Foxconn’s Semiconductor Strategy: Focusing on Specialty Chips

Foxconn, the world’s largest contract electronics manufacturer, has revealed its semiconductor strategy, highlighting a focus on producing “specialty chips” rather than competing in cutting-edge technologies. This strategic approach aims to cater to specific sectors such as automotive and the internet of things (IoT), where mature technology is commonly used. In contrast, leading-edge players like Taiwan’s TSMC and South Korea’s Samsung are pushing towards developing highly advanced 2-nanometer and 3-nanometer chips. Foxconn’s decision to prioritize specialty technology allows the company to differentiate itself in the market and optimize its supply chain management.

Specialty chips, also known as semiconductors, play a crucial role in sectors like automotive and IoT. These chips are typically produced using mature technology, such as 28-nanometer or larger chips. The size of nanometers in chips refers to the size of individual transistors on the chip. Smaller transistors result in more powerful and efficient chips; however, developing such advanced technology can be challenging. While competitors are striving for 2-nanometer and 3-nanometer chips, Foxconn recognizes the importance of focusing on specialty technology to efficiently manage the supply chain.

The Rise of Electric Vehicles (EVs) and Foxconn’s Strategy

Apart from semiconductors, Foxconn has also entered the electric vehicle (EV) market. The company acknowledges the significance of power devices and silicon carbide chips, which offer increased efficiency at higher voltages commonly found in EVs. By leveraging its component business, platform business, and contract, design, and manufacturing services, Foxconn aims to attack all areas of the EV market. This diversified approach enhances cost competitiveness and allows the company to provide comprehensive solutions to traditional auto original equipment manufacturers (OEMs). Foxconn’s goal is to build its ideas into customers’ cars, enabling them to gain a competitive edge.

Challenges in the Global EV Market

While Foxconn sets its sights on the EV market, it faces fierce competition from major players in China, Europe, and the U.S. In third-quarter 2021 through second-quarter this year, Tesla, BYD, and Volkswagen held a significant share of the global EV market. This competitive landscape poses challenges for Foxconn’s entry into the semiconductor market, which is dominated by experienced firms with intricate supply chains. However, the company remains determined to navigate these challenges and establish itself as a key player in the EV industry.

Lessons Learned: Foxconn’s Journey into Semiconductors

Foxconn’s venture into the semiconductor industry has encountered obstacles, exemplifying the difficulties faced by new entrants. The company experienced setbacks, such as the withdrawal from a joint venture with Indian conglomerate Vedanta to establish a semiconductor and display production plant in India. However, Foxconn views these setbacks as learning opportunities instead of failures. It continues to work with the government to gain support for their proposals and is still actively exploring opportunities in India, Indonesia, and Thailand. The company’s main objective is to diversify its production away from China while developing collaborative partnerships with EV-related companies in these regions.

Foxconn places great importance on managing the entire supply chain and ensuring a clear understanding of what is happening in all areas of the industry. By having a presence in various sectors, the company gains valuable insights and can anticipate potential disruptions. This knowledge allows Foxconn to proactively address challenges like chip shortages, enabling better supply chain management and mitigating potential delays. Looking ahead, the company remains focused on its semiconductor strategy, capitalizing on the growing demand for specialty chips while expanding its footprint globally in the EV market.

Foxconn’s semiconductor strategy revolves around producing specialty chips for specific sectors like automotive and IoT. By avoiding direct competition with leading-edge players, the company successfully differentiates itself in the market. Additionally, Foxconn’s entry into the EV industry through power devices and silicon carbide chips demonstrates its commitment to diversification and comprehensive solutions. While the global EV market presents challenges, Foxconn’s determination to establish a significant market share globally remains unwavering. Moreover, by actively managing its supply chain and maintaining a diversified presence, Foxconn aims to stay ahead of the curve in both the semiconductor and EV industries.

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