Foxconn began to move toward the front desk of Guo Ting-ming in the next round of what kind of chess

Reporter Zhang Si intern reporter Wang Xingping intern editor Xie Jinchi

Since Foxconn acquired Sharp, every decision made by Sharp will make its new owner, Foxconn, attract much attention. The acquisition of Sharp is only a part of Foxconn’s exploration of upstream terminals.

Looking at a series of Foxconn initiatives in recent years, whether it is the acquisition of Sharp, competing for Toshiba flash memory business, or continue to spread the news of investment and construction in the United States, let the world's largest foundry business from behind the industrial chain to the front desk. Foxconn's diversified layout is not only a matter of seeking independence from the OEM industry line, but also a desire to establish a self-service brand and transform it into a service technology company.

For Foxconn's frequent distribution, household appliance industry observer Liu Buchen believes that this is Gou's hope that the whole industrial chain will undergo a strategic transformation from the "Hon Hai of manufacturing" to the "Hon Hai of access."

Crazy layout

Today's Sharp has already faded from the coats of Japanese companies and joined the family of Hon Hai (Foxconn parent company), who was stamped by Gou. This "marriage" experienced four years of running-in before and after, but at the same time, it also allowed Guo Ting-ming, who had passed 60 years, to abandon the happiness of his family and embark on the "second spring" of entrepreneurship.

In fiscal 2016, Sharp suffered a loss of about 25 billion yen (approximately 228 million U.S. dollars). In 2017, operating profit is expected to increase 44% year-on-year to 90 billion yen (approximately 821 million U.S. dollars), and finally achieve a profit of 59 billion U.S. dollars. Yuan (about 538 million U.S. dollars). Behind these achievements, it proves that Sharp has transformed from a strategic defensive to a strategic offensive since Foxconn entered the game.

In May this year, after the mobile phone was announced to return to the Chinese market, on June 6, Sharp released a new series of AQUOS LCD TVs. This is the first time that Foxconn has launched a new TV after the marriage of Sharp. At the same time, it also means Sharp's return to the Chinese market. Earlier this year, Sharp announced a high-profile announcement that its TV shipments worldwide in 2017 will be raised from the original planned 10 million units to 14 million units.

Fast profitability is the top priority for Gou to take over Sharp. But for Gou, his expectations do not stop there. “Let Sharp make profits as soon as possible, because it was because of Sharpe's acquisition of Sharp, but also because of Sharpe’s rapid rejuvenation to fill in the shortcomings of Foxconn’s own brand as soon as possible.” Home appliance industry observer Liu Buchen interviewed by “Daily Economic News” reporter Said.

After spending four years and spending 10 billion, Gou's enthusiasm for purchasing Sharp's acquisition is almost proportional to Foxconn's transformation. In other words, Terry Gou needs Sharp's locomotive. When Foxconn acquired Sharp, Gou said that he hopes to use Sharp, a famous brand established over the past 100 years, to build Foxconn as an innovator of respected high-tech consumer electronics products.

It is worth noting that in May 2016, Foxconn acquired Nokia's feature phone business for US$330 million. "This transaction is Fu Zhikang (Foxconn Subsidiary) acquiring the manufacturing, sales and distribution division of Microsoft's mobile phone business. For Foxconn, it can immediately occupy Nokia's sales platform for professional sales and distribution departments in 40 to 50 countries around the world. With channels, paving the way for Foxconn's transformation services technology company, said Fu Wenkang’s chairman, Tong Wenxin, to the media.

Buying and buying did not stop. On June 4, 2017, Terry Gou told the media that the company will team up with Apple and Amazon to bid for Toshiba's memory chips (flash memory) business. However, at present, this acquisition may face out. According to a report by the Japanese Kyodo News Agency on June 24, Toshiba expects to formally sign a contract with the priority negotiating parties of the US, Japan and South Korea on June 27 to sell its semiconductor subsidiary Toshiba Memory.

In addition, in addition to upgrading the brand and technology of consumer electronics products, Terry Gou has long extended his reach into areas such as shared travel, e-commerce, cloud computing, robotics, artificial intelligence, and financial services.

