The Taiwan-based Foxconn Tech Group is ramping up its investment for engagement in semiconductor and chip-making sector, in an effort to reduce dependence on smartphone manufacturing and expand its portfolio as the development of global smartphone market is slowing down.
Apple’s major suppliers of components and parts have reduced their revenue expectation partly due to the lower-than-expected sales of the newly launched series XR amid fierce competition.
As the biggest assembler of iPhone series, Foxconn plans to cut expenditure of 20 billion yuan ($2.9 billion) in 2019 as it faces “a very difficult and competitive year”, according to Bloomberg.
The company is reportedly in talks with municipal government of Zhuhai City, South China’s Guangdong Province, to build a chip plant in which about $ 9 billion will be invested.
An assembly line at Foxconn’s factory [Photo/thehour.cn]
Most of the investment would be provided by Zhuhai government in the form of subsidies and tax breaks, according to Nikkei Business Daily.
A report of Nikkei also said Foxconn plans to begin construction as early as possible, say, 2020 at the earliest. However, the company didn’t comment on this.
In August, Foxconn and the Zhuhai municipal government signed a strategic cooperation agreement, according to which the partners would conduct collaboration in chip and semiconductor design.
Foxconn’s move comes as China is nurturing its domestic semiconductor, in a bid to wean itself off over-dependence on foreign technologies.
Foxconn has been interested in chip business, however, insiders said, chip manufacturing industry has a relatively high threshold for players to tap, in addition, the industry requires huge capital expenditure and a big pool of experts.
Foxconn may have difficulty in chip design, and the easiest solution is to acquire some semiconductor companies, said James Yan, research director at Counterpoint Technology Market Research, adding, Foxconn can enhance its bargaining power if it hones itself successfully for semiconductor design and manufacturing.
Foxconn is the largest contract manufacturer in the world. It acquired Japanese electronics maker Sharp Corp in 2016. Sharp has experience in chip manufacturing. However, it stopped the development of semiconductor technology in 2010 due to financial issues.
Foxconn previously attempted to acquire the flash memory chip business of Japanese semiconductor conglomerate Toshiba Corp, however, Toshiba still has its own ambitions in semiconductor sector.
Strength of Foxconn lies in its experience in assembling and manufacturing electronic components and precision instrument. And Foxconn’s previous business has much relevance with semiconductor sector.
The reality is that, Foxconn lacks talents for operation in semiconductor field and need a partner, said Sean Yang, an analyst with industry consultancy CINNO Research.