Foxconn: Behind the Scenes

Monday, August 13, 2007 9:13

A few years ago while working on a project for a global OEM in the construction equipment industry, I spent a week at the Bauma show in Shanghai interviewing 70+ OEMs and component suppliers who were showing off their products. It was a very tiring week, but what I came away with was that this was an industry that would one day be dominated by Chinese OEMs. There were already 4-5 very strong Chinese firms with in-house technologies, but more importantly maybe only 2-3 of those would have been considered a threat by the likes of Caterpillar, Kobel, Cummins, Bobcat, Parker Hannifin, or any of the other global OEMs (including my client).

Terry Gou

Many of the firms were flying under the radar while they collected technologies, built service platforms, and entered 3rd markets in Africa, India, and Eastern Europe. the advances were measured, the splashes caused few ripples, but once the market was lost… it was lost forever. for these firms, the element of surprise was key, and critical to that was ensuring that the visibility into their companies was kept to a minimum.

For the 56 old Founder of Hon Hai Precision Industries, Terry Gou, flying under the radar was also his M.O. for many years.

Foxconn5 years ago, Solectron, ITT Industries, and Flextronics would have probably said much the same about the Taiwanese Hon Hai Precision Industrial Co (AKA Foxconn), who now is larger than Solectron and Flextronics combined, but is still a company most consumers do not fully appreciate when they fire up a Dell computer, play tennis on the Nintendo Wii, or make a call on their new iPhone.

According to Jason Dean’s article in the WSJ entitled The Forbidden City of Terry Gou (subscription)

In an era when manufacturing has been defined by outsourcing, no one has done more to shift global electronics production to China. Little noticed by the wider world, Mr. Gou has turned his company into China’s biggest exporter and the world’s biggest contract manufacturer of electronics.

One of the most interesting anecdotes I found was about the lengths Mr. Gou went to in order to get the ear of Michael Dell.. and what happened after

In 1995, when Michael Dell was visiting southern China, Mr. Gou offered to arrange meetings with local officials he knew in return for the chance to drive the 30-year-old American to the airport, says Max Fang, who was then Dell’s head of procurement in Asia. On the way, Mr. Gou made an unscheduled detour to show off his factory.

Dell then wasn’t one of the world’s top five PC vendors, and Hon Hai didn’t yet make parts that Dell bought directly. But Mr. Gou “knew that Michael Dell was a star of tomorrow, so he wanted to meet him,” says Mr. Fang, who has known Mr. Gou since 1979. Today, Hon Hai is one of Dell’s biggest suppliers, analysts and industry sources say. Mr. Gou keeps a photograph of Dell’s founder on a shelf in his Taiwan office.

A must read, this article goes further than any report to date in detailing the history of Foxcon, its clients, and its executives, and I highly suggest everyone take the time to read it is a case study on one of Asia’s most successful companies.

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One Response to “Foxconn: Behind the Scenes”

  1. Mike says:

    August 13th, 2007 at 8:24 pm

    This sounds like the typical Chinese:

    Do your research. Do anything you can to get in front of them. Make friends and see what happens later.

    Well, i guess its all business in general!