According to the New York Times, Foxconn is being forced to prepare for life after Apple, following reduced demand for the iPhone and other iOS devices.
The manufacturer has thrived on Apple's huge success in recent years, deriving at least 40% of its profits from it. However, after the Cupertino company's 19.2% drop in profits last quarter due to lower demand for iPhones and iPads, Foxconn is now looking at ways to become independent from Apple.
Foxconn also makes products for Amazon, Dell, HP, Nokia, Sony and several others. However, Apple's success with the iPhone and iPad has led the Cupertino company to become Foxconn's best customer.
But now, Foxconn is looking for ways to make the same profits without being deterred by the decline in demand for Apple products.
One of Foxconn's moves is to start manufacturing its own products. The company has begun designing its own televisions, which are sold under the RadioShack brand in Canada and the Vizio brand in the United States. It has invested up to $840 million in Sharp to secure its large LCD panels.
But as companies like Samsung, Sony and LG know all too well, it's hard to make money from TVs. Global demand for LCD TVs fell 1% in 2012, while overall demand for all TVs fell 6%, according to NPD DisplaySearch.
According to a company spokesperson, Foxconn has sold just 20,000 units in Taiwan so far. However, the company is working with Taiwanese and Chinese channels to offer subsidized TVs, which will of course cost much less when someone buys them with a subscription.
For example, consumers will be able to buy a 60-inch TV for just NT$33,800 ($1,150), provided they pay NT$1,158 per month on a two-year contract. It's like buying a cell phone on a contract.
The problem with making TVs is that Foxconn ends up competing with its customers. Some analysts say the company has two conflicting goals. One is that it doesn't want to compete with Sony, Sharp, and Toshiba because it makes its own TVs, and the other is that it has too many LCD panels that need to be used somewhere.
“So what do you do when you’ve spent $840 million on LCD panels?” says Thomspon Wu, an analyst at Credit Suisse. “You’re just saying I have to decide, either I’m going to make TVs and sell them at a discount, or I’m not going to make them at all.”
Companies in Taiwan do this all the time, according to Kirk Yang of Barclays Asia Technology Research. They sell products at a loss just to get started, and then once sales pick up, they make a small profit.
Some analysts believe that Foxconn bought all these panels because it was waiting for the Apple TV, which was almost certain to be manufactured by Foxconn, but nothing has been heard about it yet.
The big bet for Foxconn is still this. Will Apple make a TV? And if it does, will Foxconn be the manufacturer? Because if it is, then the company is more ready than ever to produce huge quantities.
So what is Foxconn really doing now? Is it preparing for life after Apple, or is it simply preparing for the company's "Next Big Thing"?
Dimitrios Georgoulas @ GreekAppleNews
