Foxconn Chairman and CEO Yang Liu
iPhone maker Foxconn is betting big on electric cars and redrawing some of its supply chains as it enters a new era of icy relations between Washington and Beijing.
In an exclusive interview, chairman and chief executive Young Liu told the BBC what the future might hold for the Taiwanese firm.
He said that although Foxconn is moving some supply chains out of China, electric vehicles (EVs) are what will drive its growth in the coming decades.
As tensions rise between the US and China, Mr Liu said, Foxconn must prepare for the worst.
“We hope that peace and stability will be something that the leaders of these two countries will have in mind,” Mr. Liu, 67, told us in his offices in Taipei, Taiwan’s capital.
“But as a business, as a CEO, I have to think, what if the worst happens?”
The scenarios could include Beijing trying to blockade Taiwan, which it claims is part of China, or worse, invading the self-ruled island.
Mr Liu said “business continuity planning” was already underway and pointed out that some production lines, particularly those related to “national security products”, were already being moved from China to Mexico and Vietnam.
He likely meant servers manufactured by Foxconn, which are used in data centers and can contain sensitive information.
Foxconn, or Hon Hai Technology Group as it is officially known, started in 1974 making knobs for televisions. It is now one of the most powerful technology companies in the world, with annual revenue of $200bn (£158.2bn).
It is best known for making more than half of Apple’s products, from the iPhone to the iMac, but it also counts Microsoft, Sony, Dell and Amazon among its customers.
For decades, it thrived on a playbook perfected by multinational corporations—they design products in the US, manufacture them in China, and then sell them to the world. That’s how it grew from a small component manufacturing business to the consumer electronics giant it is today.
But as global supply chains adjust to strained ties between Washington and Beijing, Foxconn finds itself in an unenviable spot — caught between the world’s two largest economies, the same nations that have fueled its growth until now.
The US and China are at loggerheads over many things, from trade to the war in Ukraine. But one of the biggest potential hotspots is Taiwan, where Foxconn is headquartered.
Taiwan has long been a thorny issue, but Chinese leader Xi Jinping’s repeated promises of “unification” have upset the uneasy status quo. Meanwhile, the US, under President Joe Biden, has been more vocal in its support for Taiwan in the event of an attack.
There are hopes of a thaw with US Secretary of State Anthony Blinken visiting China this weekend. But there are also fears of conflict – one US general estimated that it could happen within the next few years at the earliest.
“The United States and China are engaged in what we see as a strategic competition,” said Shihoko Goto, deputy director of the Asia program at the Wilson Center in Washington.
“Foxconn wants to do business with both, but there can only be one winner.”
But Mr. Liu doesn’t think it’s that simple. First, he said, Foxconn’s business model, which relies on American designs and Chinese manufacturing, is far from over.
“We employ a lot of workers and most countries, including China, want to support their workers,” Mr. Liu said, adding that the Chinese government wants companies like Foxconn to keep operating because of the huge number of jobs they create.
Does the rising tension put pressure on the model? “Until now? We haven’t seen it,” he told us.
But the West and its allies have urged countries and companies to “de-risk” China, a long-term shift to limit global dependence on China that has yet to develop.
Asked if this was affecting business, Mr Liu was cautious.
Some foreign customers insisted on moving production out of China, he said, but that was their decision, not Foxconn’s.
“They’re getting a push from their government to reduce the risk and then they’ll let us know.”
The Covid challenge
Geopolitics aside, Covid-19 is another reason for companies to consider “de-risking” China.
A combination of harsh Covid policies, a lack of quarantine space and the contagiousness of the Omicron variant led to protests and riots at the Foxconn factory in Zhengzhou – the world’s largest iPhone plant – in late 2022. Hundreds of workers who feared from the spread of the virus, fled the campus on foot.
Mr Liu said the scenes unfolding in front of the world were caused by the lack of transport due to Beijing’s steadfast zero-Covid policy.
But when pressed further, he admitted that he should have handled things differently.
“If the same situation happened again, I would stop production entirely,” he said, reiterating that he would make that decision even at the risk of upsetting customers like Apple.
The company’s success is certainly based on its impressive customer base, but Foxconn is just as indispensable to those customers.
To understand how important it is to Apple, for example, you only need to look at how much of the iPhone is made by Foxconn – about 60%, according to some estimates. Factories in China make some of the most important parts of the device – camera modules, connectors, even the back of the phone’s case.
iPhone on wheels
That expertise is also what Mr. Liu hopes will fuel Foxconn’s next big bet: electric cars.
“Look at this – it’s a big iPhone, so we’re very familiar with that,” he said, pointing to the panel that controlled the car he’d given us a ride in.
Built for families and priced for the aspiring global middle class, the sleek white SUV is one of several models produced by Foxconn.
“The reason we think this is a great opportunity for us is that with traditional gas engines, you have engines that are mostly mechanical. But with electric cars, it’s batteries and motors,” he explains.
Foxconn Chairman Young Liu with one of the company’s electric cars
It’s familiar language for a tech company like Foxconn, he added.
Foxconn hopes to capture about 5 percent of the global electric vehicle market in the next few years — an ambitious goal, given that the firm has only made a handful of models so far. But it’s a gamble Mr Liu is confident will pay off.
“It doesn’t make sense to make (EVs) in one place, so regional car production is very natural,” he added. Foxconn’s car plants will be based in Ohio in the US, in Thailand, Indonesia and perhaps even in India, he said.
For now, the company will continue to focus on what it does best – making electronic products for customers. But maybe not so far in the future Foxconn will start selling its own cars.
Either way, with the foray into electric cars, Foxconn is diversifying not only into manufacturing but also into supply — both of which Mr. Liu says hold the key to the company’s future.