Source: Visual China
Reporter / Qin Yi Editor / Chen Xiaoping
Gou and hon Hai Precision, which he founded, are investing heavily in Southeast asia and South Asia.
A week ago, the Investment Promotion Commission of Thailand announced that it had approved Hon Hai's joint venture to establish an electric vehicle company, Horizon Plus, with a project investment of about US$1.04 billion, and Hon Hai officially launched its local electric vehicle layout.
This move corresponds to the strategy of Hon Hai (Foxconn's parent company).
"We also know that under the trend of de-globalization and regional manufacturing, we must adopt innovative operational thinking to create a win-win situation in the country, local enterprises and Hon Hai supply chain."
In the 2021 annual report released in early June, Hon Hai's management described its regional layout in this way, Southeast Asia and India gradually became the focus, not only the FOUNDC business, but also its vigorous development of electric vehicles and semiconductor businesses, all concentrated in this area.
Gou, 72, has resigned as chairman of Hon Hai and remains on the board. The founder of the trillionaire enterprise is watching its industrial map extend southward.
All the way south
Hon Hai went to Nanyang and started more than a decade ago.
As early as 2007, when Vietnam joined the WTO, Gou personally visited the transnational transportation route from the Shenzhen Longhua factory to Hanoi, Vietnam, and bought more than 400 hectares of land in Bac Ninh, Vietnam.
"Moving forward to Vietnam", the family announced to the outside world at that time, Hon Hai planned to invest 5 billion US dollars in Vietnam, 4 billion yuan for "building towns", and 1 billion yuan for the construction of electronic product manufacturing production lines.
At that time, Hon Hai had millions of employees in the Chinese mainland, and Vietnam's status was not conspicuous. After 2018, Hon Hai significantly increased the layout of Vietnam and other places.
According to the official website, it has three core companies in "Nanyang":
In India, for Rising Stars Mobile India Private Limited; In Vietnam, it is Funing Pricision Component CO., LTD. and Fuhong Precision Component (BAC GIANG) CO., LTD.
Judging from the results of equity penetration, these companies are 100% controlled by Hon Hai.
According to the report of the Vietnamese local research company VietnamCredit, the reporter of "21CBR" showed that Funing elite parts and Fuhong precision parts are controlled by Zhuo Xianhong (ZHUO XIAN-HONG transliteration), and both companies were established in January 2007.
Among them, Funing Elite registered capital of 80 million US dollars, the main business is routers, mediators and other communication equipment manufacturing, the company has a total of 13,000 employees;
The main business of Fuhong Precision Parts is the manufacture of electronic components and circuit boards, and the partners are Canon, Intel, Samsung Electronics, etc., and the company has a total of 9625 employees.
According to the annual report of Industrial Fulian, in 2021, Hon Hai has set up a new company in the local area of "Fu Fu Precision Components".
Source: Visual China
According to Vietnamese media reports, in 2020, Foxconn's local revenue has reached $6 billion, double that of the previous year. Foxconn executives said that in the next 3-5 years, the annual operating income will increase to 40 billion US dollars.
Foxconn sent employees from Kunshan and other regions to Vietnam to pass on their experience.
"We pass on our work experience and the company's culture and working atmosphere to them so that they can get to work quickly." A female worker wrote this article recalling that she went to work locally for 18 months starting in mid-2020.
As far as she can see, Hon Hai's factory in Vietnam is very large:
"The company's investment in Vietnam mainly includes Guiwu Dachang District & Huangtian Factory Area & Gwangju Factory Area & Yunzhong Factory Area, our FIT is located in the Yunzhong Second Factory Area, at a glance dozens of factories, so spectacular, with nearly 30,000 employees."
According to industry news, Hon Hai is increasing its investment in India and plans to undertake a certain share of the iPhone's production capacity.
"It is the general trend for international manufacturers and different industries to increase investment in India, and the speed will be faster." In May this year, Liu Yangwei, the current chairman of Hon Hai Group, said.
It has been reported that around the Dragon Boat Festival, its Foxconn Zhengzhou factory sent more than 20 employees to the Indian factory to teach experience.
"3+3" layout
After Liu Yangwei took over the Honghai Shuai seal, he formulated three action routes in the short, medium and long term, namely F 1.0 current situation optimization, F 2.0 digital transformation, and F 3.0 transformation and upgrading, going hand in hand.
F3.0 is the focus of the roadmap, specifically the "3+3" plan, Hon Hai will enter three major industries: electric vehicles (EVs), digital healthcare and robotics, and enter three core technology areas: artificial intelligence, semiconductors and next-generation communications.
In the past year, Hon Hai has accelerated its layout around new undertakings, "The headwinds of the epidemic have not hindered our pace of transformation. Liu Yangwei said in a letter to shareholders.
The regional layout of the new business, in addition to increasing the size of Taiwan and North America, the investment is mainly concentrated in Southeast Asia and South Asia.
Taking electric vehicles as an example, the newly approved Horizon Plus project, a joint venture between Hon Hai and Thailand's State Petroleum Group (PTT), reached an agreement in February this year, and the US$1.04 billion is only the first investment plan.
