Foxconn revamps leadership, unveils ‘agile’ plan to minimize tariff impact

3 min read
Screenshot of Foxconn’s first investors conference in Taipei on June 11, 2019. (Image credit: TechNode)

Foxconn, the world’s largest electronics manufacturing contractor and China’s biggest private sector employer, announced significant organizational changes in a conference on Tuesday as its founder, Terry Gou, prepares to run in Taiwan’s 2020 presidential election.

The company also sought to reassure investors that a plan to expand its manufacturing capacity outside China is at the ready should US-China trade tensions affect its supply chain. Chairman of Foxconn’s telecom business Sung-Ching Lu said at the conference that the firm is ready to expand its international factories should tariffs render products made in China too expensive in the US.

In its first investor conference in Taipei, the Taiwan-based conglomerate announced that it is forming a new leadership committee to make major business decisions. It also outlined an “agile” plan to deal with the escalating US-China trade war and the rise of artificial intelligence (AI).

Foxconn revealed the long-awaited news of a nine person “operation committee” which will make decisions on major business matters, overseen by the board of directors. More executives will participate in daily operations under the new structure. Gou announced his candidacy in the upcoming Taiwanese presidential elections in April and has said that he will step down from the board of directors when a new board is elected in June.

Foxconn’s stock price has fallen by more than 7% since Gou, known to be an aggressive businessman, announced his resignation.

The Taiwanese firm also said it will be holding investors conferences twice a year to increase transparency. One of the members of the operation committee could eventually replace Gou on Foxconn’s board of directors. The committee will include executives from many of Foxconn’s units, such as Foxconn CFO Chiu-Liang Huang and Zheng-Hui Ling, head of Foxconn’s giant iPhone-assembling facility in central China.

Its youngest member is Young-Way Liu, 63, who has led Foxconn’s budding semiconductor business and is a board member at Sharp Corp, the Japanese electronics manufacturer Foxconn acquired in 2016, as well as Terry Gou’s former assistant. Due to his personal relationship with Gou and his relative youth, there is speculation that he could replace Gou on the board.

The 5G arm will be led in the committee by Fang-Ming Lu, corporate executive vice president of Foxconn, and Sung-Ching Lu will lead the charge in electric vehicles (EV) manufacturing.

Foxconn manufactures electronics for some of the world’s largest tech firms, such as Acer, Hewlett-Packard, Xiaomi, Sony, Blackberry, Nintendo, and Huawei. It makes popular products such as Amazon’s Kindle and Apple’s iPhone. More than China, it has factories across South and North America, eastern Europe, Australia, and Asia, including in its home of Taiwan.

But the company is facing headwinds. In the last year, Foxconn stock has lost 20%  of its value, and has fallen to the lowest level seen since early 2014.

A big part of Foxconn’s business are iPhones, and Apple’s flagship product has seen its market share in the US shrink in 2018 to 15.8% from 17.9% in 2017, according to research intelligence firm Gartner. The new 25% tariffs on Chinese goods announced by the White House could render iPhones prohibitively expensive in the US, but Foxconn has a plan.

“If Apple needs us to move our supply chain, we can do that with the fastest speed. US-China relations are changing dramatically and we are closely monitoring them, and so does Apple,” (our translation) Liu said at the conference.

“We have been seeing some of the orders [for Apple products] are shifting [from one country to another], but as long as the global consumption level maintains, it won’t affect our business,” Liu added.

In January 2019, Foxconn announced it would be investing  more than $200 million in India and Vietnam, shifting production away from China as rumors of new tariffs began heating up.

The new tariffs have not affected the growth of its network products, Sung-Ching Lu said at the conference.

With additional reporting by Rachel Zhang.