From iPhones to EVs: Foxconn's CEO Sets Sights on Electric Vehicles
Foxconn, the renowned manufacturer of iPhones, led by CEO Liu, aims to diversify its expertise Venturing into electric vehicles, the company seeks to leverage its strong global supply chain and expand its customer base Overcoming labor challenges, Foxconn is poised to make a mark in the EV industry (348 characters)
Young Liu is familiar with the common saying in the auto industry that describes modern vehicles as "iPhones on wheels." Cars and SUVs are equipped with advanced technology such as computer chips, sensors, touchscreens, and data connections.
Liu is well-versed in iPhones, as his company, Hon Hai Technology Group, also known as Foxconn, manufactures most of the iPhones worldwide. As the CEO, he has a deep understanding of Apple's products.
The company is now venturing into new territory by delving into the design and production of electric cars. This decision does not come without its challenges and potential setbacks. According to Liu's calculations, cars have 20 times more components than phones, including various parts such as suspension components, windshield wipers, and high-powered motors that smartphones lack. Additionally, the automotive industry is heavily regulated, with varying rules and standards across different markets, further adding to the complexity and risk of this new venture.
Liu and Foxconn have made a bold move. He stated that, in order for their plan to succeed, Foxconn must capture approximately 5% of the worldwide EV market by 2025. However, more than just financial success is at stake, although there is no shortage of that. The reputation of Liu and Foxconn is also on the line. Additionally, Foxconn will need to address its history of labor problems in China, including workers clashing with the police, in order to expand its business.
However, Liu is focused on expanding the company, and vehicles, despite their differences from phones, play a significant role in this strategy.
"Our revenue is comparable to the GDP of certain countries," Liu commented in an email response to CNN Business queries. "I needed to consider which industries would propel future growth. The PC and smartphone sectors had already reached a high level of maturity."
From mahjong to CEO
With its headquarters in Taiwan, Foxconn has established itself as one of the largest companies globally, boasting a workforce of over 1 million employees and business operations spanning across 24 countries. The company is recognized for its extensive range of technology products, including touchpads and TVs, catering to a diverse clientele. However, its most prominent and renowned customer remains to be Apple.
Liu clearly understands how to make a strategic gamble. When he was younger, he reportedly made extra money by playing mahjong, a game that involves both strategy and luck. He claims to have won game after game.
Foxconn Chairman Young Liu speaks at an event presenting the company's new technologies in Taipei, Taiwan, on October 16, 2020.
Yimou Lee/Reuters
After obtaining a master's in computer engineering from the University of Southern California in 1986, Liu established three different tech firms in California. Despite retiring in 2001, he felt out of place due to the age gap with his friends. He explained, "All my friends were older than me. My youngest friend was around 60 years old."
Liu, who is now well over 60, appears far younger with his dark hair and slender build. Despite his affable, nerdy smile, he has a business style that doesn't match his appearance. Despite this, he has founded several companies.
In 2007, he joined Foxconn as a "special assistant" to founder Terry Gou. In just 12 years, he became the chairman and CEO of the company in 2019. Despite its already huge size, Liu immediately sought ways to make it even bigger.
Triple play
For a technology company like Foxconn, the concept of venturing into electric vehicles may seem unusual. While there are a few successful examples, such as Tesla, breaking into the global market is no easy feat. However, Liu believes that the automotive industry is in dire need of what Foxconn can provide.
Liu pointed out that after studying the EV market, they discovered that it is not as vertically integrated as it should be. "The current business model is not as optimal as what we have learned from our 30 to 40 years of experience in the [information technology] industry. We believe that the EV business model should be completely reinvented."
Multiple electric vehicle models were on display during Hon Hai Technology Day (HHTD23) in Taipei, Taiwan on October 18, 2023. Foxconn presented their range of electric vehicles, featuring their latest Model N cargo van, and announced their intentions to begin mass production of Model B, a "sporty and intelligent crossover."
Foxconn is revolutionizing the auto industry in much the same way it has transformed smartphone manufacturing. The company has no intentions of releasing vehicles under their own name, or even under the brand of Foxtron, their electric-vehicle joint venture with Taiwanese automaker Yulon (of which Liu is also the chairman).
Instead, their initial EV model, currently in production and set to launch in early 2024, will be marketed in Asia under Yulon's Luxgen brand. The Luxgen N7 electric SUV is expected to have a starting price of around 999,000 New Taiwan dollars, or approximately $31,000 US dollars. According to Liu, he has already traded in his Mercedes to drive the N7.
The N7 is a rebranded version of Foxonn's previously unveiled crossover SUV, known as the Model C. In addition to the N7, Foxconn has also showcased several other vehicles to demonstrate the range of products the company is capable of producing for its customers. The Model B is a compact crossover SUV, while the Model E is a luxurious sedan developed in collaboration with the Italian auto design firm Pininfarina. Furthermore, Foxconn has introduced the Model V as Taiwan's first locally-produced pickup truck, and its Model T electric buses are currently in operation in Taiwan. Lastly, there's the Model N, a cargo van similar to GM's BrightDrop vans or Rivian's Amazon delivery vans.
The Luxgen N7 EV at the 2023 edition of the Hon Hai Tech Day (HHTD2023) in Taipei, Taiwan, on October 18, 2023.
Walid Berrazeg/SOPA Images/Shutterstock
Instead of solely depending on its own industry knowledge, Foxconn brought on former Nissan chief operating officer Jun Seki to assist in developing the company's EV strategy. "His network is extensive and far-reaching," Liu commented on Seki's hire. "Thanks to him, we have already recruited industry specialists in procurement and product domains, and we continue to expand our team."
