Foxconn Technology, the world’s biggest contract assembler of consumer electronics and main assembler of Apple products, says it has joined forces with a fellow Taiwanese hardware firm to delve further into electric vehicle production as the global market is set to grow.
The assembler founded by one of Taiwan’s richest people, billionaire Terry Gou, formed a “strategic alliance” with Yageo Group, Foxconn announced last week. The alliance will advance Foxconn’s fledgling electric vehicle business by sharing Yageo’s years of experience in EV components along with its knowhow in 5G technology and semiconductor packaging, the statement says.
“Through the cooperation with Hon Hai Group, we are able to enlarge mutual technological benefits and resource sharing to maximize the value of both groups and see multiple growths in the future,” Yageo Chairman Pierre Chen says in the statement.
Release of newer models, “pent-up” demand and supportive government policies should raise EV sales from 2021 after a drop this year caused by Covid-19 containment measures, analysis firm ResearchAndMarkets.com said in July. The global EV market is forecast to expand at an 18.4% compound annual growth rate from 2020 to 2025, fellow market analysis firm Kenneth Research forecasts.
Foxconn has tried over the past decade to reduce its dependence on contract manufacturing in the face of rising competition for workers in China and slowing growth in the global consumer electronics industry. A foray this year into medical gear is part of that drive.
Foxconn’s Chairman Young Liu announced in January that it would set up a joint venture with Fiat Chrysler Automobiles and ship EVs within two years. A month later, Foxconn said it would establish a joint venture with Yulon Motor Co., one of Taiwan’s biggest automakers, to work with a Yulon subsidiary in developing EVs. Foxconn would likely to contribute component assembly to both ventures.
“Foxconn’s smartphone profit margin isn’t high, so they’re looking to do something that’s more value added, and electric vehicles are of course a candidate,” says Liang Kuo-yuan, president of the Polaris Research Institute think tank in Taipei.
Foxconn posted a net profit of about 22.9 billion New Taiwan dollars ($793million) in the second quarter, a 34% gain over the same period last year. Revenue reached NT$1.13 trillion in the same quarter, but Liu warned that sales in the quarter ended September could dip as Apple delays its iPhone launch.
The assembler’s revenue from automotive orders reached NT$9.5 billion ($329 million) last year and the company has set a NT$1 trillion target for 2025.
Through their alliance, Yageo and Foxconn will merge resources to increase capacity for component R&D and innovation, the statement says. It says both sides expect boosts in international competitiveness, product quality and product service. Beside EVs, the alliance is also intended to help each company develop digital healthcare and robotics.
Taipei-listed Yageo has 15 design and R&D centers and 42 manufacturing sites, many of which are offshore.