Taiwan’s tour de force: Terry Gou’s Foxconn
Founded by the outspoken Taiwanese businessman Terry Gou, Foxconn opened its first computer components factory in Shenzhen in 1988. It came to global attention because of its work as a contract manufacturer in consumer electronics, assembling products for the likes of Sony, Microsoft and Apple. At the height of the iPhone boom five years ago, it was said to be making 137,000 phones a day for the Californian tech giant – or about 90 a minute – at its main Shenzhen production base.
Foxconn’s output per minute of iPhones at its peak production level five years ago
But Foxconn spurred more horrific headlines when 14 of its workers killed themselves in a short period, some of them jumping to their deaths from the factory roof. The tragedies stirred an international debate about its “military-style” management and long working hours, which were heavily criticised by labour groups. This also led to questions for its core customers, with Apple boss Steve Jobs defending Foxconn, pointing out that it employed hundreds of thousands of workers, and that suicide rates among its workforce were below China’s national average.
“Foxconn is not a sweatshop,” Jobs added. “They’ve got restaurants and swimming pools… For a factory, it’s a pretty nice factory.”
Occasionally, Gou hasn’t helped matters with what sounds like a cavalier attitude towards his staff. For example, at one public event he quipped to an official from Taipei’s zoo: “Hon Hai [Foxconn’s holding company] has a workforce of over one million people worldwide and as human beings are also animals, to manage one million animals gives me a headache.”
Foxconn says Gou is often quoted out of context, and it complained that the fatalities at its factories were sensationalised in the media.
It counters that it offers some of the best working conditions in China, which soon became apparent to the government when it sent hundreds of officials to check Foxconn’s production lines.
“They originally wanted to publish the investigation results, but a minister I won’t name said they couldn’t,” Gou has insisted. “If they did, at least 95% of China’s factories wouldn’t have been able to reach the standards we met.”
Like other contract manufacturers, Foxconn has been trying to shift away from assembling products that other companies design towards developing components and brands of its own. Analysts say that Gou is also keen to reduce its reliance on Apple, which accounts for as much as half of its revenues. The plan is an overhaul of the business to focus on areas like cloud computing, mobile devices, the Internet of Things and the production of smart robots.
Gigantic new factories like the one near Guiyang, the capital of Guizhou province, are another of Foxconn’s models for its future, which will see more manufacturing activity outside Guangdong, and lower costs for land and labour.
Gou has promised that investors will start to see the results of Foxconn’s transformation plan this year. And in the most visible sign of its quest to reinvent itself, Foxconn has also bid $5.5 billion for the electronics group Sharp, which makes screens for iPhones. Analysts say that Gou wants Sharp’s liquid-crystal display technology, and that a takeover of the struggling Japanese firm might give him more leverage in his contract negotiations with Apple.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.