Will Foxconn Learn to Stand Without Apple?
According to the New York Times, Foxconn is carefully considering reducing its dependence on Apple. For years, Foxconn has been bending over backwards to keep iPhones, iPads, and the like flowing through its factories. But Apple is seeming less and less like the company it once was. According to Gartner analyst Jamie Wang, “Foxconn senses that the Apple aura isn’t as invincible as before.”
There is some uncertainty about just which way Foxconn would go about changing things for itself. It is unlikely to cut ties entirely with Apple, as the tech giant is a major source of revenue for the company and could easily continue to be, but it makes sense that Foxconn would want to reduce its reliance on one company for such a major source of income. As many know, it’s risky to put all your bets on one thing. With estimates pegging 40 percent of Foxconn’s revenue as reliant on Apple products, the company is in a dangerous position that it makes sense to work away from.
It’s possible that Foxconn could go the route of some other contract manufacturers. HTC and Asustek are examples of former contract manufacturers that broke out and established their own successful brands. However, one problem with that strategy is that clients can start to move away. Apple and Samsung (SSNLF.PK) are an example of this tension; while Apple has tried to find other suppliers and manufacturers to replace its rival, Samsung has become a bigger and more direct competitor.
It doesn’t seem likely that Foxconn will take the path of HTC and Asustek. Foxconn spokesman Simon Hsing said that the company didn’t plan to establish its own brand. Kay Chiu, the vice president of Foxconn’s consumer electronics division said, “Hon Hai [another name for Foxconn] is the largest electronic manufacturing service company in the world,” adding, “we are the platform for all the brand-name customers, and to have our own brand does not suit the company policy.”
Not having a brand is one thing, but not making original devices is another. It’s been suggested that Foxconn may proceed to design and manufacture its own unique devices, but it would not put its own brand on those devices. Rather, it would work with clients to distribute them. The company already produces its own 60-inch TVs, and will likely continue to do so due to agreements it made when purchasing a 37.6 percent stake in Sharp‘s LCD panel factory in Sakai, Japan. Foxconn has approached RadioShack (NYSE:RSH) and Vizio to distribute its TVs. Hsing said, “We are actively talking with many clients and asking if they can fully utilize what we make,” adding that the company wanted to use partners’ marketing and distribution networks rather than launching its own brand.
Unfortunately, the TV industry might not be the best move for Foxconn to try getting away from Apple. If Apple launches a TV, Foxconn will surely play a large role in manufacturing it. Additionally, NPD DisplaySearch released data showing that global LCD demand declined 1 percent year-on-year in 2012, and 6 percent for all TV types. Foxconn’s current manufacturing scheme for TVs may just be a necessary loss to break into the business — though there has been some speculation of vertical integration, as Hsing said 90 percent of the components for the 60-inch TVs are made in-house. To continue strong and reduce reliance on Apple, Foxconn may have to look into a wide variety of electronics to design and manufacture on its own.
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