Taiwan's Biggest Company - Foxconn
Summary
TLDRFoxconn, often criticized for labor practices, is Taiwan's largest company by revenue, surpassing TSMC. Founded by Terry Gou, it started as a TV knob manufacturer and evolved into a global electronics manufacturing giant, producing for brands like Apple and Nintendo. With aggressive pricing and a 'land-and-expand' strategy, Foxconn has vertically integrated its services, moving up the value chain. Despite controversies, it offers jobs to millions in low-cost regions, reflecting a tough yet necessary reality in the manufacturing industry.
Takeaways
- 🏭 Foxconn is a major electronics manufacturer with a controversial reputation, primarily due to its labor practices.
- 🍎 While often associated with Apple, Foxconn's business extends beyond Apple, producing a wide range of electronics including computers, TVs, and gaming consoles.
- 💰 Foxconn is the largest company in Taiwan by revenue, surpassing even TSMC, and is the third-largest tech company globally.
- 🔄 The company's official name is Hon Hai, with Foxconn being the trade name, symbolizing their quick production capabilities.
- 🌐 Foxconn has a complex structure with over 200 known affiliates and subsidiaries, including well-known brands like Belkin and Sharp.
- 📈 Founded by Terry Gou, Foxconn started as a manufacturer of plastic components and evolved into a global electronics manufacturing giant.
- 📈 Foxconn's revenue has seen significant growth, reaching $178 billion in a year, and it became Taiwan's largest private manufacturing company in 2001.
- 📈 China is Foxconn's key production base, with numerous factories employing hundreds of thousands of workers, taking advantage of local economic incentives.
- 📱 Foxconn's association with Apple began in 2006 with the assembly of iPhones, and Apple is now Foxconn's single largest client.
- 💼 Terry Gou, Foxconn's founder, has retired and had an unsuccessful attempt to run for the Taiwan Presidency.
- 🏗️ Foxconn's business strategy involves aggressive pricing and a 'land-and-expand' approach, aiming to be a one-stop shop for manufacturing needs.
- 👥 Foxconn's labor practices have been criticized for being authoritarian, with strict factory rules and conditions, but they offer employment opportunities with competitive wages in certain regions.
Q & A
What is the common controversy surrounding Foxconn?
-Foxconn is often associated with labor practice controversies, with critics implying that buying Apple products supports what they perceive as 'slave labor' conditions.
Besides Apple, what other products does Foxconn manufacture?
-Foxconn manufactures a wide range of products including computers, laptops, TVs, mobile phones, and even the X-box. It is a cornerstone of Taiwan’s electronic manufacturing industry.
What is the official name of Foxconn in Taiwan and what is its trade name?
-The official name of Foxconn in Taiwan is Hon Hai, and its trade name is Foxconn, named so because of the company's ability to produce electronics at 'fox-like' speed.
How large is Foxconn in terms of revenue and its position in the global technology market?
-Foxconn is Taiwan’s biggest company by revenue, larger than TSMC, and made $178 billion last year. It is also the third biggest technology company worldwide.
What are some of Foxconn's prominent subsidiaries?
-Prominent subsidiaries of Foxconn include Belkin, an American accessories manufacturer; Sharp Corporation, a major Japanese electronics manufacturer; and FIH, a mobile phone manufacturer for Nokia listed on the Hong Kong stock exchange.
What was the initial business focus of Terry Gou when he founded Foxconn?
-Terry Gou founded Foxconn as Hon Hai Plastic Material Corporation, initially focusing on making plastic turning knobs for black and white televisions and improving the plastic molding procedure.
How did Foxconn expand its business into the United States?
-Terry Gou realized the potential of the US market and visited 32 states in 11 months. His persistence led to an order for PC connectors from IBM, marking a significant breakthrough for the company.
What was Foxconn's revenue in 1988 and when did it go public?
-By 1988, Foxconn had NTD$1 billion in revenue and it went public on the Taiwan Stock Exchange three years later.
