Foxconn’s EV Supply Chain Efforts Likely Aimed at Enticing Apple

Article By : Alan Patterson

Foxconn is forging a supply chain to support electric vehicle contract manufacturing. The target customer is widely believed to be Apple.

Foxconn’s announcement of an electric vehicle alliance last month is very likely aimed at forming partnerships with companies that have an interest in entering the EV business, and none so much as Apple, according to people close to the world’s largest electronics contract manufacturer.

Foxconn, the largest assembler of iPhones for Apple, said that its MIH Alliance for EVs has in less than six months attracted more than 1,200 partner companies providing hardware and software. Together, the companies plan to launch an EV kit in October and a prototype electric bus in 2022.

Model of the Foxtron bus based on the MIH platform.

The aim of the alliance is to create an open platform for EVs patterned on Google’s Android open-source OS for smartphones. Speaking at a March 25 meeting, Jack Cheng, CEO of the MIH Alliance and co-founder of Chinese EV maker Nio, said the group will strive to develop a high-standard, high-efficiency, high-speed work methodology that will create a new-generation EV ecosystem.

“One manufacturer or team can’t achieve great things,” Foxconn chief technology officer William Wei, a former Apple engineer, said at the event. “Collaboration and teamwork is very critical.” The ability of the MIH Alliance to quickly ramp up production of EVs could help Foxconn win a new manufacturing partnership in EVs with Apple and possibly even Tesla, according to C.Y. Huang, president of boutique Asian investment bank FCC Partners.

“Manufacturing for Apple is definitely the end game,” Huang said in an interview with EE Times. “At the end of the day, it’s both Apple and Tesla.” Huang has been involved in building alliances in Taiwan’s EV industry.

With Tesla emerging as the dominant company in the EV business, Apple up to now has been missing a key opportunity to grab a piece of a business that’s expected to be trillions of dollars larger than smartphones or computers.

“Apple is indeed desperate,” CLSA analyst Patrick Chen said to EE Times. “They are indeed in talks with Foxconn for some kind of cooperation.” CLSA is an Asian capital markets and investment group.

Partnerships and Investments

In addition to the MIH Alliance, Foxconn has separately formed partnerships and made investments that also will help the company become more competitive in the EV business.

In January last year, Fiat Chrysler said it aimed to set up a joint venture with Foxconn to build electric cars and develop internet-connected vehicles in China. A month later, Foxconn entered a joint venture with Taiwan automaker Yulon to make electric vehicles.

In January this year, Foxconn and Chinese automaker Zhejiang Geely Holding Group said they will cooperate to do contract manufacturing for other carmakers. Geely owns Volvo and holds a 9.7% stake in Daimler. Also in January this year, Foxconn took a stake in struggling Chinese EV maker Byton.

And then there’s the Foxconn partnership with US carmaker Fisker. The two companies plan to start production of EVs in the fourth quarter of 2023. The partnership may revive Fisker’s aim to make a splash in the electric vehicle business following its unsuccessful Karma model.

Foxconn electric vehicle
The Foxtron concept car based on the MIH platform.

Fisker has another EV model planned for mass production called Ocean, which is assembled by Canada’s leading auto component company, Magna.

“Magna is the Hon Hai (aka Foxconn) of the automobile domain,” says CLSA analyst Chen. “Hon Hai thinks they can do a better job at a much cheaper cost.”

Foxconn will take over the next Fisker project, which is still in the early design process. The production target is 250,000 units.

That will mark the first significant entry by Foxconn to the EV business. The 250,000 Fisker vehicles, selling for a retail price of $35,000 per unit, should contribute about 4 percent to Foxconn’s annual revenue by 2024, according to Chen.

MIH Alliance

While Hon Hai hasn’t spelled out the “MIH” in the MIH Alliance, investment banker Huang says the acronym means “Made In Hon Hai”.

The alliance has a list of members that includes EV battery and motor makers, as well as semiconductor and software suppliers. Japanese electric motor maker Nidec and Chinese EV battery maker CATL are key members of the alliance, according to CLSA analyst Chen.

Other executives who participated in the March MIH event included Bosch China president Chen Yudong; Gary Hicok, senior vice president of automotive hardware and systems at Nvidia; and Dipti Vachani, general manager of Arm’s automotive and IoT business unit.

Arm’s success comes from its close cooperation with its industrial ecosystem partners, and projects like the MIH Alliance are crucial to helping the industry in realizing the potential of EV technology, Vachani said in the Foxconn announcement.

As the founding member of the alliance, Foxconn Chairman Young Liu said it is difficult for Taiwan to develop a business-to-consumer business model due to the limitations of the domestic market, but it is suitable to use the MIH platform to promote a business-to-business model and gather talent.

To make the platform bigger and stronger, it is important to maintain its neutrality, Liu said. While the MIH Alliance was started by Foxconn, after July this year, it will become an independent organization, he added.

Apple EV

In February this year, the Financial Times reported that Apple ended talks with Japan’s Nissan about a partnership for its secretive autonomous car project after the two sides failed to reach an agreement on branding.

Apple also ended talks with South Korea’s Hyundai Motor and its affiliate Kia as part of an effort to find an automotive partner for its car efforts, known as Project Titan, according to the FT report.

Taiwanese are the only likely manufacturing partners for Apple in the EV business, according to Huang.

“Other people in the world care more about their franchise and their brand equity. Taiwanese don’t care about brand equity at all.”

It’s a new chance for Foxconn to develop low-cost modules for electronics brand owners in much the same way as the company started making laptop computers for Apple and Dell decades ago. The difference is that this time, Foxconn aims to provide more value added with advanced display technology that comes from its recent acquisition of Sharp, for example, according to CLSA analyst Chen. That added value will improve the profit margin for Foxconn in the EV business, he says.

While Taiwanese companies don’t have a significant presence in the EV business today, they have considerable potential, according to FCC Partners’ Huang.

“EVs are very different from traditional automobiles, where it’s mainly mechanical engineering. In the case of EVs, two-thirds of the components are electronic. And that is what Taiwanese are especially good at.”

“EVs are very different from traditional automobiles, where it’s mainly mechanical engineering. In the case of EVs, two-thirds of the components are electronic. And that is what Taiwanese are especially good at.”

A model of the MIH kit platform.

 

This article was originally published on EE Times.

Alan Patterson has worked as an electronics journalist in Asia for most of his career. In addition to EE Times, he has been a reporter and an editor for Bloomberg News and Dow Jones Newswires. He has lived for more than 30 years in Hong Kong and Taipei and has covered tech companies in the greater China region during that time.

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