platform. Tesla has previously opened all patents, BYD has opened the E platform, and Volkswagen has also opened the MEB platform. To what extent Foxconn, which is not good at car manufacturing, can receive responses from car companies.
However, judging from the relevant actions and the statements at the Technology Day, Foxconn's emphasis on the automobile OEM business is obvious.
Source: Live screenshot of Hon Hai Technology Day
At the 2022 Hon Hai Technology Day, Hon Hai Technology stated that it will redefine the CDMS (Contract design and manufacturing service) business model in the automotive field in the next 10 years.
Liu Yangwei emphasized that Foxconn and Tesla are not competitors, and hope to help Tesla build cars one day.
Currently, the proportion of Hon Hai’s automobile OEM business is still very small. "Since Hon Hai's global market share of ICT products is between 40% and 45%, we hope to reach the same level in the electric vehicle field," said Liu Yangwei.
develops a new layout
In the past two years, even though he has retired, Terry Gou still personally stands for electric vehicles. Hon Hai Group has acquired, invested and cooperated with more than ten electric vehicle projects within one year, with the layout and investment areas ranging from complete vehicles and batteries to autonomous driving. The progress of the automobile business has been continuously pressing the acceleration button.
As for the reasons behind it, many automotive industry insiders gave similar views: global smartphone shipments have been declining continuously, and Apple orders have been dispersed to other fruit chain companies. In addition, due to the impact of the epidemic, Apple is planning to reduce its dependence on China's supply chain, and Foxconn needs to find new business growth points.
More than half of Hon Hai's revenue comes from Apple's business. On the one hand, this has brought Hon Hai a stable income and an industry-leading OEM level. But at the same time, Hon Hai is also subject to Apple's gross profit and weak bargaining power. Apple has also begun to support "spare tires" to check and balance Foxconn. For example, Luxshare Precision and Goertek have now become the main suppliers of Airpods. The development trend of the electric vehicle industry has given Foxconn an opportunity to reduce Apple's dependence and achieve technological upgrades.
At the 2018 Hon Hai shareholders' meeting, Terry Gou was still lamenting that the next five years will be a crucial period of transformation for Hon Hai. Three years later, in 2021, Foxconn proposed a more realistic money-making goal: It is estimated that by 2025, pure electric vehicles will account for 5% of its manufacturing revenue, with a revenue target of US$30 billion, of which 40% of the spare parts will be manufactured by Hon Hai Group itself.
. Public data shows that in 2019, Hon Hai's revenue from the automobile industry was less than 0.2% of the total turnover. To achieve a rapid increase in automobile revenue performance, Hon Hai's pressure can be seen.
It is not easy for Foxconn to achieve its industry status in the field of consumer electronics OEM in the two fields of car manufacturing and automobile OEM.
Judging from the current development trend of electric vehicles, Zhang Xiang, director of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, believes that large car companies are unlikely to find Foxconn to produce cars, and most new car-making forces choose to build their own factories, which will affect Foxconn's car-making business. In addition, the technology iteration of car manufacturing is also very fast. For example, the production line may be updated every 3 to 5 years. If the scale cannot be increased, Foxconn will not dare to take the risk of building a new factory, "In the end (car manufacturing) will likely become an empty slogan."
However, although Foxconn lacks accumulation in the field of car manufacturing, it has certain advantages in supply chain management and other aspects.
For example, in terms of supply chain management, Hon Hai adopts eCMMS ( vertically integrated business model), and all services involving components, components, molds, whole machines to design, production, assembly, logistics, etc. are covered. With the successful replication of the eCMMS model, Foxconn's Shenzhen factory has not only become the world's largest 3C manufacturing and production base, but also the world's shortest 3C supply chain. These capabilities are also of reference value in the automotive field.
On the Technology Day, Liu Yangwei also made further explanation, "Whether it is electric vehicles, PCs, mobile phones, etc., Hon Hai's advantages are vertical integration and global supply chain management capabilities. Currently, few companies in the industry have these capabilities at the same time."
Since joining Hon Hai as the special assistant to the chairman in 2007, he has taken over Hon Hai's semiconductor career and became one of the "Five Tiger Generals". Liu Yangwei was once called Hon Hai's "the most shining star". However, there are also public reports that some inside Hon Hai questioned Liu Yangwei's lack of "military achievements" and it was difficult to convince the public. Therefore, the automobile business is not only one of Hon Hai's new territory, but also a battle that Liu Yangwei cannot lose.
