Taiwanese electronics giant Hon Hai, also known as Foxconn, has had a good run assembling iPhones, but it was always precarious: Apple paid the firm a measly $8 per phone and the company always struggled with labor issues, from suicides to a shortage of low-priced workers. Now that iPhone volumes have dipped and Apple is sending more business to Pegatron, an even lower-priced electronics assembly firm, it’s blindingly obvious that Foxconn needs to diversify.
Here are all the ways that it’s trying to simultaneously branch out to new clients and move up the value chain:
- Foxconn is making a device with software maker Mozilla, most likely a tablet that runs the Firefox operating system.
- It’s also building a factory in the US to manufacture the much anticipated Google Glass wearable computers.
- Who better to build Apple iDevice accessories than the company who builds iDevices? Hon Hai is about to begin making its own branded accessories such as headphones and keyboards, according to the Wall Street Journal, including iPad- and iPhone-specific add-ons.
- At home in Taiwan, it is expanding into high speed internet, cloud services, and possibly 4G data spectrum.
- Foxconn recently bought a stake in TV maker Sharp and invested in a US maker of wearable high-definition video cameras.
- It is also building factories in Brazil and Indonesia and operates an online and retail outlet chain in China called CyberMart.
- Foxconn also has aims to supply digital content for the smartphones, tablets and wearable computers it assembles.
Each of these expansion strategies poses significant challenges.
Part of the reason that Foxconn’s growth has slowed is that major clients like Apple, HP, and Nokia are selling products in mature markets. Adding a new competitor in the form of a former supplier won’t change that dynamic, and may indeed sour relations with Foxconn’s existing customers—especially if they are worried about the inherent conflict of interest.
Selling apps and media content falls way beyond the firm’s hard-won expertise in building objects in the real-world, while maintaining high quality standards and eking out razor-thin profit margins. It’s also a very crowded field.
It may be the accessories business that offers the most promise. Foxconn is perfectly positioned to glean valuable information about upcoming product releases from its electronics clients—one can imagine that it was among the first to know that Apple was ditching the well-established iDevice connector for a totally new plug in the iPhone5, for example. And Foxconn’s ability to squeeze out the slightest of profits from a high-volume business should put it in good stead in the brutally competitive world of after-market gadget accessories.
The volumes from cases, keyboards, headphones and rest may never reach the heights of the iPhone glory days. But such is life in the constantly disrupted technology industry.