A robust global supply chain
In addition to this, other technology companies have expressed interest in entering the automotive industry. Apple, a prominent client of Foxconn, has been quietly working on an electric vehicle (EV) development program for some time. Sony has also joined forces with Honda to produce an electric vehicle set to be manufactured in Ohio by 2026. Furthermore, Xiaomi, a well-known producer of smartphone handsets, is also planning to commence EV production within the next few years.
Foxconn stands out for its aggressive approach to the broader industry. Liu presents a compelling offer to automakers, claiming that Foxconn is capable of delivering a variety of services such as vehicle design, engineering, and manufacturing.
A man takes photos of the Model B car at the Foxconn booth at 2035 E-Mobility Taiwan, an annual electric and autonomous vehicle trade show in Taipei, Taiwan on April 13, 2023.
Ann Wang/Reuters
Amid the challenges faced by the global auto industry in 2021 due to a shortage of computer chips, Foxconn is likely to find interest from potential partners, according to auto industry analyst Bill Russo of Automobility Ltd. With its expertise in sourcing modern electronics, Foxconn is well-equipped to meet the increasing needs of automakers.
This was a significant factor for Monarch Tractor, as Foxconn has been producing self-driving electric farm tractors for the startup at a factory in Ohio. President Mark Schwager stated that Foxconn was one of 16 companies considered by Monarch as a manufacturing partner.
"We wanted a few elements that were really, really important to us. One was access to a robust global supply chain, and Foxconn is second to none with respect to electronics and their position [in that industry]," Schwager said. "We cast a wide net because its a novel product that nobodys really ever built before,"
First customers
Currently, in addition to Yulon, start-up companies, some of which are formed in collaboration with Foxconn itself, have served as the channel for Foxconn's EV designs. One example is Ceer, a joint venture established last year by Foxconn and the Saudi Public Investment Fund, which plans to launch electric vehicles in the Middle East by 2025. Although based on Foxconn's engineering, these vehicles will be marketed under the Ceer brand.
Foxconn has also established partnerships with major players in the auto industry. For example, Foxconn and Stellantis recently announced a joint venture called SiliconAuto to develop and manufacture computer chips specifically for electric vehicles. Additionally, Foxconn is in the process of finalizing a deal to acquire 50% of ZF Chassis Systems, a unit of the German auto parts supplier ZF.
Foxconn's business relationships haven't all been smooth. In 2023, the company purchased a factory in Lordstown, Ohio from startup EV pickup maker, Lordstown Motors, which had previously acquired the plant from General Motors in 2019. However, shortly after beginning truck production, Lordstown Motors filed for bankruptcy and also initiated a scathing lawsuit against Foxconn.
The opening sentence of the lawsuit reads, "This case stems from the fraudulent behavior of a major multinational manufacturing company, which ultimately led to the downfall of an American start-up business."
A partially completed Endurance electric pick-up truck from Lordstown Motors is pictured on the assembly line at the Foxconn electric vehicle production facility in Lordstown, Ohio, U.S. on November 30, 2022.
Image credit: Quinn Glabicki/Reuters
Lordstown has filed a lawsuit and publicly stated that Foxconn has failed to uphold their agreements and fulfill promised investments. The lawsuit is currently ongoing.
Foxconn has refuted the allegations, labeling them as "false comments and malicious attacks." Additionally, Foxconn claimed that they have been attempting to engage in "constructive negotiations" with Lordstown in order to assist in resolving their financial challenges.
Foxconn is currently in talks with Fisker Automotive to produce a cost-effective hatchback EV called the PEAR. The acronym stands for Personal Electric Automotive Revolution. This production will take place at the Lordstown plant, which currently manufactures tractors. Fisker's founder and CEO, Henrik Fisker, has prioritized outsourced manufacturing as a fundamental aspect of the company's strategy. The Fisker Ocean SUV is already being manufactured in Austria by contract manufacturer Magna.
In addition to the Lordstown plant, Foxconn is producing EVs in Taiwan and has plans for EV manufacturing in other countries as well. Unlike smaller items like smartphones, cars are typically manufactured near their market to reduce shipping costs. This is why companies such as Toyota, Kia, BMW, and Mercedes-Benz operate large factories in the United States.
Analyst Sam Fiorani of Auto Forecast Solutions stated that the Lordstown plant provides Foxconn with a significant edge in the North American EV market. He also mentioned that companies like Magna have considered building a factory in North America for this purpose, and Foxconn was fortunate to come across a plant with the necessary space.
Labor struggles
As Foxconn moves into the EV market and adds new manufacturing capabilities, Liu has to ensure that the companys well-known labor issues remain in the rearview mirror.
Last year, hundreds of workers at a Foxconn facility in China clashed with police. The workers at the plant, where a recent covid outbreak had forced thousands to evacuate, voiced concerns about the health conditions and unpaid wages. Foxconn later proposed compensating workers to resign and leave the facility. The company had previously faced allegations of worker mistreatment in its Chinese factories, a topic that Liu seems tired of addressing.
Liu acknowledged that despite the proactive work and improvements being made in this area, the company still receives criticism for past issues in an emailed response. The company has also published extensive lists of employee welfare initiatives on its website to ensure the well-being of its workers. In addition, Foxconn has brought in third-party auditors to review the treatment of its employees as part of its efforts to improve worker relations, according to Liu.
If Liu successfully navigates his company through these challenges, you may soon find yourself driving a car and listening to music from a smartphone, both manufactured by Foxconn. And in both cases, you likely won't even be aware of it.
