Hon Hai, otherwise known as Foxconn, explained that they will not be joining the fierce competition for high-tech chips, with Chiang Shang-Yi, the semiconductor chief strategy officer, confirming that they will not be participating in the 4-nanometer or 3-nanometer space. Nonetheless, the company's attempts to enter the semiconductor sphere have been met with a few challenges.
Foxconn, formally known as Hon Hai, has stated that its semiconductor strategy is to focus on creating "specialty chips," which are not cutting-edge. Chiang Shang-Yi, the Chief Strategy Officer for Semiconductor at Hon Hai Technology Group, clarified that the company will not be producing 4-nanometer or 3-nanometer chips. He highlighted that Hon Hai is concentrating more on specialty technology such as semiconductors found in automotive and Internet of Things uses, which normally utilize more mature technology such as 28-nanometer chips or larger.
The likes of Taiwan's TSMC and South Korea's Samsung are pushing forward in the race to develop 2-nanometer and 3-nanometer chips. Samsung has even announced their intentions to mass-produce 2-nanometer chips by 2025 after they began producing 3-nanometer chips in June 2020. Chiang declared that to attempt to catch up with those companies in terms of 3-nanometer or 2-nanometer chip production would be too late. Instead, he stated that Hon Hai's strategy is to manage the supply chain and leverage specialty technology, which is not late at all.
Hon Hai Technology Group, the world's largest contract electronics manufacturer that assembles consumer products such as Apple's iPhones, has made strides in semiconductors and electric vehicles in the past couple years. Chiang, of the firm, said the focus is on power devices and silicon carbide chips, which are favored by EV-makers thanks to their higher efficiency at the higher voltages common in EVs . In 2021, Foxconn announced prototypes made by Foxtron, a venture between Foxconn and Taiwanese car producer Yulon Motor. Foxconn currently only produces a small number of EVs, though their goal is to capture a 5% market share globally by 2025, according to Reuters.
Jun Seki, Hon Hai's chief strategy officer for EVs, stated to CNBC in a different interview that they have a component business, a platform business and a CDM business (contract, design, and manufacturing services). He said, "Our approach is to attack all of them. The component module platform makes our costs very competitive. This is a domain that results in traditional auto OEMs having a very weak profitability," referring to original equipment manufacturers, which are products sold to other companies as components.
Jun stated that sometimes they would have to construct cars based on customers' designs, but if the customers gave them a chance, they would be able to incorporate their own ideas into vehicles, which would make customers more competitive. Nonetheless, the electric vehicle industry is continuing to get more competitive, as China, Europe, and the U.S. are significant contributors. According to Counterpoint Research, between the third quarter of 2021 and the second quarter this year, the top three EV providers - Tesla, BYD, and Volkswagen - held 42% of the global EV market.
Foxconn's efforts to break into the semiconductor space have not been successful thus far, a testament to the difficulty for new entrants to compete in a market that is largely controlled by companies with deep expertise and complicated supply chains.Earlier in 2021, Foxconn opted out of an agreement with Indian conglomerate Vedanta to construct a semiconductor and display manufacturing facility in India as part of a $19.5 billion investiment.When asked by CNBC about the perceived failure of the project, CEO and chairman Young Liu stated, "I wouldn't call it a failure yet. We are still working with the government, looking for ways to get their approval. I think we have learnt a lot about how to deal with government regulations."
In August, the government of Karnataka in India announced that Foxconn will invest more than $600 million to construct a phone manufacturing plant and an independent semiconductor equipment establishment. Liu expressed that India has the potential of accounting for 20-30% of Hon Hai's manufacturing, which is analogous to China. This decision comes as Foxconn began diversifying their production outside of China due to the prolonged discord between China and the US.
The CEO declared that partnerships with India, Indonesia and Thailand had been productive. Foxconn is currently looking to collaborate with a number of EV-related companies in both these countries. According to the CEO, Hon Hai's practice of concentrating on the total supply chain gave them an upper hand. He referenced the chip shortage of two years ago, explaining that due to their familiarity with the events, Hon Hai had more time to adequately respond to the situation. Chiang concluded the point by stating that this provided them with a greater advantage.
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