Foxconn Founding Story
The unknown founding story of a company that makes the products the world can’t live without.
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Hey folks!
Happy Monday! I hope you have a fantastic week ahead. I can not tell how excited I am to share this week’s newsletter with you. Why? Just look at the list of products that have come off Foxconn’s assembly line - iPhones, iPads, iPods, BlackBerrys, Google Pixel, PlayStations, Xboxes, Kindles... I could continue on and on. Foxconn’s history is fascinating that there is no way I could have covered it all in just one newsletter. This week I will focus more on the initial founding story and cover its founder Terry Gou in detail. In the next edition of Tech Breakdowns, I will cover the modern Foxconn we know today.
Let us get in!
Foxconn Founding Story | Chapter 1
Terry Gou, Founder
Terry was born in 1950 in Taiwan when his parents seeked asylum there during the height of the Chinese Civil War. After immigrating to Taiwan, Terry’s father found a job working as a police officer, however, due to a surge of immigrants to Taiwan at the time, his salary couldn’t afford rent and the family lived in a Taoist temple. One thing that his father ensured was that his son would get the best education. Gou is a private person and does not speak to the media often, so not a lot is known about his childhood growing up outside of that he learnt to speak different languages from his local friends.
By the age of 23, Gou had undergone three years of vocational training and served in the military. After graduating from Taipei University of Marine Technology, he got a job as a shipping clerk where he saw, firsthand, the booming Taiwanese export industry and increasing demand for cheap plastics. (While researching about him, I realised that Terry is somewhat of a controversial figure and people hold strong opinions about him but the one thing they do agree on is that he is nothing if ambitious.) So, the gears in his head started to turn and realised he not going to get far doing his job and needed to do something else. So, he quit his job in 1974 and borrowed $7,500 from his mother and bought a couple of plastic moulding machines and hired 10 elderly workers. He decided he would make channel changing knobs for black-and-white televisions and called the company Hon Hai. He sold these knobs to an American company called Admiral TV. Terry soon took a liking to the western lifestyle and started learning English, practising his name over and over again. Soon, he made similar deals with RCA, Zenith and Philips RCA.
A company in the US that was taking off right around this time was Atari. Fuelled by the growing economy in the late 70s, video games parlours and video games, in general, were exploding in the US. So was Atari’s growth and it needed to make its video game consoles and machines cheaper. So, Atari set up a plant in Taiwan that would manufacture 15,000 consoles a day. The Atari 2600 model (may I add, a very beautiful console) needed a connector that would link the joystick to the console. Atari kept the manufacturing of its most important parts for itself while outsourcing “dumb parts” to the local factories. Guess who they outsourced it to?
Terry wasn’t completely happy though. He did not want to be just another manufacturer for a bigger company. He invested in R&D and filed patents for technology Hon Hai developed and pushed into manufacturing more parts like cables. Hungry for more, Gou went to the US in the early 80s, visiting 32 states over 11 months. He set his playbook, he would rent a Lincoln Town Car in every city he would visit and travel door to door from one company’s headquarters to another seeking orders till security kicked him out. In one particular case, he hung out near the IBM offices for 3 days till finally gave him an order for connectors.
IPO and China Calling
In 1985, Hon Hai established a US subsidiary and named it Foxconn. And around that time, the booming economy of Taiwan ran out of cheap labour and the wage prices started increasing. It was no longer feasible for many American companies to manufacture in Taiwan and started looking elsewhere like Malaysia, Thailand and the Philippines. China was not yet on the map of electronic companies because of the less than stable record of the China Communist Party. However, China offered an unlimited supply of cheap labour. For comparison, wage levels in China were 3% of the US’s.
After opening the trade borders with the US in the 1970s, China now opened trade with Taiwan in the 1980s. Along with this, the Chinese government had accelerated investments in infrastructure, education, training and production in the 1980s.
In 1988, Foxconn set up a shop in the Shenzen Economic Zone with 150 Chinese rural migrants with around 2/3 of the workforce made up of women. Soon, it became clear to Terry Gou that China would be the emerging pillar in the electronics manufacturing industry.
Largely to fund its ambitions to expand into China, Foxconn went public in 1991 and was listed on the Taiwan Stock Exchange. Unfortunately, the amount of money raised and the company valuation is not available publicly. The earliest financials available are from 1996 when the company made half a billion dollars in revenue and employed about 9000 people.
Terry’s Grit
Once the operations in China started to grow, Terry started pitching to more companies in the US, Europe and Japan. The story of how Terry landed a deal to manufacture parts for Dell shows exactly the kind of person he is.
Back in 1995 when Dell Computers wasn’t the biggest PC company, Michael Dell visited China. Terry offered to arrange meetings for Dell in exchange for a chance to drive Michael back to the airport. During the drive, Terry made an unscheduled stop at the Foxconn factory to show Michael Dell around. Foxconn didn’t yet make the parts that Dell Computers purchased yet and Dell Computers wasn’t a big company yet. It was a match made in heaven and today, Foxconn is one the biggest Dell suppliers.
I am going to leave this edition here but the story of Foxconn is far from over. The early 21st century made the modern Foxconn we know today. Next week I will discuss how Foxconn’s relationship with Apple came to be and how Terry Gou forced Steve Jobs to give him his business card. Of course, I will also cover the terrible harmful work environment that the name Foxconn is now synonymous with.
What Else Is Happening
China for the third time since 2017 has banned all forms of cryptocurrency. China worries that the volatility of these decentralised digital currencies undermines China’s authority over the countries fiscal policies. China also doesn’t want any competition for its digital-yuan which is in a pilot stage. Link.
Speaking of crypto, Twitter will now allow users to send tips to other users they follow. Self-plug: you don’t need to send me any crypto to enjoy my tweets at @ShobhitJethani. Link.
The Apple vs Fortnite saga goes on - Apple will not allow Fortnite back on its App Store after Epic Games CEO, Tim Sweeny made a public request on Twitter. “Apple will not consider any requests for reinstatement until the district court's judgment becomes final and non-appealable," said the letter from Apple's lawyer. Link.
According to sources, OYO Rooms is filing for a $1.2 billion IPO next week. Seems like Zomato’s successful IPO earlier this year has opened the gates for other Indian technology companies to go public. Link.
Facebook’s CTO from 2013, Mike Schroepfer is stepping down and the company’s current head of AR and VR, Andrew ‘Boz’ Bosworth is stepping in. Boz has been in charge of the Oculus headsets, RayBan x Facebook Smart Glasses the Portal devices. This move indicates just how important Facebook thinks hardware is to its future. Link.
Carveouts
I love learning about how movies are made. I have seen countless videos on cameras, lights, set design etc. But one thing I never thought about were props. I never imagined that the noise from props like paper bags, ice cubes, pool balls and sandwich wraps is a big problem for the film’s audio. Prop master Scott Reeder explains how he makes “silent” versions of real-life items to solve this problem. There is indeed no business like show business. Link
Trivia
All responses are welcome and like always clues are available to anyone who asks. Reply to this mail with your answer or to get a clue.
Last week, we had Nihal C cracking the puzzle first. He was followed by Dev B and Digant V. The answer? Microsoft. Well played to everyone who participated.
That's all for this week folks. See you next week!
Shobhit
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