Certainly, Young Liu has heard the auto industry cliche that modern vehicles are “iPhones on wheels.” Cars and SUVs are packed with computer chips, sophisticated sensors, touchscreens and data connections.
Liu knows a lot about iPhones. As a manufacturer for Apple, the company he runs as CEO, Hon Hai Technology Group, better known as Foxconn, makes most of the iPhones in the world.
But now the company wants to try something new, designing and building electric cars.
The shift comes with significant risks. By Liu’s own estimates, cars have 20 times the components of phones. Many of them, from suspension components to windshield wipers and high-powered motors, smartphones don’t even have. And cars are far more regulated than smartphones, with rules that vary from market to market.
For Liu and for Foxconn, it’s a bold move. He has said that, for this plan to work, Foxconn needs to have about 5% of the global EV market by 2025. But there’s more than money on the line,although there’s plenty of that. There is also Liu’s – and Foxconn’s – reputation.
And, of course, Foxconn has a history of labor issues in China, with workers at one point squaring off against police, that it will need to overcome to expand its business, as well.
But Liu needs to grow the company – and cars, as different as they might be from phones, are a huge part of that plan.
“Our revenue is as big as the GDP of some countries,” Liu said in response to questions emailed by CNN Business. “I had to think about what industries would drive growth in the future. The PC and smartphone business were quite mature.”
From mahjong to CEO
Based in Taiwan, Foxconn is already among the world’s largest companies. It has more than 1 million employees and operations in 24 different countries. It makes a wide and growing variety of tech products from touchpads to TVs for a variety of customers. Its largest and best known customer, though, is Apple.
Liu evidently knows how to take a calculated gamble. To make some extra cash when he was very young, Liu has told associates, he played mahjong, a complex game involving elements of strategy and luck. He could win game after game, he has said.
After earning a master’s in computer engineering from the University of Southern California in 1986, Liu went on to found three different California tech firms. He retired in 2001 but, he said, he felt a little out of place.
“All my friends were older than me,” he said. “My youngest friend was 60 some years old.”
Liu is well over 60 himself now, but, with dark hair and a slender build, he looks far younger. His affably nerdy smile seems at odds with the business style of a man who has founded several companies.
He joined Foxconn in 2007 as a “special assistant” to founder Terry Gou. Over just a dozen years, he rose to became chairman and CEO in 2019. The company was already huge, but Liu immediately started looking for ways to make it even bigger.
Triple play
Electric vehicles seem especially surprising for a technology company like Foxconn. Despite a few notable exceptions that have managed to break through globally particularly Tesla it’s not an easy industry to get into. But Liu sees the auto industry as deeply in need of what Foxconn can offer.
“When we studied the EV market, we find it is not vertically integrated enough,” Liu said. “The business model isn’t optimal compared to what we learned in the 30 to 40 years of experience in the [information technology] industry. We think the EV business model should be reinvented.”
Foxconn is approaching the auto industry in essentially the same way that it does smartphone manufacturing. It has no plans to sell vehicles under the Foxconn name, or under that of Foxtron, an electric-vehicle joint venture Foxconn formed with the Taiwanese automaker Yulon. (Liu is also the chairman of Foxtron.)
Instead, its first EV model, just now entering production with sales to start in early 2024, is sold in Asia under Yulon’s Luxgen brand. The Luxgen N7 electric SUV will sell at prices starting around 999,000 New Taiwan dollars or about $31,000 US dollars. Liu said he already gave up his his Mercedes and is now driving an N7.
The N7 is a branded version of a crossover SUV Foxonn had previously unveiled as the Model C. Foxconn has also revealed several other vehicles that show the sorts of products the company could make for others. The Model B is a smaller crossover SUV. The Model E is a luxury sedan styled in cooperation with the Italian auto design firm Pininfarina. Foxconn also boasts that its Model V is the first Taiwan-made pickup truck while its Model T electric buses are already operating in Taiwan. Then there’s the Model N, a cargo van similar to GM’s BrightDrop vans or Rivian’s Amazon delivery vans.
Rather than rely entirely on its own learning about the industry, Foxconn hired former Nissan chief operating officer Jun Seki to help strategize the company’s EV efforts.
“His connections are broad and deep,” Liu said of Seki. “Because of him, we have already hired industry experts in procurement and product areas, and we are hiring more.”
A robust global supply chain
Other tech companies have also talked about getting into cars. Apple, Foxconn’s most famous customer, has had a barely acknowledged EV development program for years. Sony partnered with Honda to create an electric vehicle that will be built in Ohio in 2026. Chinese electronics company Xiaomi, best known for smartphone handsets, also plans to start producing EVs in a couple of years.
