Foxconn thinks of life after Apple
• Taiwanese company bets it can package its traditional expertise to sell smart manufacturing, including fully automated factories
Foxconn, the Taiwanese contract manufacturer that rose to global prominence as the manufacturer of the Apple iPhone, is trying to reinvent itself as smartphone sales plateau and Apple diversifies its supplier base.
Foxconn, the Taiwanese contract manufacturer that rose to global prominence as the manufacturer of the Apple iPhone, is trying to reinvent itself as smartphone sales plateau and Apple diversifies its supplier base.
The company, which kicked off a three-day event on Wednesday to celebrate its 30 years of doing business in China, already does much more than assemble goods for others.
It is a top global producer of display screens, thanks to the acquisition of Sharp. Its far-flung activities include autonomous car start-ups and investments in cancer research.
But with its stock down almost 20% since late last year, Foxconn, Taiwan’s second most valuable company with a market cap of $51bn, is under pressure to show that it can convert new initiatives into growth.
The Sharp purchase and a handful of more recent deals — including an agreement announced this week for Sharp to buy Toshiba’s personal computer business for $36m — indicate that a push into producing its own branded products is one part of the strategy.
Just as important, though, is a plan to provide integrated solutions for businesses that include both sophisticated hardware and software services such as cloud computing, Foxconn chairman Terry Gou announced at the company’s 30-year anniversary celebrations in Shenzhen on Wednesday.
This “new business model” could be especially appealing to smaller companies and institutions like hospitals that have sophisticated technical requirements that they often have trouble handling on their own, Louis Woo, special assistant to chairman Gou, told Reuters.
“We have built data centres for many of our customers but we’re not known to provide data centre services,” Woo said. “In the future, since we’re having all these pieces, we can put them together to provide a technical service to a business customer.”
SMART MANUFACTURING
The company is also betting that it can package its traditional expertise to sell “smart manufacturing” services, included fully automated factories, to other industrial companies.
Woo acknowledged that none of this would happen overnight, a view shared by sceptical analysts.
“Right now, with the contract manufacturing, it’s very hard to switch to a new model,” said Vincent Chen, an analyst at Yuanta Investment Consulting.
And it has to be careful to keep current customers onside, in particular Apple, which is estimated to generate around half of Foxconn’s total revenue.
“There will definitely be risks” in pursuing so many different areas, said Boyce Fan, an analyst at Trendforce. “But this will be key for Foxconn to find the next growth opportunity.”
This attempt to pivot towards a new business model comes as trade disputes between the US and China ratchet up. “I don’t think the current conflict between the US and China is about trade, it’s about technology,” chairman Gou said in a video that was broadcast at the ceremony on Wednesday.
“Regardless whether we are talking about aeroplanes, ships or semiconductors, the US is ahead of China so China needs to focus on designing and manufacturing technology,” he said, noting that this was Foxconn’s focus.
He said that, among other things, Foxconn recently bought 20,000 textbooks about artificial intelligence for all of its employees to study. Gou also touted healthcare as a major new opportunity.
The company’s technical strengths are in Sharp’s highresolution imaging and displays, which use the next-generation 8K standard and have ready applications for medical imaging devices such as endoscopes.
Gou has raised the possibility of smart toilets that can double as health diagnostic devices, Woo said, with sensors feeding data to the cloud for analysis. That would play to Foxconn’s strength in 5G wireless communications equipment.
Such efforts will not come cheap, and Foxconn is laying the financial and political groundwork for its next chapter with a Shanghai initial public offering for one of its main subsidiaries, Foxconn Industrial Internet.
The $4.3bn initial public offering will provide funding for initiatives in smart manufacturing, cloud computing, data centres and 5G technology, among other areas.
A number of Chinese stateowned companies are expected to participate in the deal.
Foxconn Industrial Internet generates a big chunk of revenue from making mundane components such as smartphone casings and frames. And for all the talk of healthcare and cloud and artificial intelligence , most of the proceeds from the public offering are earmarked for smart manufacturing.
Sharp is also selling $1.8bn worth of new shares to buy back preferred stock, issued to banks in return for a financial bail-out.