Foxconn Founding Story | Part 2
From a promising growing company to an evil dystopian organisation
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Hey folks!
Happy Monday! I hope you have a fantastic week ahead. Last week I covered the early days of Foxconn and its founder Terry Gou. I was blown away by the response and the feedback I got from last week’s post and it is now the most successful post in Tech Breakdowns history. Today, we continue the journey of exploring the behemoth that Foxconn is and how it got there. Most of the growth of the company came after the year 2000 so there is a lot of unpack here. If you haven’t read the first part, I highly recommend that you read it. We left the last part at the end of the 20th century when Terry Gou basically kidnapped Michael Dell and landed a large order to make parts for the Dell PC.
Let’s get in!
Foxconn Founding Story | Chapter 2
Welcome to the 21st century
Let’s set the stage - the year is 2000, Foxconn employs 44,000 people and the revenue is $2.8 billion (up a whopping 55% year over year). By now, Foxconn has cemented itself deep in the PC manufacturing supply chain. Foxconn was a giant by all means, but that alone will not make it the largest electronics manufacturer in the world. Do you know what is? Mobile.
Between 2003 and 2004, Foxconn made a few key acquisitions. The company acquired a plant in Mexico owned by Motorola and a plant in Finland owned by Eimo Oyj - the latter made products for Nokia, the largest cell phone company at the time.
A fun fact: If you were to strip down a Nokia 1209 handset, here’s what you would find - the plastic body is moulded by Foxconn Technology; the speaker, the number pad, the circuit board connectors, all are made by Hon Hai Precision; the circuit board itself is made by Foxconn Advanced Technology; the display is made by Chimei Innolux, an affiliate company partially owned by Terry Gou himself. 70% of the phone’s components are made by Foxconn.
When Apple met Foxconn
“I forced him to give me his business card.” Terry Gou on Steve Jobs.
Foxconn had previously made some parts for Apple, but the turning point came in the year 2000 when Foxconn landed an order to produce the new cute and cuddly iMacs. Foxconn set up a huge production base in Shenzen - “from procuring the raw steel for PC casings to putting together the finished product” - by leveraging this, the company was able to rack up orders from other companies like Dell, Sony and Nintendo.
If Apple’s second chance in life wasn’t clear when Steve Jobs returned, it certainly became clear in 2001 when Apple put “a thousand songs in your pocket” with the iPod. iPod was a generation-defining product. This is also when the famous line “Designed by Apple in California, Assembled in China” became synonymous with Apple products. Of course, assembled in China meant assembled by Foxconn. Couple this with the launch of the iPhone in 2007, the first decade of the 21st century was the golden age for Foxconn. Let me repeat - golden age - not the average growth of a public company. Just take a look at the chart below:
The above chart focuses only on Foxconn’s relationship with Apple, Foxconn’s fortune was guided by smartphone adoption in general.
The Chaos Era
One piece of advice that Apple’s Steve Jobs regularly provided to college graduates and potential employees was, “Stay hungry. Stay foolish.” Terry Gou’s version of this slogan is: “Hungry people have especially clear minds.”
In 2006, the British newspaper revealed the poor working conditions highlighting the long working hours, discrimination against Chinese workers by their Taiwanese peers and lack of working relationships. The article termed the factories as “iPhone sweatshops”, noting that Foxconn broke Chinese labour laws which stipulated a forty-hour workweek which can be extended by three hours a day or 36 hours a month - Foxconn employees on the other hand were clocking in twelve to fifteen hours a day, six to seven days a week. Factory workers repeatedly reported that the company was coercing them into working overtime. Forced by the bad press, Apple launched an investigation that was “1200 person-hours” long. The investigation concluded, “We found no instances of forced overtime. . . . We did, however, find that employees worked longer hours than permitted by our Code of Conduct, which limits normal workweeks to 60 hours and requires at least one day off each week.”
In 2010, there were reports of security guards beating the workers. That year, 15 Foxconn employees committed suicide. In the beginning, the company’s response at the time was to sit back and let the whole thing rollover. Steve Jobs also defended Foxconn saying that they are “pretty nice” and “not a sweatshop”. In an interview with Bloomberg Businessweek, Terry Gou said “The first one, second one, and the third one, I did not see this as a serious problem. We had around 800,000 employees, and here [at the factory] we are about 2.1 square kilometres. I am feeling guilty. But at that moment, I didn’t think I should be taking full responsibility.”
The company did do something, but only after the ninth death. The company put up yellow nets around the entire building to catch any jumpers, set up a 24-hour counselling centre with 100 trained professionals, increased wages by 30% and promised another raise later in the year.
Also in 2010, in a report, twenty universities based in Taiwan, Hong Kong and Mainland China described Foxconn factories as labour camps with widespread abuse and illegal overtime. Similar observations were made in an article published by The New York Times in 2012. That year in January, 150 workers threatened to commit mass suicide after 600 workers were moved into a new “unbearable” factory location. In September, a riot of 2000 people erupted in the workers' dormitories when a guard allegedly beat up a worker.
On the contrary to all of the above, The Economist published a report stating that the suicide rate at Foxconn was lower than that of Mainland China. According to a study by the Center for Disease Control and Prevention, China’s suicide rate is approximately 22 deaths per 100,000 people and in 2010, Foxconn’s employee count was 930,000. The number of suicides reduced steadily from 2010 with the last reported in 2016.
Foxconn makes many things, the most recent of which is a boring dystopia. There’s a joke among the Foxconn employees, “In 20 years, there will only be 2 companies. Everything will be made by Foxconn and sold by Walmart.” This quote first appeared back in 2010, and so far, I would not bet on it.
What Else Is Happening
Ozy Media, a digital-millennial first media company that over the years has raised questionable claims about its audience size crossed a line when an employee impersonated a YouTube employee on a call with Goldman Sachs. This was the first domino to fall as more shady business practises of the company were revealed. Ozy Media is shutting down. The whole thing is an interesting read. Link.
App Store ratings determine how successful an app will be. After years of complaints, Apple now finally lets you rate its app on the App Store. My favourite is the review of Apple’s Stocks app: “Like seriously, I’m pretty sure everyone deletes it”. Link.
Netflix acquired a game studio proving it serious about gaming. Last month it launched the Stranger Things games in some markets and now the company is releasing three more games in Poland, Italy and Spain as a members-only perk. Link.
Amazon launched a home surveillance robot called Astro. Leaked documents show Amazon employees calling it “terrible”, “not ready for release” and it will throw itself down the stairs if presented the opportunity. At least it looks cute. Link.
Google lawyers: “The most searched query on Bing is by far: Google.” Link.
Carveouts
I was blown away by this new company: ModelMe. Fashion retailers spend millions on models to take pictures of their garments for their websites, ads and social media. ModelMe just creates a model using AI. You just click a picture of your product, upload it on their website and they create “an infinite range of diverse on-model fashion photos.” Take a look below, none of these models exist. 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.
We had a new winner last week. Digant V was the first to crack the puzzle and he was followed by Dev B and Nihal C. The answer? Discord. Well played to everyone who participated.
That's all for this week folks. See you next week!
Shobhit (@ShobhitJethani)
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