Hon Hai also focuses on the key components of electric vehicles.
Since the end of 2021, Foxconn has signed a joint venture with Thailand's ARUN Plus to build a factory, and has cooperated with Indonesia and Saudi Arabia to establish a battery and electric vehicle parts supply chain.
"The goal is to be able to provide complete services from platforms, chassis design, three electrics, component supply, software, electronic motor architecture to vehicle manufacturing to improve value to customers." Liu Yangwei said in the shareholder letter.
Hon Hai is also aggressively killing the semiconductor field, slowly building a whole industrial chain from IC design to downstream packaging and testing, acquiring Taiwan's six-inch fab, establishing a joint venture to establish Guochuang Semiconductor, and other investments in Southeast Asia and South Asia.
In 2021, Hon Hai entered wafer fabrication, acquiring about 5.03% of the shares of Malaysian listed company Dagang Nexchange (DNeX), DNeX held an equity stake in the 8-inch fab SilTerra, and Hon Hai participated in the bidding for SilTerra.
In May 2022, Foxconn announced that it will invest in a 12-inch fab with DNex in a joint venture, with a monthly production capacity of 40,000 units, second only to TSMC Kumamoto's 55,000 units. The two parties did not disclose the amount of factory construction and the proportion of shareholding.
According to market conditions, the industry estimates that the amount of investment is at least NT$100 billion.
Source: Visual China
The 2021 annual report also revealed that Hon Hai plans to work with Indian companies to "set up new fabs locally." Hon Hai has reportedly entered the site selection phase in India and is discussing preferential measures with several state governments.
The electric vehicle and semiconductor industries are the key to Gou's upgrade of Hon Hai, and its large-scale landing in Southeast Asia and South Asia has not limited to the local cheap and abundant labor force, but to build a whole industrial chain in the local area.
Hon Hai's annual report disclosed that in the field of electric vehicles, the company is exploring a "build-operate-localize cooperation model", that is, "the operation supply chain is fully localized".
Manufacturing center
In terms of Chinese mainland business, Hon Hai's annual report is limited.
"The Chengdu factory, Zhengzhou factory and Wuhan factory were also selected as lighthouse factories, which are the results of our promotion of F1.0 and F2.0."
The "lighthouse factory" mentioned is a concept proposed by the World Economic Forum and McKinsey, representing the highest level of smart manufacturing and digitalization.
However, the reform of F 1.0/F 2.0 focuses on the promotion of advantages and disadvantages, improving quality and efficiency, and optimizing internal operations, and does not involve large-scale investment.
"On the one hand, domestic traditional manufacturing operations are facing upgrading, using digitalization to improve supply chain resilience and production efficiency; On the other hand, due to the control of cost and efficiency, it (Foxconn) also has to seek other cost depressions. Wit Display analyst Lin Zhi told the 21CBR reporter.
Objectively speaking, even if the large-scale investment in Nanyang is compared to the huge stock of Guo's Chinese mainland, it is still small.
According to Hon Hai's official disclosure, in 2021, its fixed assets in Chinese mainland were NT$247.952 billion, or about 56.037 billion yuan, accounting for 57% of all fixed family businesses in Hon Hai, while Southeast Asia and South Asia could not be listed separately.
In the past two years, Chinese mainland efficient and resilient supply chain has become a ballast stone for Hon Hai to cope with risks and deliver on time, and it can still perform well under the epidemic.
In 2021, Hon Hai Group's annual revenue reached 1.34 trillion yuan, an increase of 12% year-on-year, and the annual net profit was 31.5 billion yuan, up 37% year-on-year.
At present, hon Hai Group's global territory strategy is summarized as "two places of research and development, three regions of design and manufacturing, global assembly and delivery", research and development to Greater China and the United States as the two fulcrums; The center of "design and manufacturing" is still Chinese mainland.
However, looking closely at the before and after comparison of fixed assets, in terms of trends, Hon Hai is significantly increasing investment in North America, Singapore, Taiwan, Southeast Asia and South Asia; The absolute amount of Chinese mainland will be reduced by about 3.8 billion yuan in 2021, accounting for more than 8 percentage points from about 65%.
Gou is adjusting its layout globally and becoming more diversified overall.
From the perspective of foundry business alone, emerging regions do show competitiveness.
After staying for 18 months, the female worker who went to Kunshan gave the local Vietnamese workers a high evaluation, "The wages are lower than the wages of our Chinese workers, and they are as diligent as the Chinese workers." ”
Even if it does not move out, it will not maintain the scale of labor during peak periods.
Its financial report shows that in the case of revenue growth, in the past 15 months (from the end of 2020 to March 2022), Hon Hai has reduced the number of people by more than 170,000, a decline of 20%.
Foundry giants are also seeking transformation, "from labor-intensive industries to brain-intensive industries."
Some analysts believe that in emerging industries such as electric vehicles, the reason why Gou Taiming no longer regards Chinese mainland as the focus is precisely because the local forces are too strong, and the late Hon Hai may not be able to win the advantage, and can only turn to Nanyang.
Under the trend of industrial upgrading, Hon Hai is not the Hon Hai of that year, and the mainland is no longer the mainland of that year.