The FOXCONN Industrial empire

Posted on September 11, 2010


Foxconn was thrown into limelight in May 2010 when several cases of workers suicides were reported. Foxconn is the world largest manufacturer of electronics and computer components worldwide and mainly manufactures on contract to other companies. Foxconn produces the Mac mini, the iPod, the iPad, and the iPhone for Apple Inc.; Intel-branded motherboards for Intel Corp.; various orders for American computer manufacturers Dell and Hewlett-Packard; motherboards for UK computer manufacturer Zoostorm; the PlayStation 2 and PlayStation 3 for Sony; the Wii for Nintendo; the Xbox 360 for Microsoft, cell phones for Motorola, the Amazon Kindle, and Cisco equipment.

The 8 page article written by Frederik Balfour and Tim Culpan of Businessweek give us an interesting insight into the company and Terry Guo the founder  behind this hegemonic industrial enterprise  :

Some excerpts :

Foxconn is now the biggest exporter out of China, and its general is the richest man in Taiwan, estimated by Forbesto have a personal fortune of $5.9 billion. He says he cannot confirm that figure, however, as he does not keep track. “I have one guy in charge,” Gou says in heavily accented English that he picked up while touring the U.S. in the 1980s. “Every year he gives me a piece of paper and says, ‘Hey, this is how much.’ I think for me, I am not interested in knowing how much I have. I don’t care. I am working not for money at this moment, I am working for society, I am working for my employees.”

The colossus that Gou (pronounced “Gwo”) runs today started with a $7,500 loan from his mother. His first world headquarters was a shed he rented in 1974 in a gritty Taipei suburb called Tucheng, which means Dirt City in Mandarin. Gou, then 23, had done three years of vocational training and served in the military. He then worked for two years as a shipping clerk, where he got a firsthand view of Taiwan’s booming export economy and figured he ought to stop pushing paper and get into the game. With the cash from his mother, he bought a couple of plastic molding machines and started making channel-changing knobs for black-and-white televisions. His first customer was Chicago-based Admiral TV, and he soon got deals to supply RCA, Zenith, and Philips (PHG).

Imagining his future success, he practiced signing his name in English over and over until he had perfected it. He remains proud of it today, walking over to a whiteboard during the interview and signing with a schoolboy flourish.

To sustain an efficient Chinese workforce, Gou quickly discovered that he had to provide housing, food, and health care, additional costs that kept most of his competitors out of the country. He had to do everything himself.

The flagship of Foxconn Technology Group, as part of an effort to mend the collective psyche of a Chinese workforce that numbers more than 920,000 across more than 20 mainland factories. The need to do so became apparent after 11 Foxconn employees committed suicide earlier this year, most of them by leaping from company-owned high-rise dormitories. The publicity-averse Taipei-based company and its 59-year-old founder and chairman, Terry Gou, were thrown into the spotlight, subjected to unfamiliar scrutiny by customers, labor activists, reporters, academics, and the Chinese government.

The suicides introduced Foxconn to much of the world in the worst terms imaginable—as an industrial monster that treats its workers like machines, leveraging masses of cheap labor, mainly 18-to-25-year-olds from rural areas, to make products like the iPhone at seemingly impossible prices.

Foxconn’s business has evolved to the point where it’s not just relying on cheap, unskilled labor. It now employs 50,000 toolmakers, including a team of 2,000-plus workers who focus on the design and fabrication of molds and dies. This enables the company to boost production faster than anyone else, especially important in the handset market where new models are constantly introduced. “If you want to look under the hood at Foxconn and understand why they have a high market share, it’s because of these things,” says Jason Dedrick, associate professor at the School of Information Studies at Syracuse University.

To understand how diversified Foxconn’s supply chain is, pry the back off a Nokia 1209 handset. The plastic casing is molded by Foxconn Technology. The speaker is made by Hon Hai Precision, as are the keypad and printed circuit-board connector. The printed circuit board is made by Foxconn Advanced Technology. The TFT LCD screen is made at Chimei Innolux, an affiliate 2.7 percent-owned by Gou. In all, about 70 percent of the phone’s components are made by a Foxconn- related company.

My previous posts about Foxconn :

Posted in: Business, Economics