Wang Laichun, a former Foxconn "factory sister", is preparing to challenge former boss Gou on a new track.
On February 11, Lixun Precision under Wang Laichun issued an announcement announcing that it has reached a strategic cooperation with Chery Group, and the two sides will establish a joint venture company to engage in the research and development and manufacturing of new energy vehicles. At the same time, Luxshare Precision will spend more than 10 billion yuan to purchase Chery shares.
Founded in 1998, Luxshare Precision is one of Apple's largest foundries, mainly involved in the production of wireless headphones for the iPhone and AirPods. Although the overall scale is not as large as Foxconn, after winning all oem orders for AirPods Pro in 2019, Luxshare Precision has a hidden trend of competition.
Now, Wang Laichun hopes to cooperate with Chery to extend the FOUNDRY business to the new energy vehicle sector with more profitable and greater imagination space. Foxconn has made a big bet on this track, and the two foundry giants may collide head-on.
As the founder of Hon Hai Group, Foxconn's parent company, Gou has paid special attention to the new energy vehicle business in recent years. In his view, the car is just a four-wheeled iPhone, "Since we can build an iPhone, why can't we build an electric car?" ”
As early as 2005, Foxconn was involved in auto parts manufacturing through the acquisition of other companies. In 2010, Foxconn won the Tesla order, mainly supplying central control touch screen panels, connectors, covering parts, etc. In the following years, Foxconn has successively entered the supply chain of first-tier car companies such as Mercedes-Benz, BMW, and BAIC.
Just producing parts for other automakers obviously doesn't satisfy Gou's appetite. At hon hai technology day in 2020, Hon Hai chairman Liu Yangwei declared that "Tesla is the iPhone of electric vehicles, and Foxconn hopes to become an Android in the field of electric vehicles."
At the same time, Foxconn released the MIH EV open platform, which allows manufacturers to carry out secondary design and customization based on the chassis and software design of the platform, greatly shortening the new car development and mass production cycle. This platform already has some elements of the ODM foundry model.
In October 2021, Foxconn officially released three electric vehicles
A few months later, Foxconn formed a joint venture with Geely and released three electric vehicles in October 2021. Gou, who has already retreated to the second line, drove an electric car into the venue, declaring that "this is the best gift I have received since I was 71 years old."
Less than half a year later, Wang Laichun waved a check and laid out new energy vehicles in a big way. The blue-eyed "working queen" of Gou will directly compete with Foxconn for customers in the automotive circle.
Gou's opponents also include his "enemy of a lifetime" and BYD founder Wang Chuanfu.
Wang Chuanfu started by producing batteries, and after 2003, it became one of the most important mobile phone foundries in China, with customers including Xiaomi and Huawei. In the same year, BYD obtained car manufacturing qualifications through the acquisition of Qinchuan Automobile, and five or six years later successively launched plug-in hybrid and pure electric vehicle models.
In the embryonic era of China's new energy vehicles, BYD is one of the few choices for domestic consumers. From 2013 to 2018, BYD occupied the top spot in the domestic new energy vehicle sales list for a long time, until it was surpassed by Tesla.
In addition to producing its own brand models, BYD is also trying to oem other car companies. Wang Chuanfu publicly called out to Lei Jun in June 2021, saying that "losing 5 billion yuan is not much, but you lost 3 years of time, which is very important." Many people speculate based on this that BYD intends to OEM Xiaomi automobile.
If the above speculation comes true, Wang Chuanfu will clash with Gou Taiming and Wang Laichun again in the field of automotive foundry. However, Xiaomi Automobile finally chose to build its own factory, and BYD did not get the order.
Foxconn, Luxshare Precision and BYD are all leading players in China's manufacturing industry. They have been fighting around the mobile phone OEM for many years, winning or losing; now that the trend of the times has changed, the three of them have reunited at the new energy vehicle track. More than 20 years after Gou, Wang Laichun and Wang Chuanfu "fell in love and killed each other", they once again stepped into the same river.
Born in 1950, Gou was once the "nobleman" of Wang Laichun and Wang Chuanfu, inspiring the two to enter the mobile phone OEM.