Foxconn is unique, though, in its aggressive pitch to the wider industry. Liu offers a value proposition directly to automakers, saying Foxconn can provide a range of services including designing, engineering and building vehicles.
Given the struggles the global auto industry faced in 2021 trying to build cars as supplies of computer chips dried up, Foxconn could find a receptive audience, said auto industry analyst Bill Russo of Automobility Ltd. If there’s one thing Foxconn knows how to do, it’s how to source the sort of modern electronics automakers increasingly need.
That was a major factor for Monarch Tractor. Foxconn has been manufacturing self-driving electric farm tractors on a small scale for this startup company at a factory in Ohio. Foxconn was one of 16 companies Monarch had considered as a manufacturing partner, said Mark Schwager, president of Monarch.
“We cast a wide net because it’s a novel product that nobody’s really ever built before,” Schwager said. “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.”
First customers
For now, besides Yulon, start-up companies, some formed in partnership with Foxconn itself, have been the outlet for Foxconn’s EV designs. For instance, there’s Ceer, a joint venture founded last year by Foxconn and the Saudi Public Investment Fund. This new automaker plans to begin selling electric vehicles in the Middle East beginning in 2025. The vehicles will be based on Foxconn’s engineering but will be sold under the Ceer brand.
Foxconn has made some publicly announced deals with truly major players in the auto industry. Foxconn and Stellantis recently announced a joint venture, SiliconAuto, to design and build computer chips specifically for electric vehicles. And Foxconn is finalizing an agreement to purchase half of ZF Chassis Systems, part of the German global auto parts supplier ZF.
Not all of Foxconn’s business relationships have gone smoothly. Last year, Foxconn purchased a factory in Lordstown, Ohio, from a startup EV pickup maker, Lordstown Motors. (Lordstown Motors itself had purchased the plant from General Motors in 2019.)
But in June 2023, not long after starting production of its trucks, Lordstown Motors declared bankruptcy. While there were several factors involved, Lordstown also filed a scathing lawsuit against Foxconn.
“This case arises from, and is based on, the fraudulent conduct of one of the world’s largest multinational manufacturing companies, which, over time, had the intended effect of destroying the business of an American start-up,” read the lawsuit’s opening sentence.
In the lawsuit and in public statements, Lordstown accused Foxconn of ignoring their agreements and not following through on promised investments. The suit is still ongoing.
Foxconn denied the accusations at the time, calling them “false comments and malicious attacks.” Foxconn said it had been trying to have “constructive negotiations” with Lordstown to help “in finding a solution to its financial difficulties.”
Foxconn is now in discussions with Fisker Automotive to build a small, relatively inexpensive hatchback EV called the PEAR an acronym for Personal Electric Automotive Revolution at the Lordstown plant, where the tractor is being built. Fisker founder and chief executive Henrik Fisker has made outsourced manufacturing a key part of the business plan. The Fisker Ocean SUV is already being made in Austria by the contract manufacturer Magna.
Foxconn is now building EVs in Taiwan and, besides Lordstown, has plans for EV manufacturing in other countries, as well. Unlike small, easily shippable items like smartphones, automobiles are mostly built close to where they are sold to reduce shipping costs. That’s why companies like Toyota, Kia, BMW and Mercedes-Benz have large factories in the United States.
The Lordstown plant gives Foxconn a huge advantage in the North American EV market, said analyst Sam Fiorani of Auto Forecast Solutions.
“Companies like Magna have toyed with the idea of building a factory in North America for this purpose,” he said, “and Foxconn just happened to run into a plant that had that space.”
Labor struggles
As Foxconn moves into the EV market and adds new manufacturing capabilities, Liu has to ensure that the company’s well-known labor issues remain in the rearview mirror.
Just last year, hundreds of workers at a Foxconn facility in China faced off against police. The workers at the plant, which had recently been the site of a covid outbreak that forced thousands to flee, complained about health conditions in the plant and about promised pay they said was not distributed. Foxconn later offered to pay workers to quit and leave the site.
Foxconn had also been the target of earlier accusations of worker abuse in some of its Chinese factories. It’s something Liu appears weary of being asked about.
“For every proactive work and improvements we are doing in this area, we still get criticism about past issues,” Liu said in an emailed response.
The company has published on its website lengthy lists of employee welfare initiatives it has undertaken, it says, to ensure that workers are cared for. Also, to bolster its own efforts to improve worker relations, Foxconn has engaged third-party auditors to review the manufacturer’s treatment of its employees, said Liu.
But if Liu can lead his company through all of these challenges, in a few years you may be able to drive your car listening to music from a smartphone that were both made by Foxconn. And, in both cases, you probably won’t even know.
Source: cnn