How did Foxconn's expansion in China contribute to its growth?
-Foxconn quickly expanded in China, building factories in various cities and benefiting from preferential tax policies and infrastructure support from local governments. This expansion, along with the outsourcing trend from American and western companies, significantly contributed to its growth.
What is Foxconn's strategy for maintaining competitive pricing in the market?
-Foxconn enters markets as a late-comer with aggressive pricing, leveraging its size and profits from one industry to fund extremely low prices in others. This strategy, along with its focus on manufacturing, differentiates it from tech giants focused on the Internet or computer software.
What are the labor practices at Foxconn that have attracted controversy?
-Foxconn has been criticized for its labor practices, including building factories in areas with low labor costs and maintaining a strict, authoritarian work culture with high production discipline and long working hours.
How does Foxconn's work culture compare to other working environments in China?
-While Foxconn's work culture is described as rigid and authoritarian, it is not necessarily worse than the white-collar working life in China, where practices like the '996' work schedule (9 am to 9 pm, six days a week) are prevalent.
What changes have been made at Foxconn in response to criticism regarding worker conditions?
-In response to criticism and high-profile incidents, Foxconn has made changes such as capping overtime at 60 hours a week, improving dorm conditions, and increasing wages, with workers now earning between $400 to $700 a month depending on their level.
How has Foxconn's relationship with Apple evolved over time?
-Foxconn took on the job of assembling Apple's iPhone in 2006, and as Apple's success grew, so did Foxconn's. However, due to controversies and increased costs, Apple began using Foxconn's competitor, Pegatron, to manufacture some iPhones starting in 2010.
Outlines
🌟 Foxconn: Beyond Apple and Labor Controversies
Foxconn, often discussed for its labor practices, is a multifaceted company that manufactures a wide range of electronic products beyond Apple's. It is Taiwan's largest company by revenue, surpassing TSMC, with a revenue of $178 billion in the previous year. The company, officially known as Hon Hai in Taiwan, operates under the trade name Foxconn, emphasizing its swift production capabilities. Foxconn's global reach extends to over 200 affiliates and subsidiaries, including notable ones like Belkin and Sharp Corporation. Founded by Terry Gou, the company started with manufacturing plastic components for TVs and evolved into a major electronics assembler, particularly for Apple, which contributes up to 50% of its revenue. Foxconn's growth is attributed to its expansion in China, where it benefits from favorable tax policies and infrastructure support, and to the outsourcing trend by Western companies.
📈 Foxconn's Business Strategies and Labor Practices
Foxconn's business strategy is characterized by a 'land-and-expand' approach, aiming to be a vertically integrated provider for all manufacturing needs. The company has moved up the value chain, from connectors to entire PCs, and uses acquisitions to fill service and product lines. Foxconn is known for aggressive pricing, leveraging its size and profits from one industry to fund low prices in others. Labor practices at Foxconn have been controversial, with factories located in areas with low labor costs and preferential tax regimes. The company recruits young rural workers with promises of knowledge expansion and experience accumulation. The work culture is described as 'authoritarian', with strict discipline and monitoring. Despite the tough conditions, workers are aware of the job's realities and are paid competitively compared to the Chinese minimum wage. Overtime is voluntary but common due to the need for higher earnings.
🏭 The Realities and Perceptions of Foxconn's Workforce
This paragraph delves into the realities of working at Foxconn, highlighting the company's rigid work culture and the perception of its labor practices. While Foxconn has faced criticism for its strict work environment, it offers employment opportunities that many workers willingly choose. The company's labor practices have been under scrutiny, leading to improvements in worker conditions and pay following several high-profile incidents. Foxconn's business has become more expensive for clients like Apple, prompting Apple to diversify its manufacturing to include competitors like Pegatron. The video aims to provide a more nuanced view of Foxconn, a company that plays a vital role in Taiwan's economy and the global electronics manufacturing industry, despite its less glamorous image compared to semiconductor manufacturers like TSMC.
