Can you make an iPhone and an electric car? Uncover the inside story of Foxconn’s entry into the automobile manufacturing industry

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Tencent technology news on August 21, as the world’s largest OEM of consumer electronics products and Apple’s largest supplier, Foxconn has long dreamed of manufacturing cars. Gou Taiming, its founder and former chairman, said at an internal meeting more than once: “if we can make iPhone, why can’t we make electric vehicles? It’s just an iPhone with four wheels. ”
It is reported that Gou supported an internal project codenamed “A-fu initiative” in 2014 to manufacture a complete electric vehicle prototype. The project was not disclosed at that time and was led by the Foxconn team in charge of precision instruments. According to people familiar with the matter, Gou promised that if the project was successful, employees participating in it would receive stock awards.
The “A-fu initiative” project is short-lived because automobile manufacturing is more complex than expected, but Foxconn’s dream has never been dashed. Now, Foxconn is launching a new round of offensive to the electric vehicle industry. At this moment, the rigid pyramid supply chain in the automotive industry with a history of 100 years seems to be at the tip of a fundamental change. In this model, automobile manufacturers are at the helm, while suppliers are at the bottom. So, will this change succeed?
Foxconn’s slowdown is aimed at electric vehicles
Liu Yangwei, chairman of Foxconn, vowed that by 2025, the company’s design, parts, mechanical parts or software will be used in 5% of the world’s electric vehicles
Liu Yangwei, who succeeded Gou as the new chairman two years ago, vowed that by 2025, Foxconn’s design, parts, mechanical parts or software will account for 5% of the global electric vehicles. But the company is actually more ambitious. It has announced plans to establish complete vehicle assembly plants in the United States and Thailand and look for places to produce cars in Europe.
At the same time, Foxconn has placed itself at the centre of an industry initiative aimed at developing new technologies and standards for electric vehicles that may challenge traditional carmakers.
These developments have come against the backdrop of declining profits in consumer electronics. Foxconn’s sales increased by only 0.3% last year, and its net profit has been shrinking since 2017. If the company wants to increase its gross profit margin from the current 6% to 10% according to the target, the electric vehicle project is crucial. Optimism about its electric vehicle promotion pushed Foxconn’s share price to its highest level in four years in March, up more than 15% since the beginning of this year. But if the ambition of electric vehicles is blocked again, Foxconn will face high risks.
Gou (left) ceded the position of chairman of Foxconn to his ambitious student Liu Yangwei
Foxconn’s subsidiaries have supplied electronic products to many traditional and electric vehicle manufacturers, including Tesla to BMW, ranging from instrument panel displays to printed circuit boards, as well as a variety of mechanical and plastic parts.
In order to expand the scope of supply products and collect a wider range of technical know-how, Liu Yangwei has signed a number of supply agreements and established technology development partnerships in the past year and a half. Stellantis, a joint venture between Fiat and Chrysler, is now the world’s fourth largest carmaker and is developing cab software for networked vehicles. In January this year, the company established a new joint venture with Geely to provide manufacturing and consulting services related to intelligent driving system, software platform and even whole vehicle.
Foxconn has been helping to improve its software expertise through its subsidiary FIH mobile. For a company internationally known for its hardware capabilities, this is its weak link. FIH Mobile has always produced Android phones in its history. Earlier this month, the company acquired a semiconductor factory in Taiwan to gain more control over the supply of chips needed for electric vehicles.
The company estimates that its revenue from auto parts (excluding display panels for Automotive Telematics) may exceed NT $10 billion (US $359 million) by 2021. According to the company, in a manufacturing empire with an annual revenue of more than NT $5 trillion (about US $178.8 billion), this figure is still insignificant, but it has increased by 40% compared with the same period last year.
Liu Yangwei recently elaborated his automotive ambition at the investor conference. He said: “at present, the revenue mainly comes from mechanical and plastic parts, but we will extend our tentacles to the system and module level, and start producing complete vehicles in the near future.”
The ultimate goal is to produce complete vehicles
On October 16, 2020, Foxconn displayed its open platform electric frame interactive dashboard at hhtd forum
For decades, traditional automobile companies have invested heavily in engines, transmissions and complex powertrain systems, which are major obstacles to entering the automobile market. However, manufacturing electric vehicles is not so complex, which has attracted a large number of start-ups around the world. Foxconn plans to replace the traditional primary suppliers and produce the whole electric vehicle for newcomers such as Fisker and byteng listed in New York and traditional automobile manufacturers seeking to transform into electric vehicle companies such as Taiwan Yulong automobile.
New entrants are springing up. Xiaomi, a long-standing manufacturer of electronic products, entered the smartphone market in 2011. Now it has become the second largest mobile phone manufacturer after Samsung and ahead of apple. Xiaomi plans to launch its own brand of smart electric vehicles by 2024. Baidu, a search engine and Internet giant, has set up a joint venture with Geely and plans to launch branded electric vehicles. Perhaps the biggest opportunity will be apple. Foxconn has assembled more than 60% of iPhones around the world. Foxconn is widely regarded as the best candidate for producing apple cars.

