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When Foxconn, Apple’s main iPhone maker, said it was getting into the electric car business in 2020, its strategic shift made perfect sense. Contract electronics manufacturing is a relentless, low-margin business, and rumours had been swirling that Apple was developing its own electric vehicle. If Foxconn could apply its mass-production expertise to cars, it could future-proof itself against an increasingly commoditised consumer electronics industry.
Today, Foxconn, the world’s largest contract electronics manufacturer, is considering taking this strategy one step further. It has confirmed interest in acquiring a stake in Nissan aimed at co-operation.
Nissan certainly needs the help. Its merger talks with Honda have officially fallen through, leaving the Japanese carmaker with deeper uncertainty about its future. For Foxconn, co-operating with Nissan would be a rare opportunity to gain manufacturing expertise and market access.
Foxconn has been making progress in its EV ambitions. It has struck an agreement with Stellantis to design car chips and is investing in building its EV battery supply chain. Its initial target of capturing 5 per cent of the global EV market by 2025 would have meant a potential revenue boost of about $31bn — a significant figure given its $210bn in revenue last year.
Yet, many of its production initiatives remain in the early phases, with meaningful market share growth still elusive. The clearest indication of the challenges it faces is the fact that it has delayed its EV market share target. The pushback highlights not only weaker than expected demand but the inherent difficulties of shifting from consumer electronics to the capital-intensive, slower-moving world of carmaking.
Looming tariffs add to the risk. US President Trump announced, then temporarily paused, a 25 per cent tariff on all US imports from Mexico and Canada. While Foxconn has been expanding its manufacturing footprint to include the US, a significant portion of its operations remains concentrated in China and Mexico. Moreover, its heavy reliance on US clients, most notably Apple, makes it particularly vulnerable to shifts in trade policy and supply chain disruptions.
Shares of Hon Hai — the name under which Foxconn is listed in Taiwan — are up 80 per cent in the past year. But the rally is driven not by EV ambition so much as strength in its artificial intelligence server, cloud and networking products division, still the company’s main growth engine.
The potential partnership with Nissan would provide Foxconn with valuable industry experience. Nonetheless, EVs are capital intensive and fiercely competitive. It is up to Foxconn to ensure this move is remembered as clever expansion, not value-destructive mission creep.
june.yoon@ft.com