Mindmap
Keywords
💡Foxconn
💡Labor Practices
💡Electronic Manufacturing Services
💡Terry Gou
💡Revenue
💡Subsidiaries
💡Vertical Integration
💡Aggressive Pricing
💡Outsourcing
💡Manufacturing
💡996 Work Schedule
Highlights
Foxconn is often discussed controversially due to its labor practices, commonly associated with Apple product manufacturing.
Beyond Apple, Foxconn manufactures a wide range of electronic products including computers, laptops, TVs, and mobile phones.
Foxconn is the largest company in Taiwan by revenue, surpassing TSMC and generating $178 billion in the previous year.
The company's official name in Taiwan is Hon Hai, with Foxconn as its trade name, signifying its swift production capabilities.
Foxconn is the third largest technology company globally and has over 200 known affiliates and subsidiaries.
Prominent subsidiaries include Belkin, Sharp Corporation, and FIH, which manufactures mobile phones for Nokia.
Terry Gou founded Foxconn 46 years ago, starting with manufacturing plastic components for televisions.
Foxconn's initial breakthrough came from an order by Atari, leading to the realization of the US market's potential.
Persistence led to an order from IBM, marking a significant milestone for Foxconn in the PC connector market.
Foxconn's expansion into China began with a factory in Shenzhen, leveraging local government incentives.
By 1996, China became Foxconn's key production base, and by 2001, it became Taiwan's largest private manufacturing company.
Foxconn's revenue surged to $28 billion in 2005, becoming the world's largest electronics manufacturing service provider.
In 2006, Foxconn began assembling Apple's iPhone, significantly contributing to its revenue growth.
Terry Gou's retirement and unsuccessful bid for Taiwan's presidency highlights his political aspirations.
Foxconn's business strategy involves aggressive pricing and vertical integration to meet all manufacturing needs of its customers.
The company's labor practices have been a source of controversy, with factories located in areas with low labor costs and strict work environments.
Foxconn's work culture is described as authoritarian, with strict discipline and high expectations from its workforce.
Despite controversies, Foxconn offers employment opportunities that meet the needs of many workers in China.
Foxconn's labor practices have led to increased costs for Apple, prompting the company to diversify its manufacturing to competitors like Pegatron.
Foxconn's scale and market power in assembly are significant, despite being overshadowed by the glamor of semiconductor manufacturing.
Transcripts
Foxconn is a controversial company.
Whenever people bring it up, they do it in the context of their labor practices.
Usually for the purposes of implying, “If you buy Apple products, you are supporting slave labor.”
But Foxconn is bigger than just its Apple business. They make computers, laptops, TVs,
mobile phones (the old school kind), that X-box everyone is excited about and so much more.
In fact, Foxconn is Taiwan’s biggest company by revenue. Yeah, bigger than TSMC.
It made $178 billion last year. It is a corner stone of Taiwan’s
electronic manufacturing industry. And it does so much more than just assembly.
In this video, I want to talk about Foxconn and its bombastic founder - Terry Gou.
But first, the name. Sometimes you hear it called Hon Hai. Sometimes Foxconn.
The company’s official name in Taiwan is Hon Hai. The trade name is Foxconn - named
as such because the company says that they can produce electronics
at "fox-like" speed. I generally will refer to it as Foxconn here.
Foxconn is really big. It is not only Taiwan’s biggest
company by revenue but also the third biggest technology company worldwide.
The company is also complicated. It is a sprawling company with over 200
known affiliates and subsidiaries. Its most prominent subsidiaries include:
American accessories manufacturer Belkin. Maker of Apple accessories,
routers, surge protectors and USB hubs.
Sharp Corporation, the major Japanese manufacturer that makes televisions and other electronics.
Foxconn acquired a majority share in the company in 2016 after extended wrangling.
