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Apple iPhone supplier Foxconn, officially generally known as Hon Hai, said its semiconductor strategy is to focus on producing “specialty chips” — not competing in cutting-edge chips.
“We do not chase [after] essentially the most advanced technology. Hon Hai will not compete with vanguard players like 4-nanometer or 3-nanometer. We focus more on specialty technology,” Chiang Shang-Yi, chief strategy officer for semiconductor at Hon Hai Technology Group, told CNBC’s Emily Tan on Tuesday.
Specialty chips are generally known as semiconductors present in sectors reminiscent of automotive and web of things. Chips for automotive uses are typically made using mature technology – 28-nanometer or larger chips.
“Nanometer” in chips refers to the dimensions of individual transistors on a chip. The smaller the dimensions of the transistor, the more powerful and efficient it’s, nevertheless it also becomes tougher to develop.
The likes of Taiwan’s TSMC and South Korea’s Samsung are sprinting toward producing the highly advanced 2-nanometer and 3-nanometer chips. Samsung has already said it’s going to mass-produce 2-nanometer chips by 2025, after the corporate began producing 3-nanometer chips in June last 12 months.
“If we tried to chase 3-nanometer, 2-nanometer, we’re way too late. The best way we’re working on [is to] just try to manage the availability chain. And we call it specialty technology – that’s not late in any respect,” said Chiang.
Our strategy is we attack all.
Jun Seki
Hon Hai’s chief strategy officer for EVs
Hon Hai Technology Group is the world’s largest contract electronics manufacturer that assembles consumer products like Apple’s iPhones. But within the last couple of years, the Taiwanese firm has made its foray into semiconductors and electric vehicles.
When it comes to EVs, Chiang said the focus lies in power devices and silicon carbide chips — increasingly a fabric of selection amongst EV-makers, thanks to its higher efficiency at higher voltages common in EVs.
Foxconn first announced EV prototypes in 2021 made by Foxtron, a enterprise between Foxconn and Taiwanese automobile maker Yulon Motor.
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Foxconn currently only produces a small variety of EVs, but has set an initial goal of capturing a 5% market share globally by 2025, according to Reuters.
“Once we [talk] about EV business, now we have a component business. We’ve got a platform business. We’ve got a [CDMS] business: contract, design and manufacturing services,” said Jun Seki, Hon Hai’s chief strategy officer for EVs, told CNBC in a separate interview.
“Our strategy is we attack all. Component module platform makes our cost very competitive. That is an area that makes traditional auto OEMs profitability very poor, he said referring to original equipment manufacturer, that are products sold to other firms as components.
We’ve got slightly little bit of every part. There’s reason for that. For those who do slightly bit in every part, what is going on on in that area.
Chiang Shang-Yi
Chief strategy officer for semiconductor
“Sometimes we could have to construct their cars by their drawings. If our customers may give a probability to us, we are able to construct our ideas into their cars, then we are able to make customers more competitive,” said Jun.
Nevertheless, the worldwide EV market is simply getting more competitive.
China, Europe and the U.S. are major players when it comes to electric cars. From third-quarter 2021 to second-quarter this 12 months, the highest three players – Tesla, BYD and Volkswagen – held 42% of the worldwide EV market, according to Counterpoint Research.
Tough entry into chips
Foxconn’s foray into semiconductor has had a tricky start, pointing to the problem for brand new players to enter a market dominated by firms with extensive experience and a highly intricate supply chain.
Earlier this 12 months, Foxconn pulled out of a three way partnership with Indian metals-to-oil conglomerate Vedanta to arrange a semiconductor and display production plant in India as a part of a $19.5 billion deal.
“You call it a failure, but I do not think it’s finalized yet. I believe we learnt through the way in which how we interpret, how we work with the federal government. Thus far, the federal government remains to be not making a choice yet. So I’ll not call it a failure at this moment. We’re all still trying to work with the federal government, to find ways so the federal government will support our proposal,” Young Liu, Hon Hai’s CEO and chairman, told CNBC.
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In August, the federal government of the state of Karnataka in India said Foxconn will pump in greater than $600 million to construct a phone manufacturing project and a separate semiconductor equipment facility.
India could account for 20% to 30% of Hon Hai’s manufacturing, which is “very similar to China,” Liu said.
This comes as Foxconn began diversifying production away from China amid persistent tensions between Beijing and Washington.
“We have been working with countries like India, Indonesia and Thailand. They’re all going quite well,” the CEO said. Foxconn is exploring cooperation with Indonesia and Thailand EV-related firms.
He added that Hon Hai “very much focus on all the supply chain,” he added. “There’s reason for that.”
“For those who do slightly bit in every part, what is going on on in that area. Like everyone knows, two years ago, there’s an enormous shortage in chips and lots of cars can’t be shipped because they lack chips. And this case, Hon Hai may have a greater idea because we’ll know what is going on on. And we give us more lead time to try to manage them,” said Chiang.