In 1988, Foxconn opened its first mainland factory in Shenzhen, recruiting more than 150 workers. Wang Laichun, then 21, became one of them. In the following decade, Wang Laichun rose all the way to the level of section chief, allegedly managing thousands of employees, the culmination of the career of mainland employees at Foxconn at that time.
At the age of 32, Wang Laichun left Foxconn to start a business, and jointly funded the acquisition of Hong Kong Luxun Company with his second brother Wang Laisheng, and founded Luxun Precision in Shenzhen in 2004.
This coincided with a blowout in smartphone sales and a surge in Foxconn orders. Gou handed over a part of it to Wang Laichun, who was foundry by Luxshare Precision and then assembled and delivered through Foxconn. This part of the revenue became the main cash flow of Luxshare Precision in the early days.
According to the prospectus, from 2007 to 2009, Foxconn has been a major customer of Luxshare Precision, accounting for 47.7%, 56.5% and 45.4% of sales, respectively. With the support of his former boss, Wang Laichun gradually gained a foothold in the foundry industry.
In addition, the Gou family was directly involved in the IPO (Initial Public Offering) of Luxshare Precision.
In 2010, Luxshare Precision went public on the Shenzhen Stock Exchange, and Fugang Electronics under Gou's younger brother Gou Taiqiang subscribed for 4 million shares at a price of 40 million yuan, holding more than 3% of the shares, making it the third largest shareholder.
However, the Gou family does not seem to be able to reap the rewards. According to the enterprise investigation data, Fugang Electronics withdrew from the list of shareholders of Lixun Precision in April 2018, and the value of its shares was still about 40 million yuan according to the stock price at that time.
For Gou's kindness, Wang Laichun has always been grateful.
After the listing of Luxun Precision, Wang Laichun once told the media that Foxconn's working methods and business philosophy had a great influence on her, and the company developed from more than 100 people to nearly 10,000 people, and she has always insisted on using the management model she learned at Foxconn to operate.
At that time, Luxun Precision's factories and offices were plastered with quotations from Gou, and Wang Laichun claimed that he often told employees the famous words of "President Guo". One company's endorsement of a potential rival's boss speech is an anecdote in The history of Chinese companies.
BYD's Wang Chuanfu also benefited from Gou, and the two had a very brief honeymoon period.
When the 32-year-old Wang Lichun first started his business, Wang Chuanfu, who was only a year older than her, had already broken through. He "went to the sea" in 1995 to found BYD, mainly producing nickel-cadmium batteries and lithium batteries, and achieved annual sales of nearly 100 million yuan two years later, known as the "battery king".
In July 2002, BYD was listed on the Hong Kong Stock Exchange. Four months later, Wang Chuanfu traveled to Taiwan to meet with Gou and then visited Foxconn's Shenzhen production line. At that time, there were news reports that the two sides "talked happily, staggered their plans, and imagined the bright prospects for future cooperation."
In the face of this junior who is 16 years younger than himself, Gou may not think much about it. In that year, BYD's sales were only more than a billion yuan; in contrast, Hon Hai's business spanned mobile phones, electronic products and other sectors, and its revenue had exceeded NT$345 billion (about 78.3 billion yuan), dozens of times that of BYD.
Gou
In hindsight, Wang Chuanfu undoubtedly learned a lot from Gou. The following year, BYD officially entered the mobile phone parts and assembly, constantly poaching from Foxconn, and adopting a strategy of closely following the price of the latter to compete for customers. When Gou noticed it, he was greatly ignited.
It is inevitable that Gou and Wang Chuanfu will oppose each other.
In June 2006, Foxconn took BYD to court for $5 million for infringement of trade secrets. The entanglement of the two companies has since become public.
Foxconn claimed that some former employees who had jumped to BYD took confidential documents with them, causing BYD to benefit from it. According to Gou, BYD saw foxconn making money and "poached more than 400 of my cadres and stole tens of thousands of documents."
The following year, BYD spun off its mobile phone foundry business and planned to go public in Hong Kong in July. Foxconn filed lawsuits in Hong Kong courts twice in June and September, eventually delaying BYD's listing for six months. Wang Chuanfu publicly accused Foxconn of "deliberately causing trouble."
