Foxconn Tries to Move Past the iPhone Kun-Mao Chao Kun-Mao Chao ( 趙坤茂 ) Department of Computer Science and Information Engineering National Taiwan University, Taiwan A note given in BCC class on May 8, 2013

Starting to develop its own 2 Source: The New York Times 5/6/2013 A wall of flat-screen televisions at Foxconn’s headquarters in Taipei.

Foxconn & Apple Terry Gou did almost everything that Apple could ask for. He made all those iPhones — and he made them cheap. When Apple was subsequently criticized for low wages and poor working conditions at his factories in China, it was Mr. Gou’s company, the Foxconn Technology Group, and not Apple, that caught the most heat. 3 Source: The New York Times 5/6/2013

Foxconn & Apple Foxconn, which is based here but does most of its manufacturing in mainland China, wants to reduce its reliance on Apple. Its new strategy is a shift away from making products that other companies design, and toward developing products of its own, with an especially aggressive push into designing and manufacturing large, flat-screen televisions. 4 Source: The New York Times 5/6/2013

Foxconn & Apple “Foxconn senses that the Apple aura isn’t as invincible as before,” said Jamie Wang, an analyst at the research firm Gartner. “So they are worried that they need something besides Apple’s business that will allow them to grow.” Last month, Foxconn reported that first-quarter revenue was dragged down 19.2 percent compared with the same period last year because of declining iPhone and iPad orders from its main customer, Apple. 5 Source: The New York Times 5/6/2013

Contract Manufacture vs. Branded Production Foxconn’s predicament mirrors a common problem faced by Taiwanese contract manufacturers, whose fortunes depend heavily on those of their clients. A handful of manufacturers, like HTC and Asustek Computer, have managed to shed their contract manufacturing businesses altogether to develop branded products. But as they began competing with clients, those clients began deserting them. 6 Source: The New York Times 5/6/2013

Sakai LCD factory Since last year, Foxconn’s investment choices have reflected its new strategy. Mr. Gou personally spent about $840 million on a 37.6 percent stake in Sharp’s LCD panel factory in Sakai, Japan. Sharp needed a quick cash infusion and Mr. Gou’s purchase gave his company a quick way to control a component that accounts for more than 50 percent of the production cost of a TV set. 7 Source: The New York Times 5/6/2013

Sakai LCD factory Most analysts say they believe Foxconn needs a larger TV customer. Televisions represent less than 5 percent of Foxconn’s business, far less than its revenue from Apple. Analysts say Mr. Gou’s efforts to buy an LCD factory and vertically integrate his television manufacturing represent anticipation that orders for an Apple television product will come his way. 8 Source: The New York Times 5/6/2013

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