FIH, manufacturer of mobile phones for Nokia. Listed stock on the Hong Kong stock exchange.
The company has made a variety of other acquisitions, but most of these
are smaller companies with the goal of filling out Foxconn’s overall service and product lines.
Terry Gou founded Foxconn some 46 years ago first as Hon Hai Plastic Material
Corporation - an electrical components manufacturer.
It got its start making plastic turning knobs for black and white televisions,
just another company amongst many doing this sort of business.
But as Terry Gou researched the industry in an effort to figure out ways to make
a better TV knob, he realized that the entire plastic molding procedure needed improvement.
He built a factory capable of improving the precision of making plastic molds.
Customers were very impressed by the quality of his finished products.
Hon Hai‘s next big breakthrough came when Atari put in an order for
2,600 pieces of a plastic connector for their joystick cable.
Terry soon realized the potential of the US market. He flew to the US and
visited 32 states in 11 months. In trying to acquire an order from a big US-based PC maker,
he booked himself into a motel near an IBM facility in Raleigh, North Carolina.
With persistence, he got an order for PC connectors from IBM.
By 1988, Hon Hai (by now rebranded as Foxconn)
had NTD$1 billion in revenue. Three years later the company IPO’ed in the Taiwan Stock Exchange.
Around then the company began exploring production expansion in the Mainland,
starting with a factory named "Haiyang" (ocean) located in the then-dusty city of Shenzhen.
His first employees were 150 migrants from rural Guangdong, 100 of them were women.
Foxconn quickly expanded in China, building factories in Shenzhen, Shanghai, Chongqing
and Kunsan. Local governments looking for economic growth and jobs offered preferential tax policies
and good infrastructure. On the other side, a titanic macro trend in American and western
companies to outsource the dirty work of their manufacturing to Asia. Foxconn ate it all up.
By 1996, Foxconn generated $500 million in revenue and China was its key production base.
Today they have 32 plants in China employing hundreds of thousands of migrants.
In 2001, the company had $4.4 billion and became Taiwan’s largest private manufacturing company.
Four years later in 2005, revenues had exploded to $28 billion and Foxconn
beat Flextronics to be the world’s biggest electronics manufacturing service provider.
In 2006, Foxconn took on the job of assembling Apple's iPhone. As
Apple's fortunes rose, so did Foxconn's. Apple is Foxconn's single biggest client.
Estimates say Apple contributes up to 50% of Foxconn's total revenue. Much
of Foxconn's success comes as a result of the explosion in the mobile industry.
Terry Gou is retired now. He tried to make a run for the Taiwan Presidency
but that did not work out. He lost to a Korean fish in the KMT primary.
It is weird to think that he would try for it in the first
place - with Foxconn and himself having such close ties to the Chinese government.
The government literally helped him create a customs-free zone in Zhengzhou city out of nothing
so that they can build iPhones. It's hard to think that there isn't a relationship there.
Foxconn’s general attitude is to stay out of limelight and to let the main brand shine.
So it can be difficult to learn how they do what they do so well.
Their business strategy for their customers can be best described as “land-and-expand”. Their goal
is to be a vertically integrated one-stop shop for all of their customers’ manufacturing needs.
Over the decades, Foxconn has persistently moved up the value chain. They started with connectors.
Then they moved to cables. And from there to printed circuit boards and finally whole PCs.
Their subsequent acquisitions have been in service of this strategy.
For example, they orchestrated a merger of their subsidiary Innolux with Chi Mei Optoelectronics
to help build the largest TFT-LCD firm in the world.
Another Foxconn strategy is price. Foxconn is a late-comer to markets,
but they enter with aggressive pricing.
Their size helps fund these new market entries. They are able to leverage their
strengths and profits from one industry to pay for its extremely low prices in others.
In this, Foxconn is like any of the American tech giants. The big difference is that it
focuses on manufacturing rather than the Internet or computer software.
There’s another reason why Foxconn can deliver such low prices. It is a source of a
lot of the controversy and bad press surrounding the company. And that is their labor practices.