Adding fuel to the fire was that in September 2008, Buffett, the "god of stocks", bought a 10% stake in BYD for $230 million, pushing the latter's stock price up sharply. Buffett also invited Wang Chuanfu to attend the annual shareholders' meeting of Berkshire Hathaway, and spent three days visiting BYD during his trip to China two years later, accompanied by Wang Chuanfu throughout the trip.
Buffett (second from left) and Wang Chuanfu (far right)
Wang Chuanfu was favored by the gods, which made the fierce Gou Taiming very unbearable. He wrote an open letter through the media questioning why Buffett invested in "BYD, which stole Foxconn's trade secrets." Such an aggressive question certainly does not get any response.
At Hon Hai's annual shareholders' meeting in 2011, the indignant Gou Taiming fired again, mocking the combination of Wang Chuanfu and Buffett as "a braggart plus a stock speculator", while declaring that "in my lifetime, the lawsuit with BYD will be fought to the end".
However, the lawsuit between the two foundry giants was finally resolved, and only a few BYD employees were sent to prison.
The paradox is that Liu Xiangjun, the key figure in the "Fubi case", who jumped from Foxconn to BYD, was sentenced to 4 years in prison in this case, and after being released from prison, he actually re-entered BYD to work as a legal representative or person in charge of dozens of branches, and only withdrew around 2018. Wang Chuanfu's handling of this veteran general is quite interesting.
In addition to a complete reversal of face with Wang Chuanfu, Gou's relationship with his former disciple Wang Laichun has also become delicate.
In 2010, a series of suicides occurred in the Foxconn factory of "fourteen consecutive jumps" of employees, and the surging public opinion made Gou anxious and had no time to take care of him. In September of the same year, Luxshare Precision was listed on the Shenzhen Stock Exchange, raising nearly 1.3 billion yuan.
With the capital injection from the secondary market, Luxun Precision began to carry out frequent acquisitions to broaden its business scope, include mobile phone manufacturers such as Apple in the scope of services, and reduce its dependence on Foxconn.
In the second year of listing, Luxun Precision acquired Kunshan Liantao and became the main supplier of Apple's internal wiring harness; in 2014, it acquired Suzhou Fengdao and entered the game of wearable devices; in 2016, it acquired Suzhou Meite and became apple acoustic supplier.
In 2017, Apple CEO Cook came to Kunshan to inspect Luxshare Precision's AirPods production line. Cook was so satisfied with the situation that he sent a microblog praising his "remarkable craftsmanship."
So far, Luxshare Precision has obtained the foundry rights of many apple accessories, including AirPods and Apple Watch. In July 2020, Luxun Precision acquired Wistron Capital, becoming the third iPhone foundry in China besides Foxconn and Pegatron Technology.
As we all know, among the Apple products produced by Foxconn, the iPhone is the top priority. Luxshare Precision's entry means that it will directly compete with Foxconn for the cake. Gou and Wang Laichun did not openly fall out, but in the increasingly fierce direct competition, the Bole and Maxima of that year have gradually drifted apart.
Former friends become rivals, but the three are not involved in a zero-sum game. In the ten-year wave of smartphone popularity, they have fully enjoyed the dividends of industrial growth and led the company to pan for gold from the blue ocean.
In 2007, Apple released the first generation of the iPhone, and Foxconn became one of the first foundries, which continues to this day. Hon Hai's revenue was only in the early $10 billion that year, and it has swelled to more than $210 billion in 2021, an increase of more than 20 times.
Luxshare Precision is also an important player in Apple's supply chain. In 2010, its revenue was only 1 billion yuan; since then, it has received orders for Apple products such as AirPods, and its revenue has increased to 81 billion yuan in 2021. As of today, Apple remains the number one customer of Luxshare Precision.
In 2003, BYD entered the mobile phone oem and automobile manufacturing at the same time, cultivating these two businesses into new revenue pillars. According to the financial report, in 2020, BYD's mobile phone parts, assembly and other products business revenue exceeded 60 billion yuan, accounting for 38% of the total revenue; the automotive business revenue was about 84 billion yuan, accounting for 54%.
On the other hand, the revenue of BYD's battery and photovoltaic business in 2020 was 12.1 billion yuan, accounting for less than 8%. This piece of business that Wang Chuanfu relied on is no longer the focus of BYD.
