Transfin.
HomeNewsGuidesReadsPodcastsVideosTech
  1. News
  2. Explained

Foxconn Unveils Three New Electric Vehicle Prototypes As It Diversifies into the EV Business

Editor, TRANSFIN.
Oct 22, 2021 9:20 AM 5 min read
Editorial

Hon Hai Precision Industry Co., aka Foxconn, is widely known for being a major manufacturer of Apple's iPhones, Amazon's Kindles, Sony's PlayStations, Google Pixel, BlackBerry, Nintendo gaming systems, and many other consumer electronics devices.

As far as electronics contract manufacturing services go, Foxconn is as big as they come. It has 83,500 patents, owns plants across the globe - including in India - and manufactures roughly 40% of all consumer electronics sold worldwide.

But now, the Taiwanese multinational has set its eyes on an entirely new sector: electric vehicles (EVs).

Foxconn Today

Presently, Foxconn's business verticals include smart consumer electronics (smartphones, TVs, consoles etc.), cloud and networking products (servers, routers, data centres, satellite communications etc.), computing products (computers, tablets, laptops, printers etc.) and components (semiconductors, connectors, mechanical parts etc.). It also has tech and investment interests, such as a 54.5% stake in SoftBank Asia Capital.

Its list of customers is an illustrious one, including names like Cisco, Amazon, Huawei, Fisker, HP, Intel, Lenovo, Microsoft, Toshiba and, of course, Apple, whose partnership with Foxconn has been as consequential as its alliance with Google.

 

Going Electric

Foxconn first revealed its intentions to diversify into battery-powered vehicles in 2019. Last year, it debuted MIH, an “EV software and hardware open platform” and introduced its brand of EV technologies, including the manufacturing of key components.

Since then, the New Taipei-based firm has inked several partnerships with a string of automakers, including Thailand's PTT, China's Byton and Zhejiang Geely Holding Group, Italy's Stellantis, and America's Fisker. Last month, it bought a massive factory from US EV startup Lordstown Motors. This happened right on the heels of Foxconn shelling out $90m to purchase a local chip plant in Taiwan, with the goal of transforming it into an automotive chip enterprise.

Which brings us to October 18th, when the company finally revealed the physical fruits of all this frenzied dealmaking. On Monday, Foxconn unveiled its first three EV prototypes - a luxury sedan (Model E), an SUV (Model C), and a bus (Model T) - that it developed with Yulon Motor, a Taiwanese carmaker.

Foxconn Unveils Three New Electric Vehicle Prototypes As It Diversifies into the EV BusinessAs the above timeline shows, Foxconn moves quick. And it means business. Its electric bus will start running in select Taiwanese cities next year. Its SUV is scheduled to hit the markets in 2023, with the Model E slated to follow soon after.

All in all, the Taiwanese company expects its EV business to be worth $35bn in five years. By 2027, it aims to provide 10% of all the components or services required by the global EV industry.

 

The Importance of Being Earnest (About EVs)

Foxconn’s new-found obsession with electric vehicles mirrors a larger trend in the auto industry that is seeing smartphone and chip manufacturers embark into a segment that was formerly commanded by conventional OEMs.

Huawei has already developed a hybrid car named SF5. Samsung has a partnership with Renault. Sony unveiled an electric concept sedan in 2020. Baidu is expanding from software development into physical EV production. Xiaomi and Oppo are also working in the EV space. Apple and Hyundai have forged an alliance to manufacture and develop autonomous cars. The former also has ambitious plans to diversify into battery technology in a big way by 2024.

This shift can be explained by (1) the market conviction that the future of the auto industry is electric and (2) given that the market is still nascent and largely untapped, first movers stand to make big bucks - provided they make their moves now. Moreover, ventures into this segment can be capital-intensive, and tech has a fat enough wallet to foot the bill.

Naturally, these developments are also sparking major consolidation among existing players.

In 2019, Japanese automotive components manufacturers Denso and Aisin formed a joint venture called BluE Nexus (in which Toyota later bought a 10% stake). Last year, America’s BorgWarner acquired UK-based Delphi even as Japan’s Hitachi Automotive merged with three Honda Group suppliers.

Meanwhile, Volkswagen + Ford and Toyota + smaller Japanese brands are each forming an EV technology alliance in part to drive down e-axle manufacturing costs. Speaking of which, Kyoto-based Nidec Corporation, the world's leading manufacturer of small precision motors, wants to make 35% of all e-axles within this decade. In 2020, Hyundai bought Boston Dynamics aka the “robot dog company”. And back in February, China’s Geely announced plans to go electric.

 

Make in India

Foxconn Chairman Liu Young-way has said that the firm is looking to manufacture EV components in India, Brazil and European nations. He remained mum on the plans for the same, citing "disclosure restrictions".

Foxconn already has significant manufacturing commitments in India, including thousands of jobs, billions in investments, and many plants, where it makes iPhones (the other major manufacturer being Wistron). Factors like the US-China trade war, Beijing's militarism against Taipei, and India's PLI schemes have enabled Foxconn’s India operations to intensify over recent years, with even rumours of an IPO in the air.

Interestingly, if and when Foxconn begins EV manufacturing in India, it would be sharing the space with Tesla, which is looking to build its own plants following weeks of vacillating

 

The Road Ahead

Foxconn is a manufacturing behemoth and truly one of the engines of the world economy. However, EVs are an entirely new ball game, a sector the company has no background in. Liu himself highlighted this Achilles’ heel: “Our biggest challenge is we don’t know how to make cars,” he told reporters on Monday.

As such, Foxconn’s EV success is not exactly set in stone. And the company has had its share of controversies. For instance, its infamous Wisconsin plant, which was once touted as the “eighth wonder of the world” and is now wallowing in a pool of undelivered promises. (The company also has a frighteningly poor record when it comes to labour rights, with issues ranging from subpar working conditions and riots to child labour and worker suicides.)

That said, EVs aren't your typical four-wheeled vehicles. They're technology on wheels, comprising numerous software components and computer chips - areas where Foxconn rules the roost. And considering the past year’s hectic activity and Monday’s announcements, the Taiwanese giant seems adamant to succeed.

To quote Mr. Liu:

Hon Hai is ready and no longer the new kid in town.

FIN.
 

The cut-throat world of Business and Finance means that there is fresh News everyday. But don't worry, we got you. Subscribe to TRANSFIN. E-O-D and get commentaries like the one above straight to your inbox.