When Foxconn Technology Group’s Young Liu visited Asia last month, he avoided speaking about the one client the Taiwanese company is most famous for. In meetings with the leaders of India, Indonesia and Thailand, the chairman spoke of Apple Inc. Instead of churning out iPhones, he focused on developing semiconductors and building electric vehicles.
This is in contrast to eight years ago, when Liu’s predecessor, company founder Terry Gou, met with then-governor of Jakarta Joko Widodo – known as Jokowi – and promised to invest $1 billion in Indonesia . Although not explicitly stated, the expectation was that the Southeast Asian country with a population of 255 million could become a new hub for iPhone manufacturing. That Foxconn deal helped cement Jokowi’s business credentials and he was elected president later that year – though the money never came.
Wherever Foxconn goes, there has always been the implication that the world’s largest electronics manufacturing company will set up a factory to assemble the planet’s hottest gadgets, and with it create thousands of jobs. This has happened on a few occasions. Both India and Brazil host iPhone factories. Indonesia and the US do not.
Today, that narrative has shifted. In meetings with Jokowi, India’s Narendra Modi and Thailand’s Prayuth Chan-ocha, there has been much conversation about Foxconn’s new products, and the role those countries can play in developing them. The iPhone was not a feature.
For example, India has a dream of building a semiconductor industry. Having trained millions of talented engineers – many of whom find better opportunities overseas – and watching rival China climb into the global chip sector, New Delhi wants to be part of the action. This is not a new fantasy. Various Indian governments have devised plans and set aside funds to achieve that goal over the past two decades. Haven’t found them anywhere.
But now Foxconn has entered into an agreement with Vedanta Ltd, part of billionaire Anil Agarwal’s resource empire, to develop and manufacture the chips. Vedanta has no background and no apparent reason for being in semiconductors, and the agreement signed in February is just a memorandum of understanding. Yet it speaks to Foxconn’s recent strategy to establish local research and development partnerships, rather than simply setting up factories, to take advantage of low-cost labor.
All three countries also have policies to cultivate the local electric-vehicle industry. Production of electric vehicles in India will coincide with Modi’s plans to build that sector and move towards a stated goal of net zero emissions by 2070, a plan that requires domestic development and solutions.
In February, Thailand passed laws that would help the country switch 50% of its vehicle production to electric models by 2030. That policy includes tax exemptions and subsidies. Foxconn has already signed on. Last year, it agreed to collaborate with state-owned oil and gas conglomerate PTT PCL to move both software and hardware to EVs, with a total investment of $1 billion to $2 billion. Vehicle production could begin as early as 2024.
Foxconn’s plans for Indonesia may be bold yet. This year, the company announced that it would partner with Taiwanese electric scooter maker Gogoro Inc., as well as Indonesia Battery Corp and PT Indica Energy to manufacture batteries as well as two-wheelers, four-wheelers and buses. The investment there could be upwards of $8 billion. More importantly for Indonesia and Jokowi, the company is ready to help build the country’s new capital – Nusantara – which will be built on the island of Borneo. Plans for the city were announced in 2019, and the eco-friendly capital was envisioned to replace the hazy, sinking Jakarta. Foxconn is ready to set up training institutes and provide technology to local partners, Liu was quoted as saying.
There is a need to be skeptical about all these announced programs. When it comes to following through on its reported investments, Foxconn has a less than stellar track record. Its debacle in Wisconsin, originally expected to be a leading-edge display-panel factory, but which would be far less, is perhaps the most famous example of this. (Foxconn withdrew that feature, citing changes in market conditions). Many plans also rely on local partners and governments, which are outside Foxconn’s control.
The main reason in favor of trusting at least some of these projects is that Foxconn needs them as much as local politicians. While the company has good reason to open new iPhone factories around the world to reduce its reliance on China, it doesn’t need to look beyond its major manufacturing centers of Shenzhen and Zhengzhou. Even amid the global pandemic and supply chain disruptions, Foxconn and Apple have managed to churn out gadgets with relatively little disruption.
Its chip and vehicle plans are different. Foxconn has bet its future on EVs to reduce dependence on Apple — which accounts for half of its revenue. Vehicles, both because of their size and local regulations, are better suited to local manufacturing, while semiconductors are relatively new business for the company, but can help boost profit margins. The company expects its first electric car to hit production in 2024, aiming to capture 5% of the global market within three years.
At the same time, foreign governments are no longer demanding to set up an iPhone factory in their backyard. There is no politician who would not like to churn out the coveted gadget, and the thousands of job opportunities that come with it. But EVs and chips have the potential to bring about far more than simple factory jobs. Words like “ecosystem” and “R&D” are much more than buzzwords. By focusing on both manufacturing and growth, these economies can expect to create both blue-collar and white-collar jobs.
It’s possible that a home electric vehicle will never be as good as a home-assembled iPhone. But for local economies and Foxconn, they could be far more valuable.