As the world's largest foundry company, successively deploying the downstream terminal market and the Internet market has made Foxconn from the rear of the industrial chain to the front desk. Every time the layout is a one-off, how does the final game appear? "Now Foxconn's development model is actually more inclined to Samsung's development model." Liu Buchen believes that in the future Foxconn will no longer rely on the single worker's leg to walk, but will rely on OEM and hardware manufacturing to walk on two legs.

The difficulty of profit

Earlier this year, Foxconn’s parent company, Hon Hai, announced its 2016 full-year revenue performance, which was NT 4.35 trillion (approximately US$136.38 billion), a decrease of 2.81% compared to 2015.

This is Hon Hai’s first revenue decline since its listing in 1991. From the monthly data, except for the increase of 2.22% in the third quarter, the rest of the quarter saw a decline.

The biggest reason for the decline in profits is because of Apple. As of now, Apple is the most important customer of Foxconn and contributes about half its revenue. As an important role in Apple's supply chain, Foxconn's fluctuations in iPhone shipments are directly reflected in its revenue and profits. In the second quarter of 2016, Hon Hai saw a decline in revenue and profit. According to the financial report, due to the impact of the decline in iPhone sales in mature markets, Hon Hai’s net profit for the second quarter ended June 30, 2016 It was NT$17.7 billion, a decrease of 31% compared to RMB25.7 billion in 2015.

"For Foxconn, the horizontal and vertical OEM industry lines are overly dependent on orders from single big companies such as Apple, and they have always wanted to get rid of Apple's dependence on OEM business." Industry watcher Hong Shibin accepts " Daily Economic News, an interview with reporters, said that whether it is the acquisition of Sharp, or bidding for Toshiba's flash memory business, are only part of the Foxconn industry chain. Prior to the acquisition of Sharp, it was fancy Sharp's excellent LCD panel technology, which developed downstream mobile phone, TV and other terminal independent brand market, and the acquisition of Toshiba means that Foxconn would like to take this opportunity to enter the flash memory business. If Foxconn wins the Toshiba flash memory business, it will be able to obtain lower raw material procurement costs for terminal devices that require flash memory chips, such as mobile phones and smart TVs.

In addition, in the face of rising labor costs, raw material costs, and other upstream costs, Foxconn’s overall performance growth is under great pressure, and Foxconn is also transforming its production technology. As early as 2011, Terry Gou revealed that they will deploy 1 million robots to factories in the next few years.

How does the Red Sea break out?

The purpose of Foxconn’s strong demand for downstream terminals is to combine its own supply chain advantages, but it is worth noting that the brands it acquired and the areas it wants to enter are all competitive Red Sea markets. How to break through the Red Sea is a matter that Foxconn needs to address squarely.

The most typical is the layout of Foxconn in the mobile phone field. "After Foxconn entered the game, Sharp launched its new mobile phone may be because it already includes mobile phones in Sharp's original business category. For Nokia phones, similar to Lenovo's acquisition of Motorola, may be more because Nokia is in the hearts of consumers. Image." Liu Buchen said.

Recently, the “China Mobile Phone Market Operation Analysis Report for May 2017” released by the China Academy of Information and Communication Technology shows that in May, the domestic mobile phone market shipments were 37.370 million units, down 25.5% year-on-year; 127 new models were listed, up Increased by 8.5%. From January to May, the domestic mobile phone market shipped 197 million units and 468 new models were launched, which were 5.9% and 25.1% lower respectively year-on-year.

Prior to the launch of Sharp's new mobile phones, Luo Zhongsheng, general manager of Sharp's mobile phone division, said that the market is still in space. However, Wang Yanhui, secretary-general of the Mobile China Alliance, said in an interview with the "Daily Economic News". “The domestic market has a big pattern. Sharp has just returned to China and it is difficult to get up in the short term.”

To take over Sharp, a brand competing in the Red Sea, Foxconn has anxious to get rid of the pressure of a loss-making quagmire, but is low-cost impulse this way desirable? “For the Red Sea areas such as mobile phones and televisions, the only thing that can make Foxconn break through is to carry out technological innovations and launch new products. However, how to maintain the original brand's feelings in the minds of consumers can also launch subversive products. This is what Foxconn needs. Take the thought into consideration." Liu Buchen said.