However, Gou, Wang Laichun and Wang Chuanfu have not yet won or lost in the field of mobile phone OEM, and the times have begun to turn again.
The domestic smartphone market has bid farewell to rapid growth. In 2021, China shipped 329 million smartphones in the whole year, an increase of 1.1% year-on-year. Stagnant growth means more fierce competition, and mobile phone manufacturers have a stricter control of production costs, thereby compressing the profit space of foundries.
According to the financial report, in the first three quarters of last year, Hon Hai's gross profit margin was only 6%; Luxshare Precision performed slightly better, with a gross profit margin of 16%, but it fell by nearly 2 percentage points compared with 2020.
BYD's mobile phone business mainly for Xiaomi, Huawei and other Android mobile phone manufacturers OEM, the gross profit margin in the first half of 2021 was 7%, also performed flat. However, the gross profit margin of the auto-related business during the reporting period was close to 20%, which became a major highlight.
Faced with the current situation of increasing revenue and not increasing profits, the three giants of oems began to seek a new way out. New energy vehicles with a market size of tens of trillions of yuan have become the same transformation direction.
On this not-so-new track, Wang Chuanfu entered the game very early, and Gou and Wang Laichun are both new players. The two have been immersed in the manufacturing industry for many years and are familiar with the production of auto parts, but they have no experience in the design and production of the whole vehicle.
Compared with smartphones that only need hundreds of parts, new energy vehicles require about 10,000 parts, the complexity of the system is two orders of magnitude higher, and the reliability of the supply chain is higher. In addition, the research and development cycle of new energy vehicles usually takes 1 to 2 years, which is much longer than the three or four months of smart phones.
Gou and Wang Laichun are also aware of their shortcomings. Their solution was to seek foreign aid, with Gou finding Jili and Wang Laichun choosing Chery.
From the perspective of sales, the new allies of Guo and Wang are even more powerful than Wang Chuanfu's BYD. In the 2021 domestic passenger car wholesale sales list, Geely ranked third, Chery ranked ninth, and BYD ranked 15th.
BYD also has its own advantages. It has been precipitated in the field of new energy vehicles for a long time and has a large number of fans in the economic market. In addition, it has the ability to independently produce power batteries, which is not available to Foxconn and Luxshare Precision.
In contrast, Foxconn and Luxshare Precision can only seek a breakthrough in the ODM market. However, under the trend of domestic first-line car companies building their own factories, it is not an easy task for the two companies to win large orders.
However, the entry of Foxconn and Luxshare Precision has undoubtedly brought important new changes to the domestic new energy automobile industry. Some second- and third-tier manufacturers that do not have the ability to build their own production lines may rise with the help of the capabilities of the two major foundries, which will affect the competitive landscape.
At the same time, the dark war between the two companies has begun. According to Caijing, when Chery selected partners in the field of technology manufacturing, Foxconn and Luxun Precision were both on the shortlist. Foxconn has had long-term contact with Chery, but the latter ultimately chose Luxshare Precision.
BYD also has its own problems. The head players of new energy vehicles, such as Tesla and Wei Xiaoli, are launching more cheap models and cutting into the low-end market that BYD is good at. Byd is in a weak position in terms of brand power, sense of science and technology, and service capabilities, and is bound to face a lot of impact; coupled with the domestic new energy subsidy policy is about to be cancelled in 2023, BYD's "lying and earning" era has ended.
Gou, Wang Laichun and Wang Chuanfu are about to compete in a new battlefield when the smoke of the smartphone FOUNDRY war has not dissipated. But in this war, the three major foundry giants have no "white knights" such as Apple and Xiaomi, and the competitors are more powerful. How the three veterans break the game still needs to be tested by time.
Resources:
Alpha Factory, "Foxconn makes cars, foundry giants have no choice"
Prism, "Luxshare Precision Raid Road: Foxconn's "Migrant Girl" and Her Three Nobles"
Phoenix.com, "The 'Enmity' of Gou and Wang Chuanfu"
AI Finance and Economics, "BYD executive Liu Xiangjun gradually withdrew from the company, 13 years ago involved in Wang Chuanfu and Gou Taiming's feud"
Finance Eleven, "Luxun Precision Car Manufacturing: The Anxiety and Self-Help of Fruit Chain Giants"