Taiwan's Biggest Company - Foxconn

Summary

Foxconn, 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

00:00

🌟 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.

05:01

📈 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.

10:01

🏭 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.

Keywords

💡Foxconn

Foxconn, officially known as Hon Hai Precision Industry Co., Ltd., is a multinational electronics contract manufacturing company. It is central to the video's theme as it discusses the company's size, operations, and controversies. The script mentions Foxconn's role as a major manufacturer for brands like Apple and its reputation due to labor practices.

💡Labor Practices

Labor practices refer to the policies and procedures that a company follows in its treatment of workers. The video script frequently refers to Foxconn's labor practices, which have been a subject of controversy, with critics likening them to 'slave labor' due to the conditions and expectations placed on workers.

💡Electronic Manufacturing Services

Electronic Manufacturing Services (EMS) is an industry segment where companies manufacture electronics on behalf of other companies. Foxconn is highlighted as the world's largest EMS provider in the script, emphasizing its role in assembling popular electronics like iPhones.

💡Terry Gou

Terry Gou is the founder of Foxconn and a significant figure in the video. His entrepreneurial journey and business strategies are discussed, showing his influence on the company's growth and reputation.

💡Revenue

Revenue is the income generated from a company's business operations. The script emphasizes Foxconn's revenue as a measure of its size and success, mentioning its $178 billion revenue and status as Taiwan's biggest company by revenue.

💡Subsidiaries

Subsidiaries are companies that are owned or controlled by another company, known as the parent company. The script lists several of Foxconn's subsidiaries, such as Belkin and Sharp Corporation, to illustrate the company's diverse business interests.

💡Vertical Integration

Vertical integration is a business strategy where a company owns or controls several stages of its supply chain. Foxconn's business strategy, as described in the script, involves being a vertically integrated one-stop shop for its customers' manufacturing needs.

💡Aggressive Pricing

Aggressive pricing refers to a competitive pricing strategy where a company sets low prices to gain market share. The script mentions Foxconn's use of aggressive pricing to enter new markets, leveraging its size and profits from other areas to offer low-cost manufacturing services.

💡Outsourcing

Outsourcing is the practice of contracting work to an outside company rather than performing it in-house. The script discusses the trend of American and Western companies outsourcing their manufacturing to Asia, with Foxconn being a major beneficiary of this trend.

💡Manufacturing

Manufacturing is the process of converting raw materials into finished goods through labor and machinery. The script positions Foxconn as a leader in manufacturing, emphasizing its role in assembling a wide range of electronic products.

💡996 Work Schedule

The 996 work schedule refers to a work culture where employees work from 9 am to 9 pm, six days a week. The script briefly mentions this as a comparison to Foxconn's work culture, indicating that long working hours are not unique to Foxconn but are common in the tech industry in China.

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.