Foxconn's straw is not millet

Foxconn saw a decrease in orders and a loss in performance. Its net loss for 2012 was 316.4 million U.S. dollars, which is the largest loss since Foxconn International’s listing in 2005. Foxconn said it was mainly due to fewer orders from large customers such as Nokia and Motorola. However, some analysts believe that "Foxconn International's performance is bleak, mainly due to lower-than-expected orders from new customers (Amazon and Apple), and lower profit margin orders from smart phone manufacturers in the Mainland (Millet and Huawei). "In the past, the industry rumors that Terry Goh meets Xiaomi and hopes to reverse Foxconn International's losses. Will Xiaomi's mobile phone become a life-saving straw for Foxconn International?"

Foxconn International is listed in Hong Kong, mainly for mobile phone manufacturers such as Nokia, Huawei and other OEMs. In recent years, due to reduced orders, the situation has been poor. Foxconn Technology Group, the parent company, is not listed. It is mainly responsible for electronic product R&D and OEM in mainland China. Apple is its largest customer. Previously, Foxconn International hopes to compete for orders for some Apple products from its parent company. This move has little effect on improving its predicament.

As for whether Xiaomi can become Foxconn's straw, I don't see it. In fact, the Foxconn International's intensification of losses is the accumulation of many years of cause and effect, coupled with the decline in gross profit of the entire mobile market, Foxconn to reverse this trend, not to fight for a little order can be reversed. We have seen that Foxconn’s negative news has continued in recent years. The once-jumping event also exposed Foxconn’s entire ecological environment to the world. The main reasons for the current Foxconn International performance loss are:

First, the tightening policies of Europe and the global economic recession and the integration of the mobile phone market, the demand for major customers declined. The total amount of Foxconn's foundry has changed.

Second, due to the shrinking business, it also made the product pricing limited, which resulted in a decline in profit margins. As we all know, Foxconn’s foundry fees have been low, which is one of the reasons for its low profit margin.

Third, manufacturing costs, labor costs, and raw material prices rose. As of the end of 2012, Foxconn International had a total of 700,51 employees and generated a total employee cost of 462 million U.S. dollars. At the end of 2011, the total number of employees was 98,868, resulting in a total staff cost of US$533 million. At the end of 2010, the total number of employees was 126,687 and the total staff cost incurred was US$565 million. Employees are decreasing, but staff costs have not been reduced. The increase in labor costs is also a major cause of the drag on Foxconn.

Fourth, Foxconn International's current main customers are still Nokia, Motorola and other iPhone competitors, and Apple's iPhone, iPad and other orders are owned by Foxconn International's parent company Foxconn Technology Group. It is reported that iPhone orders may be substituted for Foxconn International. This may have a certain improvement on the performance of Foxconn International.

So why is Xiaomi not Foxconn's life-saving straw? One reason is that the volume of Xiaomi's mobile phone is still very small. In the domestic market, "China Cool Joint" has occupied more market share of domestic mobile phones. Foxconn will not be able to obtain more orders and OEM costs if the amount of energy is not reached. Moreover, Xiaomi Mobile did earn great attention in its early microblogging marketing. However, with the rapid advancement of Samsung and the constant efforts of domestic mobile phone manufacturers, the domestic mobile terminal market is becoming more and more fierce, and operators are leading. The customization more balances the capacity of domestic mobile phone manufacturers. In this regard, we see more opportunities for "China Cool".

It is very difficult for Foxconn International to reverse the current market structure, because the competition in the mobile terminal market becomes more and more transparent, and the price of mobile phones is getting lower and lower. In the absence of new product launches and high margins, mobile phone OEMs earn meager profits. In this context, perhaps the next Foxconn International layoffs will continue. In fact, Foxconn International has reduced the number of employees for three consecutive years as cost pressures have increased.

As a large number of Apple's products belong to Foxconn's parent company, Foxconn can not be ruled out that the next step will be to obtain parent company's asset support, and to spin off some of its own loss-making business; in this case, Foxconn as the world's largest mobile phone OEM companies Development will change. In addition, the recovery of the mobile market, especially in Apple and Samsung, is not the rise of more mobile phone companies, especially the recovery of inherent giants, such as Nokia's market share changes in the manufacturers of significant significance for Foxconn. However, for Chinese mobile phone companies, Foxconn must achieve a certain amount of energy before it can get better feedback. It is clear that it is not yet a new enterprise that can give Foxconn a turn for the better.