For now, Foxconn’s fate is closely related to several ambitious but risky start-ups, which are more willing to cooperate with emerging suppliers than old carmakers. Byteng, founded by BMW executives, almost ran out of funds before signing a cooperation agreement with Foxconn in January. Fisk has not yet started producing its first model, which will be manufactured by Magna International, an established first-class automotive supplier. Its Foxconn cars won’t go offline until 2023.
Foxconn is taking the lead in breaking the traditional automobile supply chain pyramid. Last October, Liu Yangwei launched what Foxconn called the “open electric vehicle alliance” (MIH alliance) composed of software and hardware participants in the automotive industry. MIH alliance aims to formulate industry standards and develop “toolkits” combining hardware and software. Electric vehicle manufacturers can use these “toolkits” to reduce the development time and cost of new vehicles.
The consortium has attracted more than 1800 companies, including Qualcomm, Microsoft and Ningde times, the world’s largest battery manufacturer. Although the alliance issued more announcements than products in the early stage, it announced the specifications of the software and hardware kit of the first electric vehicle in January and plans to deliver it to carmakers later this year. Foxtron, a joint venture between Foxconn and Yulong automobile, will use the MIH platform to design an electric bus prototype for a transportation operator in southern Taiwan and will go on the road next year.
“The MIH alliance is trying to establish a similar partner chain, just like how traditional carmakers establish a supply chain,” said Shinpei Kato, founder and chief technology officer of tier IV, a Japanese automatic driving software startup. But in the traditional supply chain, only carmakers at the top of the pyramid can make decisions. Now this situation is changing. In the field of electric vehicles, key components such as engines and batteries are controlled by software, unlike the highly mechanized engine designed at the top of the pyramid. ”
This shows that parts can be packaged in larger modules and integrated as subsystems, making them easier to assemble, just like the development and production of smart phones today, which may give suppliers more power to work together. “Participating companies can make decisions together,” Kato said. In the field of electric vehicles, we may no longer need large global carmakers to produce cars. ”
Nobuyuki Kato, founder and chief technology officer of tier IV, said that in the field of electric vehicles, we may no longer need large global carmakers to produce cars.
There are still some questions about how MIH will develop and to what extent it will ultimately benefit Foxconn. Qiu Shifang, an automotive electronics analyst at the Taiwan Institute of Economics (Tier), who has been tracking Foxconn for a long time, said: “parts suppliers can enter the electric vehicle supply chain faster through the MIH consortium, and Foxconn can also contact various suppliers to enhance its competitiveness in the electric vehicle industry. However, whether MIH can play a role still depends on the supplier’s real technical capability. ”
Last month, MIH also became a registered non-profit foundation, which means that it no longer belongs to Foxconn and its members no longer obey the company’s plans. With the disintegration of the automobile supply chain pyramid, it remains to be seen who will become Foxconn’s partner and who will become its competitor.
Technology companies compete to enter the electric vehicle supply chain
Foxconn is not the only technology company that hopes to seize the once-in-a-lifetime opportunity of electrification in the automotive industry. Each technology company has different anchor points in the electric vehicle supply chain.
Nidec announced in July that it was negotiating with Foxconn to establish a joint venture next year, which is another example of automobile suppliers seeking to play a greater role. Nidec is the world’s largest motor manufacturer. Its products are used in a variety of products from computers, smartphones to refrigerators. It also publicly announced the goal of supplying 45% of electric vehicle traction motors by 2030.
Foxconn’s open platform electric frame displayed during the 2020 hhtd Forum
Foxconn’s peers quanta computer and Heshuo have always provided electronic control units to traditional automobile and electric vehicle manufacturers. Delta Electronics is the world’s leading provider of power management solutions. For more than 10 years, it has been focusing on providing power, charging, thermal energy and motor management systems for electric vehicles. All these companies have not expressed their ambition to manufacture complete vehicles. But South Korean giant LG Electronics has been deepening its relationship with Magna, and there are even rumors that it will help Apple build cars.
At the same time, traditional carmakers at the top of the old pyramid still maintain an awesome position, not only because they have higher brand awareness, but also because they have skills and experience that others can’t copy. Making an electric car may be simpler than making a traditional car, but it is much more complex than making an iPhone. It involves at least 10 times as many parts as mobile phones, and its safety requirements are much higher than mobile phones. After all, car safety is related to life and death.
Sanshio Fukuo, a senior researcher at Itochu Research Institute, said that carmakers who are concerned about the progress of Foxconn’s electric vehicle project may think Foxconn does not understand the operation of the industry. Automobile manufacturers have the ability to combine these parts and ensure safety. Foxconn may think that gathering multiple secondary suppliers will help this process, but this is wrong.
Gou Taiming, former chairman of Foxconn, said more than once that if the company can make iPhone, it can make electric vehicles

Other analysts who are cautious about Foxconn’s ambitions believe that the development cycle of automobiles is much longer than that of consumer electronics, and the construction of automobile production lines is also different. Raymond Tsang, a Shanghai based partner at consulting firm Bain & Co, points out that cars usually have more customization options. Customers can order specific colors, interiors, payment options, etc. Therefore, compared with more standardized smartphone assembly, the production line will have to manufacture cars according to unique specifications.
Qiu Shifang, an automotive electronics analyst at the Taiwan Institute of Economics (Tier), said that as the automotive industry has experienced great changes from old technology to new technology, many companies can become winners. Different ways of making cars have different business models. Traditional manufacturers and new entrants will find their place. The market will be large enough to accommodate all participants.
According to two people close to Foxconn’s management team, Foxconn Chairman Liu Yangwei believes that after taking over the baton from founder Gou Taiming, efforts to promote electric vehicles are a way to build their own heritage.
Soumen mandal, a research analyst in charge of automobile and emerging technologies at Market Research Institute counterpoint research, said: “the large number of cooperation agreements he signed, especially with stellantis, Geely and Fisk, will help Foxconn gain vehicle production experience, obtain economies of scale and ensure the safety of batteries and other parts, Foxconn will be able to provide the best products to win the trust of key customers, including apple. “( Tencent Technology (reviser / Jinlu)