Date
23 September 2017
Apple's new iPhones are flying off store shelves but for Terry Gou, chairman of Foxconn that makes the smartphones, this is both good and bad news. Photos: Bloomberg
Apple's new iPhones are flying off store shelves but for Terry Gou, chairman of Foxconn that makes the smartphones, this is both good and bad news. Photos: Bloomberg

Why iPhone 6 success is bittersweet for Foxconn

By all indications, Apple Inc.’s new iPhones are a huge success at the till.

Early reports say the iPhone 6 and iPhone 6 Plus continue to tear through online subscription channels and sales counters after a record four million pre-orders on the first day.

In Hong Kong, an iPhone 6 Plus with 128 gigabytes of memory is changing hands at a mark-up of as much as HK$20,000 (US$2,850) in the black market, according to the Hong Kong Economic Journal, parent of EJ Insight.

The frenzy is reportedly being driven by speculators from mainland China, where the iPhone 6 will not be available until after two rounds of launches elsewhere.

The sales figures are no doubt great news for Apple chief executive Tim Cook, and we can expect it’s being received with as much excitement at Foxconn Technology, the Taiwan manufacturer which makes most Apple products including the iPhone.

But Foxconn chairman Terry Gou may be having mixed feelings about this.

Reason: he has been trying to reinvent Foxconn into a technology business that makes its own products, instead of being an original equipment manufacturer (OEM) for other companies.

That makes Apple’s success bittersweet for Gou because the more Foxconn and Apple are entwined, the harder it is for his company to diversify.

For instance, up to 80 percent of the 4.7-inch iPhone 6 and all of the 5.5-inch iPhone 6 Plus were produced by Foxconn, according to Securities Daily, citing US consulting firm iSuppli.

A small number was manufactured by rival Pegatron.

More than 80 million iPhone 6 handsets are expected to ship this year, rising to 200 million in 2015, according to estimates.

That would mean that if Foxconn is still doing OEM for Apple by then, which is more than likely, increasing production capacity would be a priority.

In, Zhengzhou, Foxconn has built a massive factory complex covering 6.5 million square meters, the size of a small town.

In neighboring Shanxi province, it operates a sizable plant in Taiyuan, the provincial capital.

The two plants replaced Foxconn’s outdated Shenzhen factory which had operated the main assembly lines for iPhones.

Gou’s most recent attempt at diversification came in the past 12 months when he launched self-branded smartphones and home appliances and combined with brick-and-mortar vendors such as Metro to go into retail and e-commerce.

At the same time, he modernized his assembly lines by deploying robots, shedding a big number of workers in the process and getting around a crippling labor shortage in one fell swoop.

The Wall Street Journal estimates that Foxconn has reached peak production of 540,000 new phones per day.

Whether Gou’s diversification initiative is going according to plan remains to be seen.

But one thing is certain: he will have to keep pushing out great numbers of iPhones much as he wishes he was cranking out his own smartphones.    

– Contact the writer at [email protected] 

RA

Customers wait in line outside an Apple store ahead of the company’s iPhone 6 and iPhone 6 Plus launch in Hong Kong. Photo: Bloomberg


EJ Insight writer

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