Foxconn builds their factories in areas with low cost of labor
and preferential tax regimes. China, India, Vietnam, Brazil, Czechia. The like.
(Notice that Wisconsin is not included in that list.
Who would ever think that Wisconsin had “cheap labor”?)
For example, their EU headquarters in Czechia. To find workers that meet their requirements,
Foxconn recruited a range: From young workers from Slovakia and Poland to Romanian elders
in their 50s. They use adverts to find their workers. I sat on a bench with one such ad.
In China, Foxconn uses adverts to source a supply of young
rural workers - migrants from rural China between the ages of 16 and 29.
Their pitch to these young people is: “Hurry towards your finest dreams,
pursue a magnificent life. At Foxconn, you can expand your knowledge and accumulate experience.”
It is an entry level job - like how young people used to work at fast food restaurants
as their first full time gig. No one ever sees themselves working there forever.
(Though I know this trend is changing even in America, which is also sad)
Foxconn’s work culture can be best described as “authoritarian”. Strategies and goals flow
from the senior management levels out of the Taiwan headquarters.
Middle management in factory cities like Shenzhen and Chongqing try to devise ways
to achieve those goals and delegate work to the lower levels.
Every Foxconn worker learns Gou’s work philosophies:
``` Successful people
find a way. Unsuccessful people find excuses.
A harsh environment is a good thing.
Execution is the integration of speed,
accuracy and precision. ```
And one of my favorites: “Obey, obey and absolutely obey!”
The job is tough. Factory workers are monitored via CCTV. Production discipline is maintained
at all times. “No sleeping, no conversing, and no laughing” is the top rule in the factory.
You work 10 hours a day during normal hours. Busy season, it is 12 hours. Overtime is voluntary, but
if you do not do overtime then you won’t make all that much money. So most end up doing overtime.
It is not slave labor. They’re paid. The pay in China got a boost after a few well-publicized
jumping incidents. Now workers can make something like $400 to $700 a month depending on your level.
This is actually not all that bad considering the 2017 Chinese minimum wage is $275. A few other
changes include having no more than eight persons per dorm and capping overtime at 60 hours a week.
Workers often know about the realities of the job going in.
They have a bit of black humor about it: “No jump, no pay increase” - one has said.
About Foxconn’s labor practices - I am not really a bleeding heart type. But neither am I a cruel,
evil capitalist. Foxconn has a rather rigid work culture - but you do not get to employ
a million people in China without offering something that those workers want.
It is not the Mao era anymore. People can choose what they wanna do.
And to add, it is not like the white collar working life in China is all
that much better either - Google 996 if you do not believe me. Or ask your Chinese
(and Taiwanese) working friends. Least the factory workers get paid overtime.
Another thing. The jumping incidents and the subsequent pay raises made Foxcon's
business more expensive for Apple. So starting in 2010 with the iPhone 4,
Apple began mixing in iPhones made by one of Foxconn's competitors Pegatron.
Pegatron is a low cost competitor to Foxconn. Considering how cheap Foxconn is,
that's an achievement. And it seems like their guaranteed pay is lower. But Pegatron
stays out of the limelight and Foxconn gets slapped with the slave labor reputation.
Foxconn is such a big and sprawling company that I can’t cover the whole thing in just one video. My
goal was to shed just a little light on a company that is much bigger than most people realize.
Foxconn is bigger than TSMC, but TSMC gets most of the glamor. Foxconn came along first,
but TSMC remains the golden child of the Taiwanese economy. Few people want to think about the stuff
that Foxconn does - it is nothing like the glamor of etching microchips with lasers.
And TSMC is Taiwan-first, while Foxconn and Gou have an unpleasant close connection to China.
But Foxconn is as big and vital to Taiwan as the semiconductor manufacturers are.
And Foxconn remains the leader in assembly - and that says as much about its market power
as anything else out there.
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