Foxconn Enters Post-Gou Era With Challenges For New Management Team

Foxconn Technology Group has entered a new era after its new chairman Young Liu, who replaced Terry Gou, and a newly-formed nine-member operation committee officially took office July 1. But the new management team will face a spate of challenges over how to steer business upgrades and transformations for the post-Gou business empire.

Gou stepped down at a June 21 shareholders meeting to facilitate his bid for Taiwan’s presidency, but remains a member of Foxconn’s new board of directors. His successor Liu is concurrently chairman of Foxsemicon Integrated Technology and general manager of Foxconn’s S Subgroup dedicated to semiconductor development. Liu’s deputy on the board is Lee Chieh, vice chairman of Foxconn Industrial Internet.

Both Liu and Lee are also among members of the new operation committee formed to coordinate operations of the 12 subgroups under Foxconn and make strategic decisions for approval by the board of directors. Their new roles in Foxconn highlight the group’s efforts to deepen deployments in semiconductor and industry IoT (IIoT) development to strengthen vertical integration of its business operations in diverse domains and meet growing demand for Industry 4.0 smart manufacturing capabilities.

Integrate resources of 12 subgroups

One of the major challenges facing the new management team is how to better and faster integrate the resources of Foxconn’s 12 subgroups, each of which pursues its own profits and revenues, and maps out its own business development and transformation. This may lead to overlapped investments, which, however, can be partly addressed with IIoT that can faciliate production and share production data among different assembly lines.

In the IoT era, the changing consuming patterns will be accompanied by growing demand for product differentiations, thus drastically pushing up the ratio of customized production. This is another big challenge to Foxconn long engaged in production of devices in massive volumes.

FIH Mobile, Sharp

Meanwhile, business performances of its subsidiaries or re-invested firms, especially FIH Mobile and Sharp, will greatly affect the overall revenue and profit performances of Foxconn, and how to improve their performances is a crucial task for the new management team.

FIH Mobile, long engaged in contract production for smartphone vendors in the Android camp, including Huawei, Xiaomi, Nokia, and Oppo, has suffered operating losses for two straight years due to declining gross margins, price fluctuations for handset components, and forex losses. The company posted a net loss of US$525 million in 2017 and the loss expanded to US$857 million in 2018 despite significant revenue increases.

As a Foxconn’s re-invested affiliate in Japan, Sharp has seen a significant turnaround in operating performance, but what counts more is how to commercialize advanced technologies held by the company and make its terminal products and services more competitive after incorporating new technologies and applications. It is also imperative to leverage Sharp’s R&D prowess to boost Foxconn’s R&D momentum in imaging, communications, cloud, AI and robot domains.

Biggest external challenge

Also, Foxconn and its operation committee have to counter global economic uncertainties and volatile industry environments amid the US-China trade conflicts, which is the biggest external challenge for the committee at present.

As the world’s largest contract maker of consumer electronic devices with 75% of its production capacity located in China, Foxconn will have to work out solutions to best allocate and leverage its global manufacturing resources to deal with economic uncertainties, facilitate digital transformation of its production lines with the assistance of IIoT, and meet post-globalization demand for localized, flexible and customized production.―Digitimes

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