Foxconn’s OEM contract was divided by Pegatron and Wistron?
[Abstract] Foxconn has established a semiconductor subgroup, and is planning to build a large wafer factory. Foxconn founder and chairman Terry Gou has always regarded Samsung as a competitor. Today, it has placed a second son in the industry chain, indicating that the company is learning that Samsung continued to expand their own industrial chain business and try to obtain more lucrative profits.
The latest online information said, Foxconn set up a semiconductor sub-group, and is planning to build a large wafer factory. Foxconn founder and chairman Terry Gou has always regarded Samsung as a competitor. Today, it has placed a second son in the industry chain, indicating that the company is learning that Samsung continued to expand their own industrial chain business and try to obtain more lucrative profits.
Foxconn strives to transform
Foxconn has achieved its ultimate goal in the OEM market. It has become the largest OEM factory in the world. However, the profits of OEM business are low. Its parent company, Hon Hai Group, has a net profit margin of only 3.4% in 2016 and a loss in the first half of 2017. Even if profits are so low, Foxconn’s largest customer, Apple seems to be still dissatisfied with the desire to lower OEM prices, successively introduced Pegatron and Wistron to compete with Foxconn, which has a lower profit margin than Foxconn.
For this reason, as early as 2012, Terry Gou thought about leading and transforming Foxconn. It had established e-commerce companies to enter the hot e-commerce market in mainland of China. However, the two giants Alibaba and JD.com finally failed to achieve any results. In recent years, Foxconn began to launch its own brand business and launched products such as InFocus mobile phones. However, its influence was limited. Foxconn acquired Sharp in 2016.
Sharp has brands such as Sharp TV and Sharp Mobile, which helps Terry Gou always hope to develop its own brand business to increase profitability. Sharp TV then rapidly robs market share in the Chinese mainland market by means of price wars. In the first half of 2017, the share of the mainland TV market soared further and pushed it into the fourth place in the global TV market share. However, in the second half of the year, it appeared that the market stagnated rapidly In the end, it only gained the eighth place in the global TV market share. Sharp Mobile also launched the same introduced a full-screen mobile phone in the Chinese market in the second half of last year, but its performance was not satisfactory.
Foxconn’s acquisition of Sharp is in favor of Sharp’s panel technology and hopes to use it to enhance its industrial chain strength. Sharp is the first in the world to put into production the most advanced 10th-generation line. Foxconn hopes to further enhance its production capacity and technology level in the panel industry. In order to support Sharp TV’s competition with Samsung, Foxconn’s parent company, Hon Hai, announced that it will stop supplying Samsung to the world’s largest television company.
Sharp has IGZO and OLED in the panel technology, especially in the small and medium sized OLED panel market hopes to challenge the first Samsung, while having a stronger industrial chain strength also helps to improve its voice with Apple, Apple has begun for the iPhone Introducing OLED panels, Sharp has faced difficulties in promoting mass production of OLED panels. Terry Gou tried to cooperate with JDI, another Japanese panel company, to jointly promote mass production of OLED panels.
Foxconn wants to become another Samsung
Samsung is a world-renowned technology company, the world’s largest TV company and mobile phone company, and has a strong industrial chain. Its industrial chain advantage and its brand business support each other. In recent years, the semiconductor business is becoming Samsung’s largest source of profits, and it holds the largest share of the storage wafer market. Currently, it is continuously advancing the promotion of semiconductor manufacturing processes and hopes to compete with TSMC, the world’s largest wafer foundry company.
Apple is also Samsung’s largest customer. Last year, Apple introduced OLED panels for the iPhone for the first time. Due to Samsung’s capacity and technology advantages in the small and medium sized OLED panel market, it became the only OLED panel supplier of Apple’s iPhone, and Apple had to purchase the OLED panels at a high price, as a comparison, Foxconn had to continue to be under pressure to reduce OEM prices when Apple foundry iPhone, which is to stimulate Terry Gou want to expand their industrial chain business reasons.
Foxconn already has the business of panel and OEM. If it involves the semiconductor industry, it will form a more complete industrial chain. The layout of this industry chain is similar to that of Samsung’s industrial chain, so it will also be expected to obtain more income and profits from Apple. In addition to these industry chains also contribute to the success of its brand business, which is Samsung’s success.
However, compared with other industries, the semiconductor industry’s technology and financial threshold is extremely high, Foxconn will succeed in the semiconductor industry will test it is willing to invest in how much money and time, after all, Samsung’s development of its own storage wafer business continued for nearly 20 years Time has become a global giant, and in the wafer foundry market, the gap between Samsung and TSMC is very far away. Today, TSMC holds a global chip foundry market share of more than 50% and Samsung only hopes to be in the wafer foundry market in the next five years. Share a quarter of the market share.
For Foxconn’s future, it also faces the issue of successors. Terry Gou is 68 years old and he seems to have not yet found a successor with sufficient leadership and vision. The development of the semiconductor business just requires long-term investment. This is Foxconn. Another question to consider.