Apple iPhone supplier Foxconn, also known as Hon Hai, has revealed its semiconductor strategy, focusing on producing “specialty chips” instead of competing in cutting-edge chip technology. Chiang Shang-Yi, the chief strategy officer for semiconductor at Hon Hai, stated that the company does not chase after the most advanced technology, but rather focuses on specialty technology found in sectors such as automotive and the Internet of Things.
Specialty chips are typically made using mature technology, such as 28-nanometer or larger chips, and are commonly used in automotive applications. The size of individual transistors on a chip, referred to as nanometers, determines its power and efficiency. While companies like TSMC and Samsung are working on advanced 2-nanometer and 3-nanometer chips, Hon Hai acknowledges that it is not competing in this space. Instead, the company focuses on managing the supply chain and developing specialty technology.
Hon Hai, the world’s largest contract electronics manufacturer, has recently made strides in the semiconductor and electric vehicle (EV) industries. In terms of EVs, the company’s focus lies in power devices and silicon carbide chips, which offer higher efficiency at higher voltages commonly found in EVs. Although Foxconn currently produces a small number of EVs, it aims to capture a 5% market share globally by 2025.
Hon Hai’s strategy for EVs encompasses component, module, and platform businesses, which enables cost competitiveness. By offering these services, the company aims to make traditional auto original equipment manufacturers (OEMs) more competitive. Additionally, Hon Hai’s diversified approach includes building EVs based on customers’ designs and incorporating its own ideas into their cars.
However, entering the semiconductor market has proven challenging for Foxconn, as it faces competition from experienced players with intricate supply chains. Despite setbacks, such as pulling out of a joint venture in India, the company remains optimistic and continues to seek opportunities to collaborate with governments and expand its manufacturing capabilities. Foxconn has started diversifying its production away from China and has been working with countries like India, Indonesia, and Thailand.
Having a diverse supply chain allows Hon Hai to stay informed and prepared for challenges like the recent chip shortage, as they have a good understanding of what is happening across different sectors. This knowledge gives them a competitive advantage and allows them to better manage the supply chain and address potential issues.
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